In January, a federal jury in the Northern District of Illinois convicted Mark Sorensen, owner of durable medical equipment (DME) pharmacy Symed Inc., for participating in a conspiracy to obtain $24.8 million in illegal kickbacks to generate business for his DME pharmacy in violation of the Anti-Kickback Statute (AKS) (42 U.S.C. 1320a-7b(b)). It was alleged that Sorensen (and a co-defendant) paid illegal kickbacks in exchange for patient leads to bill Medicare, TRICARE, and the Department of Labor’s Office of Workers’ Compensation Programs (OWCP) for medically unnecessary DME and that Sorensen billed government programs for approximately $87 million and received $24.8 million as a result of the kickbacks. The AKS prohibits the receipt, solicitation, or payment of any remuneration in exchange for referrals, purchases, or orders of items or services directly or indirectly reimbursed by federal health care programs.

This prosecution provides pharmacies and DME companies with four useful reminders:

  • Lead generation arrangements and contract sales forces inherently implicate the AKS and care must be taken in structuring and operationalizing these arrangements.
  • Prosecutors routinely question percentage compensation or commissions paid to independent contractors providing marketing services and sales support. These payment structures should only be used in limited circumstances and with the advice of counsel.
  • Use of pre-printed orders with pre-selected diagnosis codes or pre-drafted statements of medical necessity can raise questions as to whether the treating physician truly exercised independent judgment in determining the need for the medication or equipment.
  • Written contracts should accurately reflect the arrangement, including the services to be provided and the payments to be made. The AKS personal services and management contracts and outcomes-based arrangements safe harbor should be considered when structuring arrangements and drafting the associated contract.  While it is obvious that “sham” relationships must be avoided, it is also important to be mindful that arrangements should not evolve over time in a matter that is not reflected in written amendments. Additionally, regulators often look at emails and other correspondence, which can result in legitimate arrangements appearing improper and can call appropriate relationships into question.

Case Discussion

Between 2015 and 2018, Sorensen paid for patient leads from broker Bernie Perconti (who had purchased the leads from marketing companies) to increase the number of patients utilizing Symed’s services. These leads included patients’ names, phone numbers, and email addresses, referred to as “raw leads.” “Raw leads” were developed (by the broker and/or other unnamed parties) into “completed leads,” which included the patient’s doctor’s name and contact information, the patient’s federal health care benefit program enrollment number, and other patient information. “Completed leads” were sometimes accompanied by a signed doctor’s order prescribing a DME product (often a back brace) to the patient whose name appeared in the completed lead.

Sorensen, Perconti and others prepared and shared documents using Symed’s logo, which would be used to generate leads and could allegedly be used to induce the beneficiaries’ doctors to submit documentation supporting medical necessity, including pre-selected diagnosis codes and pre-selected reasons that the DME products were medically necessary for the beneficiary. There were no specific allegations that payments for leads were made to prescribers under the arrangement; nonetheless the government took the position that the payments were inappropriate.

Sorensen made kickback and bribe payments to Perconti and others in return for Perconti’s referral of signed DME prescriptions or completed leads, which Sorensen submitted to Medicare, OWCP, and TRICARE for payment. The conspirators discussed which braces they should pursue for leads, focusing on improving profitability and discussing how many of each type of brace would be sold each week. Upon learning that back braces were “more profitable,” the conspirators focused on generating leads for such braces.

In June 2015, Sorensen and Perconti entered into a backdated contract providing that the marketing company would receive 79% of the compensation for each completed lead that was successfully paid for under federal healthcare programs, while Symed would receive the remaining 21% of proceeds paid per claim.

In August 2016, Symed and Perconti entered into a sham contract that did not incorporate a percentage-based payment structure but instead included a “service fee” which provided for Symed to pay Perconti’s company an hourly rate for specific administrative services, such as call center, advertising, and shipping and delivery confirmation. Despite this supposed change, the parties agreed that the percentage-based payment structure would continue in practice, even communicating about how to make the terms of the hourly fee structure appear to be legitimate and creating false invoices.

In January 2023, Sorensen was convicted of one count of conspiracy and three counts of payment of illegal kickbacks for receiving approximately $24.8 million for DME that was not medically necessary and/or procured through the payment of kickbacks; the co-conspirators each pleaded guilty to conspiracy and are scheduled to be sentenced at a later date. Sorensen faces a maximum penalty of five years in prison on each count of conviction.

Implications for Pharmacies

The Sorensen case reminds pharmacies and DME providers of the importance being thoughtful in arrangements with third parties, particularly marketing and sales arrangements, to be sure that the associated contracts accurately reflect the full arrangement between the parties and avoid interactions that can lead to improper appearances.

If you have any questions about the implications of this case, please contact the authors.