Blog: OIG Advisory Opinion Approves Ostomy Supply Distributor to Provide Free Product Samples

Cooley LLP

[author: Robert Paster]

On Monday, the Office of Inspector General (OIG) issued Advisory Opinion No. 18-02 regarding an arrangement in which the Requestor who distributes and sells, but does not manufacture, certain ostomy products (Products) provides a limited number of free Product samples to patients and contracts with a third party (Contractor) to conduct follow-up customer satisfaction surveys (the Arrangement). The OIG concluded that (i) the Arrangement does not implicate the civil monetary penalty provision prohibiting inducements to beneficiaries, 42 U.S.C. §1320a–7a(a)(5) (Beneficiary Inducement Provision); and (ii) although the Arrangement could potentially generate prohibited remuneration under the federal Anti-Kickback Statute, 42 U.S.C. §1320a-7b(b) (AKS), if the requisite intent to induce or reward referrals of Federal health care program business is present, the OIG will not impose administrative sanctions on the Requestor in connection with the Arrangement.

Under the Arrangement, Requestor ships Product samples with a retail value of $6-38 and designed to last 2-3 days to a patient, including Federal health care program beneficiaries, upon request. Patients are provided at the time of the Product sample request with an option to participate in a user satisfaction survey. The form includes a clearly demarcated option to opt-out of the survey and statement that participation in the survey is not required to receive the Product sample.

The OIG determined that the Arrangement does not implicate the Beneficiary Inducement Provision because the remuneration provided under the Arrangement would not influence a Federal health care program beneficiary to make any future purchases from a particular provider, practitioner, or supplier. Specifically, Requestor is not a provider, practitioner or supplier because it does not own or operate, directly or indirectly, any entities that file claims for payment for the Products, or other items and services, to the Medicare program or any State health care program.

Further, the OIG found that the Arrangement presents a low risk of fraud and abuse for the following reasons:

  • Neither patients nor Federal health care programs incur any costs in connection with the Product samples and patients are informed by the Requstor that they cannot bill any third-party payor for a sample.
  • The risk of patient steering is low because patients generally do not face barriers to switching among ostomy products manufactured by different DME manufacturers or sold by different suppliers and the Products’ retail values are similar to those of competing products.
  • While a patient may continue to use the Products after the sample supply is expended, there is no clinical reason that requires a patient to use the Products over a competitor’s products.
  • A patient’s decision to utilize the Products over a competitor’s product will likely have a minimal impact on Federal health care programs since the Product’s retail value is similar to competing products available on the market.
  • Inappropriate utilization is unlikely because the Product sample is limited to one 2-3 day supply and any future purchases are subject to applicable cost-sharing obligations and quantity restrictions.
  • The Arrangement includes safeguards to limit the risk that the Contractor is paid for Product referrals, including that the Contractor does not sell the Product, is not compensated based on future Product sales, and is not permitted to recommend the Products or any other items sold by Requestor during the survey process.
  • Patient survey data provided to the Requestor is aggregated and de-identified.

While this OIG Advisory Opinion may only be relied on by the Requestor, it provides insight into the OIG’s application of the law relevant to similar programs. Notably, the OIG made it clear that it considers this program very different from “problematic ‘seeding’ programs” in which a manufacturer may offer a free drug sample that is more expensive than competing drugs or more dangerous for the patient to stop using with the goal of ensuring the patient obtain subsequent product that would be billed to Federal health care programs.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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