Could the Road to an AKS Violation Be Paved with Good Intentions? Pfizer Asks SCOTUS

November 7, 2022By Sophia R. Gaulkin

We previously blogged about Pfizer’s copay assistance lawsuit, which sought to challenge HHS’s interpretation of the Federal health care program anti-kickback statute (AKS) and position that the company’s proposed copay assistance program would violate the AKS.  Now, after an unfavorable HHS Office of the Inspector General (OIG) advisory opinion and two defeats in court, Pfizer has appealed the Second Circuit’s decision to the Supreme Court.

In its petition filed earlier this month, Pfizer challenges HHS’s interpretation of the AKS as “staggeringly overbroad,” contrary to the congressional intent behind the AKS, and a threat to “almost any activity that facilitates patient access to federally funded healthcare.”  At the center of Pfizer’s argument is whether an AKS violation requires corrupt intent.  If SCOTUS takes up this case, it could have significant and far-reaching implications across the healthcare fraud and abuse landscape.


Pfizer manufactures tafamidis (sold under brand names Vyndaqel and Vyndamax), a breakthrough treatment for a rare, progressive heart condition called transthyretin amyloid cardiomyopathy (ATTR-CM).  Pfizer set the price of tafamidis at $225,000 for each one-year course of treatment.  Under Medicare’s payment formula, Part D plan enrollees who take tafamidis are responsible for a copay of approximately $13,000 per year.  Recognizing that this out-of-pocket cost represents a significant financial barrier for many patients, Pfizer proposed a Direct Copay Assistance Program for Medicare Part D enrollees using tafamidis.  Under the proposed program, Pfizer would directly cover nearly all of a Medicare Part D enrollee’s copay for tafamidis, subject to certain eligibility criteria, including financial need.  Eligible patients would be responsible for only $35 per month, and Pfizer would cover the rest of the approximately $13,000 annual copay.  The Medicare program would pay most of the remaining $225,000 in annual cost.  In June 2019, Pfizer sought an OIG advisory opinion to ensure that its proposal would not run afoul of federal law.

In September 2020, the OIG issued an unfavorable advisory opinion to Pfizer, concluding that the proposal was “highly suspect” under the AKS because one purpose of the program, and perhaps the primary purpose, would be to induce Medicare beneficiaries to purchase Pfizer’s federally reimbursable medication.   Federal courts, too, have broadly interpreted the AKS to cover any arrangement where “one purpose” of the remuneration is to induce referrals, purchases, or orders of federally reimbursable items or services, even if the arrangement has other, legitimate purposes (see, e.g., United States v. Borrasi, 639 F.3d 774 (7th Cir. 2011), here, and United States v. Greber, 760 F.2d 68, 71 (3d Cir.), cert. denied, 474 U.S. 988 (1985), here).

Pfizer challenged the OIG’s interpretation as contrary to law in a lawsuit brought in the Southern District of New York (SDNY).  The district court sided with OIG, rejecting Pfizer’s narrower reading of the AKS, which would require an element of “corrupt” intent to impose AKS liability.  Pfizer appealed to the Second Circuit, which again ruled against Pfizer.

The Second Circuit’s Interpretation of the AKS and its Mens Rea Element

The AKS makes it a criminal felony to knowingly and willfully offer or pay any remuneration (including a kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to induce a person to, inter alia, purchase, order, or arrange for the purchase or order of, a drug reimbursed in whole or in part by a federal healthcare program, such as Medicare Part D.

In affirming the district court’s decision, the Second Circuit held that Pfizer’s proposed program falls squarely within the AKS’s prohibitions because it is specifically designed to induce Medicare beneficiaries to purchase Pfizer’s federally reimbursable drug, tafamidis.

In relying on the plain meaning of the term “induce,” as the district court had done, the Second Circuit clarified the definition as:  to entice or persuade another person to take a certain action.  Contrary to Pfizer’s contention that the term implies a corrupt intent, the Court found it to have neutral intent, as one can persuade another to take an action with good or bad motives.

Similarly, the Court drew on the plain meaning of “willfully” to reject Pfizer’s argument that the term suggests “an element of corruption.”  The Court instead interpreted the term, as used in the AKS, to mean an intentional violation of a known legal duty, but concluded that “the mens rea element goes no further.”  Consistent with the district court, the Second Circuit likewise found nothing in the statutory text that would indicate that corrupt intent is a required element of an AKS violation.  On the contrary, referring to the statement in the statute itself that a person need not have actual knowledge of the AKS or specific intent to commit a violation of it, the Court concluded that a person can willfully violate the AKS, even without knowledge of the exact statutory provision that her conduct violates, as long as she knows her conduct is illegal.

In addition, the Second Circuit rejected Pfizer’s argument that the AKS should be read more narrowly than the beneficiary inducement statute (BIS), a civil statute that prohibits a person from offering to a Medicare or Medicaid beneficiary any remuneration that the person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, under Medicare or Medicaid.  According to Pfizer, Congress intended that the BIS be the AKS’s broader, civil counterpart, meaning that the Court should interpret the term “induce” in the AKS more narrowly than the term “influence” in the BIS.   The Second Circuit found that, although the two statutes have some subject matter overlap, they prohibit different activities—the AKS is not simply a narrower or criminal version of the BIS.  The Court found that there is at best little utility in interpreting the AKS by reference to the BIS.

Pfizer’s Petition to SCOTUS

Pfizer is now asking SCOTUS to reject these earlier interpretations of the AKS.  As Pfizer has argued throughout this legal battle, its proposed copay assistance program “poses no risk of corrupting independent decision making” or of inducing improper utilization of tafamidis.  According to Pfizer, this is because tafamidis is the only FDA-approved drug to treat ATTR-CM.  Because no approved alternative exists, its proposed copay assistance program would not influence treatment decisions away from other drugs.  However, HHS, SDNY, and the Second Circuit have each concluded that corrupt intent is not required for an AKS violation—copay assistance “induces” a beneficiary to purchase a medication when the assistance removes a financial barrier, even if the medication is one that the beneficiary needs and would have purchased if they had the financial means to do so.  Pfizer’s case therefore turns on whether it can convince the Court to adopt a narrower reading of the AKS.

Pfizer’s arguments for a narrower reading of the AKS in its petition are consistent with its arguments inSDNY and the Second Circuit.  Pfizer contends that these earlier interpretations of the AKS are not supported in the statute’s text, structure, or legislative history.  Rather, Pfizer argues, the AKS focuses on “corrupt transactions,” such as the specific examples of “kickback, bribe, or rebate” that Congress provided.  To Pfizer, HHS’s interpretation is “out of step” with the Supreme Court’s “longstanding efforts to ensure that criminal laws do not sweep more broadly than Congress intended.”

If SCOTUS takes up this case, we will expect to see HHS make familiar responses to Pfizer’s AKS interpretation arguments as explained above, relying on the plain meaning of “induce” and “willfully” and declining to interpret the AKS by distinguishing it from the BIS.

It remains to be seen how the justices will respond to Pfizer’s petition, but without a circuit split on this issue, it is less likely that they will take up the case.  SCOTUS has until Dec. 14, 2022 to decide whether to grant certiorari.  For now, the Second Circuit decision still stands: however serious the disease, however beneficial a copay assistance program might be to patient access to treatment, and however well-intentioned the manufacturer may be, manufacturer copay programs that include government beneficiaries are at high risk under the AKS.

Categories: Health Care