On February 23, 2022, a district court in the Central District of California denied a defendant’s motion to dismiss a qui tam suit premised on alleged Anti-Kickback Statute (“AKS”) violations, holding that “even some fair-market-value payments will qualify as illegal kickbacks.” See United States ex rel. Chao v. Medtronic PLC, No. 17-cv-1903 (C.D. Cal.).
The relator’s operative complaint argued that the defendant, a manufacturer of medical devices, violated the FCA by offering kickbacks in various forms to reward physicians for using the defendant’s devices. Among other arguments, the defendant urged the court to dismiss the complaint because the relator failed to allege that certain payments to physicians for proctoring other physicians on how to use the medical devices exceeded fair market value (“FMV”). As such, the defendant contended, the relator failed to address the potential applicability of the AKS’s personal services safe harbor.
The court concluded, however, that the relator need only “allege facts that make it plausible that the safe harbor will not defeat his claim,” which he had done. Therefore, the personal services safe harbor could not serve as a basis for dismissal on the pleadings. Furthermore, the court explained that even if the payments were consistent with FMV, this would not immunize the defendant from FCA liability. In the court’s view, FMV payments can qualify as illegal kickbacks when “the payor has considered the volume of reimbursable business...
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