OIG Advisory Opinion Approves Ostomy Samples

King & Spalding

OIG recently issued Advisory Opinion No. 18-02 addressing free samples provided by a company that distributes and sells ostomy products. The OIG Advisory Opinion found that, although the company’s practice of distributing free samples implicates the Federal Anti-Kickback Statute because these free samples may be intended to induce beneficiaries to purchase the products in the future, the arrangement will not result in administrative sanctions because it “presents a low risk of fraud and abuse.”

Although the company distributes and sells the ostomy products, the company does not manufacture the items or own or operate, directly or indirectly, entities that file claims for payment for the products, or other items and services, to the Medicare program or any State health care program. Under the arrangement described in the Advisory Opinion, the company provides a sample package of ostomy coupling systems and pouches in response to a patient request or healthcare provider request on the patient’s behalf. The sample package, which has a maximum retail value of $38, includes a 2–3 day supply of the products, educational materials regarding instructions for use, and a list of authorized suppliers from which the patient can purchase the products. The company also contracts with a third-party to process requests for samples and administer a user-satisfaction survey.

OIG based its conclusion that the arrangement will not result in administrative sanctions on the following factors:

  • The company includes a notice in the sample package informing the patient that he or she is not permitted to bill any third-party payor for the products.
  • The risk of patient steering is low because patients are not required to commit to any future purchases and patients generally face low barriers to switching among ostomy products offered by competing manufacturers.
  • The practice is unlikely to result in inappropriate utilization because the sample lasts only a few days, after which patients must purchase their own supplies. Future purchases reimbursable by federal healthcare programs are subject to applicable cost-sharing requirements.
  • The arrangement includes safeguards to limit any risk of payments for referrals being made to the third-party contractor that processes the sample requests and administers the surveys. The contractor does not sell any of the products and is not compensated based on sales. The contractor is not permitted to recommend any particular products during the survey process. Finally, the survey data that the contractor provides to the company is aggregated and de-identified, which limits the company’s ability to use the data for targeted marketing.

A copy of OIG Advisory Opinion No. 18-02 is available here.

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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