Anti Kickback Statute

Anti-Kickback Statute (AKS)


Overview of the Anti-Kickback Statute (AKS), 42 U.S.C1320a7b(b)

The Anti-Kickback Statute (AKS), 42 U.S.C1320a7b(b), makes it unlawful to “knowingly and willfully offer or pay any remuneration (including any kickback, bribe, or rebate) to any person to induce such person to purchase  any good for which payment may be made in whole or in part under a Federal health care program.” 42 U.S.C1320a7b(b)(2)

The Department of Health and Human Services (HHS) may exclude from participation in federal health care programs “[a]ny individual or entity that [it] determines has committed an act” in violation of (among other provisions) the AKS. 42 U.S.C. 1320a-7(b)(7). Other penalties include straight financial penalties which are termed “civil monetary penalties”.

Under the False Claims Act (FCA), 31 U.S.C. 3729 , “a claim that includes items or services resulting from a violation of the AKS is a “false or fraudulent claim.” This specific language addressed a disagreement among courts. The federal courts had a disagreement. Was a violation of the AKS per se a false claim violation See: United States v. Starks, 157 F.3d 833, 838 (11th Cir. 1998); United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 901-02 (5th Cir. 1997). This is now resolved by a statutory amendment and it hurts doctors. An AKS violation is a false claim and civil penalties, qui tam (relator) lawsuits follow. And of course under 42 U.S.C. 1320a-7b(b) there are criminal prosecutions as well.

Relator Lawsuits

Even if the federal government is not looking at your structures, private individuals can be deemed “Relators” and law firms that specialize in this actions can sue you on behalf of the United States.  Here is a quote from a current case that gives you a sense of what these lawsuits allege.

“Relator, defendants knowingly submitted false claims to Medicare and TRICARE for certain compound drugs, by substituting a less expensive drug for a more expensive drug; by billing for medication that was not provided; by overcharging for certain medication; and by committing violations of the AntiKickback Statute, 42 U.S.C§ 13209-7b(b)”
UNITED STATES ex rel. TIMOTHY SCHNUPP Relator v. BLAIR PHARMACY, INC., et al., Defendants. Additional Party Names: Matthew Blair (D. Md., Dec. 9, 2022, No. CV ELH-17-2335) 2022 WL 17584381, at *1

MSO’s as a Danger Area to Doctors

MSO’s and complex structures are common in the medical field.  Doctors form partnerships to purchase equipment and then lease this equipment to hospitals or other organizations.  Lawyers prepare the MSO and corporate documents and rarely do the participating physicians receive warnings.

Despite the best of intentions, these MSO structures can lead to physicians being prosecuted under the Anti Kickback Statute (AKS). The Anti-Kickback Statute (AKS) is a federal law that can be found at 42 U.S.C. § 1320a-7b.).  The AKS is dense and it has exceptions, definitions and real world applications that make it a minefield for doctors.  Ultimately it is a criminal statute which can also lead to related civil lawsuits.  It seems clear, a doctor is prohibited from obtaining anything of value in exchange for a referral.   (This applies to federal reimbursements.)

An Example of how an MSO Structure Led to an AKS Prosecution

An example of how an MSO and referral structure can lead to a criminal prosecution is a recent Texas case.  The federal government focused on two Texas critical access hospitals which partnered with a clinical laboratory that specialized in blood testing. For a fee, the clinical laboratory allowed the hospitals to bill their blood tests to insurers as hospital outpatient services. This choice led to a higher reimbursement rate. The hospitals utilized a network of marketers. These marketers operated management services organizations (“MSOs”) that offered investment opportunities to physicians. One can imagine that many attorneys had reviewed and prepared this paperwork. The physicians and hospitals were likely not intending to violate the law. They were seeking to generate income just as any business would.
However the United States prosecutors disagreed. They claimed that the MSOs were a sham which simply provided a complex vehicle to facilitate kickback payments to physicians in return for the physicians’ laboratory referrals.

If you are facing potential AKS liability we can help.   Call us at (925) 283-1863 You will reach a live person actually in our office if you call during business hours.

