Healthcare, pharmaceutical, and life sciences companies have long grappled with the Department of Justice (DOJ)’s expansive view of the Anti-Kickback Statute¹ (AKS), reaching beyond what would be considered traditional bribes or kickbacks.  A recent opinion from the United States Court of Appeals for the District of Columbia reaffirms that reach, joining several other circuits in finding that through the plain language in the AKS, Congress intended to reach a variety of commercial arrangements that provide value to patients but have the effect of influencing healthcare decisions. 

In Vertex Pharmaceuticals Inc. v. Dept. of Health and Human Services,² the D.C. Circuit held the “ordinary meaning” of key terms such as “induce” and “remuneration” is broad enough to reach arrangements that influence healthcare decisions through the provision of value, even when those arrangements are neither inherently corrupt nor structured as a traditional quid pro quo.  Separately, and perhaps more significantly, the court ruled that the Department of Health and Human Services Office of Inspector General’s (HHS OIG) routine practice of issuing AKS advisory opinions beyond the statute’s 60-day deadline is unlawful.  The court found that HHS OIG could not properly promulgate regulations that delayed or tolled the deadline to give itself more time than the statute allows.³

In this case, Vertex developed a gene therapy to treat blood disorders but could have adverse effects on a patient’s fertility.  To address this concern, Vertex created a Fertility Support Program (the Program) that provided up to $70,000 for fertility services for qualifying patients.  Vertex sought an advisory opinion from HHS OIG regarding whether extending the Program to federally insured patients would run afoul of the AKS, which prohibits “knowingly and willfully” paying “any remuneration” to “induce” the purchase of healthcare services that are paid for by federal healthcare programs.⁴ The statute provides that HHS OIG must issue an advisory opinion no “later than 60 days after the request is received.”⁵  However, HHS OIG had promulgated regulations that effectively extended that statutory deadline in two ways: first, by starting the 60-day clock only after HHS OIG “formally accept[s]” a request, rather than when the request is received; and second, by treating the clock as tolled while HHS OIG sought additional information or input from outside experts.⁶ The effect of these regulations was to greatly expand the average time for HHS OIG to respond to an advisory opinion request, causing companies to wait well beyond 60 days for the advice sought.  In this case, Vertex did not receive a response for more than a year before HHS OIG finally issued an unfavorable opinion.  The company filed suit in D.C. District Court challenging HHS OIG’s conclusions and the regulations that had extended its 60-day deadline in this case to more than a year.⁷ The district court sided with HHS OIG on both points, and Vertex appealed.⁸

On appeal, the D.C. Circuit agreed with a broad reading of the AKS, finding that the terms “induce” and “remuneration” carry their ordinary meanings.⁹ Specifically, the Court rejected Vertex’s argument that “induce” should be more narrowly defined in the criminal context, limited to just the “inducement of clearly unlawful activity.”¹⁰ Instead, the Court found that AKS’s prohibitions target influence over the selection of federally reimbursable healthcare services, even though selecting these services “is not itself a crime.”¹¹ The Court also reasoned that a broad ordinary-meaning interpretation is bolstered by the numerous statutory safe harbors, which shield certain types of arrangements from enforcement risk.¹²  The Court concluded that the safe harbors cover many common arrangements “that influence healthcare decisions and therefore accord with an understanding of ‘induce’ that means simply to influence another person.”¹³ Similarly, the Court found that the term “remuneration” carries its broad, ordinary meaning and includes “anything of value.” With these broad understandings of “induce” and “remuneration,” the Court concluded that the Program’s fertility services are remuneration intended to induce patients to choose Vertex’s gene therapy products and therefore run afoul of the AKS.¹⁴

The D. C. Circuit, however, agreed with Vertex on its challenge to HHS OIG’s advisory opinion deadline, holding that the plain statutory text requires HHS OIG to issue an advisory opinion “not later than 60 days after the request is received.”¹⁵ Thus, HHS could not promulgate regulations to delay the 60-day clock until a request has been “formally accepted,” which can take up to 10 business days, or to toll the 60-day deadline where HHS OIG determines it needs to gather additional information.¹⁶

Now as before, healthcare, pharmaceutical, and life sciences companies can expect to continue to face aggressive government enforcement actions premised on expansive readings of the AKS.  In particular, companies can expect continued AKS scrutiny of patient-assistance, access, and affordability programs, even when they serve legitimate patient needs and do not resemble traditional bribes or kickbacks.  For instance, on September 14, the U.S. Attorney’s Office for the District of Massachusetts announced a settlement with drug manufacturer Dompé U.S., Inc. to resolve allegations that the manufacturer violated the AKS by making payments to third-party patient assistance foundations that fund patients’ co-pays for one of its drugs.¹⁷ In August, an HHS OIG advisory opinion reaffirmed that manufacturer-funded charitable patient assistance programs may be permissible under the AKS where the charity remains truly independent, disease funds are broadly defined and cover all approved therapies, and robust safeguards prevent donor influence over patient assistance decisions.¹⁸  Nevertheless, the opinion also signals continued scrutiny of these arrangements, particularly as implementation of the Inflation Reduction Act reduce Medicare beneficiaries’ cost-sharing obligations.¹⁹ Companies considering similar arrangements should carefully assess and document their program’s structure, eligibility criteria, and safeguards, and any separation from prescribing or purchasing decisions.  

Importantly, companies should take note of HHS OIG’s 60-day response obligation in evaluating whether to seek an opinion, compliance strategy, the timing of regulatory review, and potential litigation options.  In addition to accelerating the HHS OIG advisory opinion process, the Court’s decision in Vertex Pharmaceuticals could be used as a basis to attack similar regulatory schemes in which agencies (e.g., FDA, CMS, and others) have sought to toll or extend their statutory deadlines.