Healthcare providers of all kinds, as well as medical equipment suppliers, have traditionally relied upon discounts as a legitimate means of attracting patients and commercial clients without running afoul of the federal anti-kickback statute (AKS). Congress specifically created the discount “safe harbor” to the AKS years ago based on its policy of encouraging discounts that are properly disclosed as a means of reducing overall health care costs. However, the U.S. government filed a position paper in federal court this month contending that the discount safe harbor does not protect discounts that are conditioned on more than just the purchase of a product or service, such as conditioning the discount on a retailer’s efforts to convert patients to using a manufacturer’s products.

In U.S. ex rel. Herman v. Coloplast Corp., a relator’s complaint alleged that Coloplast offered discounts on its DME products to retailers in violation of the AKS. The court, the United States District Court for the District of Massachusetts, originally dismissed the relator’s complaint, finding that the relator failed to allege that those discounts fell outside of the discount safe harbor. Although the government has not chosen to intervene in the case at this point, it filed a “Statement of Interest” to advise the court of “its position on the confines of the discount exception to the AKS”. The government summarized its position by stating that a “price reduction that is conditioned on the recipient taking affirmative steps to generate additional business for the seller does not foster price competition that inures to the benefits of the federal health system” and is thus not protected by the discount safe harbor. While the court has not stated that it sided with the government on this issue, it did reverse its prior dismissal of the case to allow the relator to proceed. The decision demonstrates that the government’s view on the discount safe harbor is not as expansive as some may assume, and that providers must consult qualified legal counsel when considering these types of marketing efforts.