Stark and Anti Kickback

STARK LAW & AKS LAW (Anti Kickback Law)


If you mix some mild antibiotic, a little dab of dog parasite medicine (Ivermectin) and a bit of this and that, your Rosacea may clear up.  You can’t get this at a drug store but I have a partner pharmacist who formulates this.  We can bill for it and most of the time it gets paid.  …. Is this legal ?  The profit is tempting.  Three dollars worth of chemicals, the cost of the tube and a few minutes labor and a $ 100 package exists.  Studies do show it may work.  Is it a Stark violation ?  Is it an AKS (anti kickback statute) violation ?  Is the science strong enough to justify the Rx ?  Would you prescribe it if you had no financial interest ?  Is this a Medical Board issue ?   There are state laws, medical board rules and insurance contract standards that apply but most dangerous are the federal laws that protect federal payor programs.  The complexity of laws and regulations often trip up an honest practitioner and our office knows the rules and protects you.

Do you feel safe because “Well I contacted the best medical lawyer in Los Angeles and he told me …..”.   Well don’t be so certain that you are safe.  Here are some recent press releases from the United States Department of Justice.

Fifteen Texas Doctors Agree to Pay over $ 2.8 Million to Settle Kickback Allegations

Flower Mound Hospital to Pay $18.2 Million to Settle Federal and State False Claims Act Allegations Arising from Improper Inducements to Referring Physicians

Those 15 doctors and the hospital likely had the best medical lawyers available to review their work.  We take a very conservative approach to medical-business ventures.  We often disagree with the legal opinions that read: “This opinion is no guarantee …”.   The lawyer disclaimers are red flags because although we admit that many of these aggressive practices are lucrative and successful, the failures are devastating to the physicians involved.

The Stark Law developed by our local Congressman, Pete Stark.  The Stark Law is also known as the Physician Self-Referral Act and unless you knew Pete Stark personally, that is the more descriptive name. The U.S. Code citation is 42 U.S.C. 1395 et seq..

As you read the Stark Law your head can spin. Can you make DHS Medicare referrals to a family member ?  What if it is a lithotripsy machine ? Is there an exception ? What about small towns when other treatment facility options are miles away ? Who is covered by this “physician” law ? Does it cover Doctors of Osteopathy, Dentists ? What about Pharmacists ? What about Chiropractors ?

Equally dangerous is the “AKS”. This is the federal anti-kickback statute. The Anti-Kickback Statute again focuses on referrals. This includes kickbacks for product, medical device, pharmaceutical and services kickbacks. An example are the recent string of arrests when a physician gave free samples of pain relief cream to a patient and then recommended a formulated product from a pharmacy. The physician had a complex scheme of reimbursement which the doctor’s attorney thought avoided Stark statute and Anti Kickback statute problems. The federal prosecutors disagreed.

The bottom line is this.  If you are a physician and you are making any money or have any relationship to other entities to which you refer – get legal advice. Bear in mind that with Stark law and other anti kickback statutes, our office is more conservative than many other practices.  Many of these businesses involve grey areas of law and it is our goal to put your safety and your license first.  We are not always right but we want our clients to sleep at night.  An example are the urologist / catheter arrangements where the MD’s seem to be seller and distributor of the catheters but fulfillment is by a third party (which makes the bulk of the profit).  These have often survived scrutiny but we use the “walk like a duck” approach and have unequivocally recommended against this grey area business arrangement.

If you are seeking a second opinion we can help.  If you are being sued or criminal charged for self dealing violations (or any type), Daniel Horowitz is a certified Criminal Defense Specialist (State Bar of California Board of Legal Specialization).

Call our Medical License & Criminal Defense Lawyers at (925) 283-1863 

or Fill Out our 1 Page Contact Form (click below)


Pharmacy Law



Our pharmacy defense lawyers work with the California State Board of Pharmacy to negotiate and resolve pharmacist complaints for relatively minor issues such as record keeping, storage and staffing.  More serious issues involving controlled substances (e.g. ephedrine, opioids) receive expert review and top legal representation.   One of the current hot button issues in pharmacy license law is discussed below.


Pain creams prescribed by physicians and fulfilled by third party pharmacies – the focus of major fraud investigations.

Skin remedies with a mix of barely tested ingredients – the focus of major fraud investigations.

Pharmacist license defense dovetails with physician defense as often the compounding pharmacy and the prescribing physicians are targeted.

Physicians are being prosecuted for dealings with compounding pharmacies. Consider the recent Orange County prosecution of  Tanya Moreland King and Christopher King, who owned the medical-billing and medical-management companies Monarch Medical Group, King Medical Management and One Source Laboratories.  The OCDA claimed that they billed for non-FDA approved creams and other products.

Doctors had agreements where the King’s would pay the doctors each time they prescribed a  cream or medication. The doctors were accused of hiding kickbacks by falsely labeling the payment kickbacks as “marketing expenses.”

