Pharmaceutical companies have paid billions of dollars to the US government and whistleblowers to resolve allegations that they used speaker programs and other payments to induce doctors to prescribe their drugs. These cases raise an important economic question: Why can paying a doctor to promote a pharmaceutical product be an illegal kickback when paying a salesperson to promote a product is perfectly legal?
Consider several recent settlements.
In 2022, Biogen agreed to pay $900 million to resolve allegations that it caused false claims to be submitted to Medicare and Medicaid by paying health-care professionals through speaker honoraria, speaker-training fees, consulting fees, and meals to induce prescriptions of its drugs. The government alleged that these payments violated the federal Anti-Kickback Statute.
In 2020, Novartis agreed to pay $678 million to resolve allegations involving sham speaker programs. According to the U.S. Attorney’s Office press release: “The Government’s complaint further alleged that NOVARTIS sales representatives, on the instruction of their managers, selected high-volume prescribers to serve as the paid “speakers” at these events with the intent to induce them to write more — or keep writing many — NOVARTIS prescriptions. The sales representatives then pressured the speakers to increase their prescriptions of NOVARTIS drugs, and often dropped doctors from the program if they failed to do so.”
More recently, in April 2025, Gilead Sciences agreed to pay $202 million to resolve allegations that it used speaker programs to pay kickbacks to doctors to induce them to prescribe its HIV drugs. Gilead also made factual admissions concerning its conduct.
Many other multimillion-dollar settlements have been reached for speaker program violations.
But why are these payments illegal? In most markets, paying someone to promote a product or generate business is not inherently unlawful. A company can pay a salesperson a commission for making sales. A real-estate broker can receive a commission for bringing a buyer. A manufacturer can pay an advertising agency to promote its products.
The unusual feature of pharmaceutical markets is that the person making the purchasing decision is often not the person who bears the full cost of the purchase.
The Missing Consumer
In an ordinary market, consumers have strong incentives to consider price and quality. If I am buying a car with my own money, I have an incentive to compare prices, features, reliability, and competing products. If a salesperson is paid a commission, I know the salesperson has a financial incentive to make the sale, and I can take that incentive into account.
Health care is different.
A physician generally decides which prescription drug a patient should receive, but the patient may pay only a small portion of the cost. Medicare, Medicaid, private insurers, or other third parties pay much of the bill.
That separation between the decision-maker and the person paying the bill creates an unusual economic environment. A physician who chooses an expensive drug does not necessarily bear the additional cost. And a pharmaceutical company that successfully persuades physicians to prescribe its product can potentially receive substantial revenue from insurers and government programs.
The Anti-Kickback Statute addresses one particularly troubling consequence of this arrangement. Paying a physician is not automatically illegal. The problem is paying remuneration with the intent to induce or reward referrals or purchases of items or services reimbursed by federal health-care programs.
That distinction explains why legitimate educational programs can exist alongside illegal kickback schemes.
A pharmaceutical company can have a legitimate reason to hire a physician to explain the risks, benefits, and appropriate use of a drug. But the economic purpose changes if the physician is selected because he or she is a high-volume prescriber, is paid substantial amounts, and is expected to increase prescriptions as a condition of continuing to receive payments.
The government alleged precisely this kind of conduct in the Novartis case. According to the Justice Department, sales representatives selected high-prescribing physicians as speakers and, in some instances, pressured them to increase their prescriptions.
Why Government Health Care Creates the Incentive
The deeper economic problem is not simply that pharmaceutical companies sometimes behave badly. It is that government financing and regulation can create powerful incentives for such behavior.
Medicare and Medicaid pay for enormous quantities of health-care services and prescription drugs. Because the government is a major purchaser, the normal market process is substantially altered.
Medicare physician payments, for example, are determined through the Medicare Physician Fee Schedule. CMS has historically relied heavily on information supplied by the American Medical Association’s Relative Value Scale Update Committee (RUC) in determining the values assigned to physician services. The RUC is a little-known but highly influential committee that helps determine the prices doctors are paid for thousands of medical services. CMS itself has acknowledged concerns about the subjectivity and incentives involved in this process.
The same basic problem appears throughout health care: when the person making the medical decision is not the person paying the full cost, ordinary market incentives become weaker.
That does not mean physicians are dishonest or that pharmaceutical companies cannot provide useful medical education. It means that the institutional structure creates opportunities for financial incentives to influence medical decisions in ways that would be less likely in a conventional consumer market.
Regulation Can Create the Problem It Tries to Police
There is a broader lesson here.
Third-party payment has produced an elaborate system of rules designed to prevent companies and physicians from exploiting the incentives created by health-care reimbursement. The Anti-Kickback Statute is one of those rules.
The resulting system can become self-reinforcing. When consumers are separated from the financial consequences of their health-care decisions, opportunities arise for waste and distorted incentives. Government then creates additional rules to prevent participants from exploiting those distortions.
Pharmaceutical speaker programs illustrate the dilemma particularly well. A program can provide genuine medical education. But the same program can also become a mechanism for transferring money to physicians who prescribe a company’s products.
The line between the two may not always be obvious. The Department of Health and Human Services Office of Inspector General (OIG) has issued a Special Fraud Alert: Speaker Programs listing the features of physician speaker programs that could violate the Anti-Kickback Statute. The enormous settlements involving Biogen, Novartis, Gilead, and other pharmaceutical companies demonstrate the financial consequences when the government alleges that the line has been crossed.
A more market-oriented health care system would give patients greater control over their health-care dollars and greater responsibility for the costs of their decisions. If patients were able to make more purchasing decisions in competitive markets, physicians and pharmaceutical companies would have stronger incentives to provide value rather than simply maximize reimbursement.
Reducing government control over health-care financing and allowing consumers to make more decisions with their own money would not eliminate every conflict of interest. But it could reduce the enormous incentives for companies and providers to manipulate a system in which someone else is paying the bill.
Pharmaceutical speaker-program litigation is therefore more than a story about corporate misconduct. It is also a window into the economic consequences of separating the consumer from the cost of health care.
