Pharma companies should review their commission-based compensation arrangements with independent contractors to address enforcement risk under the Anti-Kickback Statute, in light of recent Department of Justice enforcement.
Commission-based compensation arrangements with both employees and independent contractors have long been common in the life sciences industry, particularly with respect to field sales forces. However, while the federal Anti-Kickback Statute (AKS) and its implementing regulations offer protection for employee compensation, including commissions, analogous compensation arrangements with independent contractors cannot always satisfy a safe harbor to the AKS. Although commissioned-based compensation relationships with independent contractors in the life sciences industry have historically rarely formed the basis for enforcement actions, the Department of Justice (DOJ) has increasingly targeted such arrangements under the AKS and the federal False Claims Act (FCA). DOJ’s recent actions suggest that commission-based compensation arrangements with independent contractors present a growing compliance risk for life sciences companies. However, there are steps organizations can take in order to minimize the risk of DOJ scrutiny and liability.
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