Here’s how it works.

Take a $ 10 tube of a high quality topical antibiotic and mix it with your dog’s heartworm medicine and like magic you have a creme that is not available from a pharmaceutical company. The ingredients individually are indicated (although not FDA approved) for the treatment of certain skin conditions. The cost is low, perhaps $ 20 per month and if it works, that is bargain. Imagine that instead of buying the ingredients separately, they were custom mixed in a creme so that you don’t need to use two separate tubes but instead it is “all in one”.

That is the job of a compounding pharmacy and that function is both legal and ethical.

What if your doctor sells you the tube for $ 100 and bills your insurance company ? What if your doctor then gets $ 50 per tube profit making the sale ?  What if your doctor fully discloses this profit to you and to the insurance company?  But ask this question, even with disclosure is the prescription itself – the choice of treatment, truly the best for you?

There are many other issues to think about. First, drugs from a compound pharmacy may be individually FDA approved (or not) but their combination and the claims of effectiveness are usually not extensively tested through a rigorous FDA approval process. Of course neither are many over the counter remedies so this alone does not mean there is anything wrong. However, you have to trust the pharmacy to maintain rigorous standards of cleanliness and proper handling and mixing. This is something that even large pharma companies can fail with and smaller, compounding pharmacies have also at times provided tainted products. In 2017 pharmacist Barry Cadden, co-founder of the defunct New England Compounding Center, received a nine year prison sentence after 76 people died from meningitis after receiving contaminated injections of medical steroids prepared by his pharmacy.

A pharmacy license defense or physician defense attorney knows one reality.  If two are prosecuted, one is likely to point the finger at the other.  This can lead to an unfair result as the “big fish” gets away by cooperating with law enforcement and the “little fish” get caught and eaten.  Our California Pharmacy lawyers and Medical Defense Lawyers can also work together in the instance where a “stick together, we are both honest” defense is being pursued.

It is the job of the State Pharmacy Board to ensure that the compounding pharmacy that you use is clean and professional. The California State Pharmacy Board (California State Board of Pharmacy)  has an website that includes current and past accusations against Pharmacies.  (However it is a bit cumbersome as you must find a name in their accusation page and then look up the profile.  The short version is that compounding, opioid issues, bad storage and bad record keeping are key pharmacy license issues.

You can view that here  (July 2018 Accusations against Pharmacies filed by the Board) The Board has to ensure that a pharmacy complies with Section 503A of the Food Drug & Cosmetic Act and the Pharmacy Board’s own rules and regulations.

The scenario of the doctor prescribing a compounded drug and profiting on the sale invokes several potential criminal acts. The Anti Kickback Statute (AKS) prohibits a pharmaceutical company from providing anything value in exchange for an MD writing a prescription. Many big pharma companies publish specific rules about this.

Here as an example is what the Bayer company has on their website:


Bayer HealthCare LLC (“Bayer”) shall not offer or pay to any person “remuneration” or anything of value intended to induce, influence, encourage or reward that person’s order, referral, use, prescription or recommendation of a Bayer product. Where reasonably possible and practical, Bayer will attempt to structure arrangements with potential sources of sales or referrals in a manner that complies with an applicable regulatory “safe harbors.”

Bayer policy prohibits employees from offering anything of value – (for example, fee-for-service agreements, data purchases, educational grants, clinical research support, charitable contributions, business meals or educational items) – to a healthcare professional or other person (1) to encourage such person to prescribe, purchase, order, refer, use or recommend Bayer products, or (2) as a price term or in lieu of price discounts. Accordingly, Bayer has established the following policies and procedures consistent with the Anti-Kickback Statute, as well as its regulatory safe harbors, governmental guidance documents, and voluntary industry standards, such as the PhRMA Code on Interactions with Healthcare Professionals and the AdvaMed Code of Ethics on Interactions with Healthcare Professionals.

Now in the example in this article, the compounding pharmacy will say that it has no control over what the physician charges for the drug and that it simply provides a tube at $ 50 to the MD. The markup and profit disclosures are the responsibility of the doctor.

This is often a defense used in compounding pharmacy cases where criminal charges have been filed. However, many compounding pharmacies (and other pharmacies) will establish a relationship with the patient and mail the drugs on a regular, subscription basis. The pharmacy then sends checks to the MD for each tube sold. In that instance it is difficult for the pharmacy to claim that it is not kicking back money to the MD.

31 U.S.C. § 3729(a) is the False Claims Act and there are civil reimbursement lawsuits available under that statute.

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