OIG Advisory Opinion Allows Medical Device Supplier to Provide Sample Products to Patients

by Robinson+Cole Health Law Diagnosis

On May 7, 2018, the Health and Human Services Office of Inspector General (OIG) issued a  favorable Advisory Opinion in which it permitted a medical device company (Requestor) to provide free sample ostomy products and conduct follow-up customer satisfaction surveys (Arrangement).

Under the Arrangement, the Requestor provides ostomy products (Sample Products) at no charge to patients following surgery, upon request by either the patient or the patient’s healthcare provider.  The Sample Products are provided only once per patient and are designed to last no more than three days, with the approximate cost of the Sample Products between $6 and $22.  The Sample Products are not conditioned on future purchases from the Requestor. Along with the Sample Products, the Requestor provides educational and marketing materials, including a phone number and website of an educational resource, and a list of durable medical equipment suppliers from which patients may buy necessary ostomy products.

The Requestor contracts with a third-party to collect requests for Sample Products, to mail the Sample Products to patients and to conduct follow-up customer service surveys (Contractor).  The Contractor receives all information from the patients or the health care provider, and ensures that the patient receives only the appropriate and necessary Sample Products.  The request form submitted to the Company includes a patient’s agreement to participate in a customer satisfaction survey.  Patients are permitted to opt out of such participation. Survey results are communicated to the Requestor by the Contractor in aggregate, de-identified form.

The Requestor made a number of representations to OIG in its request for an advisory opinion, including, but not limited to the following:

  • The Requestor does not manufacture the sample products and does not file claims for payment for medical equipment with any payor.
  • Through the customer satisfaction survey, the Requestor collects information related to the patient’s satisfaction with the products provided and provides patients with information about the products and supports services, if requested.
  • The Requestor does not use patient information for marketing purposes, other than conducting the patient satisfaction surveys.
  • The fees paid to the Contractor are consistent with fair market value and the compensation paid does not vary based upon volume or value of sales.
  • A written agreement between the Requestor and the Contractor specifies that the Contractor is (i) permitted to provide only one sample per patient, (ii) not permitted to recommend specific products and (iii) not permitted to offer anything of value in exchange for participation in the customer satisfaction surveys.
  • The Requestor retains the right to audit both the Contractor and the Subcontractor to ensure that its requirements are satisfied.

The OIG concluded that the civil monetary penalties law (CMP) is not implicated because the Requestor does not manufacture products and does not, directly or indirectly, files claims for any product or services to the Medicare program or the State health care programs. The Arrangement does, however, implicate the Anti-kickback Statute (AKS) because the Sample Products may be intended to induce federal health care program beneficiaries to purchase the Sample Products in the future. The OIG found that risk of fraud and abuse under the AKS is low for the following reasons:

  • The Arrangement is unlikely to increase costs to federal healthcare programs.
  • There is a low risk of “patient steering” to the Requestor because the provision of the Sample Products is not contingent on future purchases from the Requestor, the use of the Sample Products is limited in duration and patients face no barriers in purchasing ostomy products from a supplier other than the Requester.
  • The Arrangement is unlikely to result in inappropriate utilization of ostomy products.
  • The Arrangement does not involve payment to the Contractor for referrals of business to the Requestor.

The Advisory Opinion is based on the facts specific to the Arrangement but provides useful insight into safeguards that the OIG will look to when evaluating other arrangements between providers or suppliers and referral sources that implicate the AKS.

[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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