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This advisory is published by Alston & Bird LLP to provide a summary of signicant developments to our clients and friends. It is intended
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Health Care ADVISORY n
AUGUST 22, 2016
Don’t Discount the Government’s Recent Statement of Interest
in False Claims Act Case
By Robert D. Stone & Tamara R. Tenney
On August 8, 2016, the U.S. government led a Statement of Interest in an ongoing False Claims Act (FCA)/Anti-
Kickback Statute (AKS) case, U.S. ex rel. Herman v. Coloplast Corp., No. 1:11-cv-12131 (D. Mass.). Certain claims in the
case turn on whether particular arrangements qualify as “discounts” under the discount exception or safe harbor to
the AKS or whether they should instead be viewed as illegal kickbacks. While the government has not intervened
in the kickback claims discussed in the Statement of Interest, the document provides insight into the government’s
current interpretation of the discount exception and safe harbor.
Background
In December 2011, qui tam relators led suit in the District of Massachusetts against Coloplast A/S and its subsidiary
Coloplast Corp, as well as multiple durable medical equipment (DME) manufacturers and suppliers in the ostomy,
continence care and wound/skin care industries. The complaint alleged that Coloplast had paid kickbacks to other
defendants in a variety of forms, such as “patient conversion bonus payments to sales representatives,” “market share
‘incentive payments’” and “below-market discounts,” in order to induce the defendants to recommend the referral,
order and purchase of certain DME products.
The government intervened in certain claims against some of the defendants—i.e., Coloplast, Liberator Medical
Supply Inc., Hollister Inc. and Byram Healthcare Suppliers Inc.—all of which ultimately settled those claims with the
government. These settlements ranged from $500,000 to $11.5 million. Many of the claims against the defendants
(collectively and individually), however, remained live, and the relators led their third amended complaint in May
2016, alleging additional AKS violations against several of the defendants. Two of these defendants, CCS Medical Inc.
and Hollister, led motions to dismiss in June 2016.
Dismissal of Claims Against CCS
On July 29, 2016, the court granted CCS’s motion to dismiss claims against it for allegedly engaging in a kickback
scheme with Coloplast. After listing the requirements for the statutory discount exception and the regulatory
