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Pharmaceutical Fraud: What are Kickback Schemes?

Unethical and dangerous, pharmaceutical kickbacks put sales ahead of patient health.

Posted by Ann Snook on May 15th, 2019

Between 2013 and 2016, doctors received payments from pharmaceutical companies for a total of $9 billion. Those who received industry payments were two to three times more likely to prescribe name-brand drugs than their peers.

While getting paid by a pharmaceutical company is not a crime for medical practitioners, these high payments may hint at a rising issue in healthcare: pharmaceutical kickbacks. Pharmaceutical fraud of this type robs the government of funds it needs to provide senior citizens and low-income families with healthcare.

Knowing how to perform good internal pharmaceutical fraud investigations protects the public and your company’s reputation.


Teach employees how to recognize the signs of fraud and how to report them. Learn how with this free webinar.


What are Pharmaceutical Kickbacks?


Illegal pharmaceutical kickbacks are designed to influence doctors’ behavior (and, as a result, boost sales) by offering something of value in return. Essentially, pharmaceutical companies bribe doctors to prescribe their products to more patients, sometimes for longer periods of time or in higher dosages.

In 1987, the US Department of Health and Human Services (HHS) passed a statute that prohibits “making or accepting any form off payment—cash, or in kind—that is intended to encourage or reward a healthcare provider or purchaser to recommend, prescribe, or purchase any good or service that can be reimbursed or paid by a federal-funded healthcare program, such as Medicare or Medicaid.”

Pharmaceutical kickbacks to doctors aren’t just monetary bribes. They can also be “in kind” payments, like:

  • unrestricted grants
  • paid consulting arrangements
  • luxury meals
  • discounted equipment
  • gifts (event tickets, expensive watches, etc.)
  • free vacations


There are some “safe harbors” for companies where they can pay doctors without committing pharmaceutical fraud. These include payment for services rendered and space or equipment rentals. As long as a contract or lease explicitly states all the details of the arrangement and it does not exceed the fair market value of the services or equipment, it does not fall under the anti-kickback statute.

However, in January 2019, HHS proposed a rule that would, if passed, eliminate most of these safe harbors in attempts to lower drug prices.


Whistleblowers are a valuable asset for preventing pharmaceutical fraud. Watch this webinar to learn how to encourage employees to call out bad behavior.


Case Study: Insys Therapeutics


In May 2019, the founder and four former executives of Insys Therapeutics were found guilty in a pharmaceutical fraud case that federal prosecutors say contributed significantly to America’s opioid epidemic.

In order to get doctors to prescribe their highly-addictive, fentanyl-based oral spray for cancer pain called Subsys, Insys provided a wide array of kickbacks, including:

  • paying doctors to speak at events billed as educational opportunities that were mainly promotional
  • bribing doctors to write more prescriptions for Subsys, whether or not the patients had cancer
  • a regional sales director giving a lap dance to a doctor she was targeting for more Subsys prescriptions


According to the Center for Disease Control and Prevention (CDC), more than 47,000 people died of opioid overdoses in 2017, accounting for about 68 per cent of all overdose deaths. In October 2017, the same day as the Insys executives were arrested, opioid use was declared a public health crisis by President Trump.

As a result, federal prosecutors are cracking down on pharmaceutical kickbacks and other fraud schemes that push these drugs on patients who don’t really need them. Detecting and preventing pharmaceutical fraud ensures your company won’t be the next one hit with a lawsuit like this one.


RELATED: Qui Tam and Whistleblower Claims and Company Retaliation


Preventing Kickback Schemes


The reason pharmaceutical kickbacks are so egregious is because they put sales ahead of patients. Encouraging doctors to prescribe drugs to patients who don’t need them poses a huge health risk. It also costs insurers (including the government in some cases) millions of dollars when doctors prescribe drugs that have generic equivalents that are just as effective.

Pharmaceutical companies can detect and prevent fraud by setting up a secure, anonymous complaint platform where employees can report fraudulent behavior such as pharmaceutical kickbacks.

Using a reporting tool can also boost prevention efforts. Monitor which doctors are getting paid by the company and which sales reps are paying them. Run reports on your whistle blower hot line data to spot patterns of complaints. This lets you analyze trends and identify areas of risk to stop fraud before it becomes a legal problem for your organization.


Click here to learn more about how case management software can guide your pharmaceutical fraud investigations to protect your brand, employees and bottom line.


Ann Snook
Ann Snook

Marketing Writer

Ann is a marketing writer at i-Sight Software. She writes about issues related to investigations of fraud, employee misconduct, corporate security, Title IX, ethics & compliance and more.

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