By Alex R. Thiersch, JD, CEO of the American Med Spa Association (AmSpa), & Patrick O’Brien, JD, legal coordinator for the American Med Spa Association
The U.S. Department of Justice (DOJ) issued a press release that may have a profound impact on the aesthetics industry as we know it. In settling an anti-kickback and False Claims Act claim against medical device manufacturer Covidien, the feds stated that device manufacturers who provide complimentary marketing support, product marketing plans and advertising support as incentives to purchase their products are engaging in an illegal kickback scheme. Even providing complimentary “lunch and learns” to customers may violate anti-kickback laws.
The DOJ enforcing the Anti-Kickback Statute and the False Claims Act is not unusual, and those of you familiar with AmSpa know we often warn practices of federal and state anti-kickback laws. What is unusual about this case, however, is the form the alleged kickbacks took—instead of money, the company offered free or reduced-cost marketing and advertising support, something that occurs all the time in the aesthetics industry.
Let me know if this sounds familiar: As part of its sales strategy, Covidien—which produces and sells a radiofrequency ablation catheter device called “ClosureFast”—would provide free marketing and practice support to physicians who purchased the devices to help them establish and grow their ClosureFast practices. This included providing the physicians with customized marketing plans and hosting “lunch and learn” meetings to educate area physicians about the purchaser’s ClosureFast vein practice in the hope of generating referrals.
Well, guess what? This non-monetary support constitutes an illegal kickback, alleges the DOJ, and can expose offenders to fines and even criminal liability.
The DOJ makes clear in its press release that these types of remuneration are treated the same as monetary kickbacks and will be actively pursued. Although the DOJ’s press release describes the marketing and sales support as being very tailored and specific to the individual practices, it does not indicate that this was a deciding factor in its pursuit of this case. Based on the press release’s rationale, many other types of non-monetary support also could be seen as kickbacks; this may include common industry practices such as providing advertising and marketing materials or services to new device purchasers. As is often the case with high-profile enforcement actions, this may mark the beginning of additional enforcement—not only at the federal level, but also for states acting under their own anti-kickback statutes.
While most medical spas are not directly affected by this new enforcement angle because they don’t bill to Medicare or Medicaid, it is conceivable that state enforcement agencies may take a closer look at these practices in light of the broad language contained in state anti-referral and anti-patient solicitation statutes. These state rules often apply to medical practices regardless of whether they bill to insurance.
This is potentially huge news for manufacturers in the industry. Stay tuned—AmSpa’s lawyers are dissecting the decision to determine its impact on the industry.