The Department of Health and Human Services Office of Inspector General (“OIG”) recently issued Advisory Opinion 16-09, which provided a favorable opinion of a company’s (“Requestor’s”) proposal to provide physician offices with a computerized point-of-care vaccine storage and dispensing system free of charge, subject to certain other requirements (“Arrangement”). OIG stated it would not impose sanctions against Requestor for violations of the Civil Monetary Penalties law (“CMP”) or the Anti-Kickback Statute (“AKS”) due to several “unique factors” of the Arrangement.
Background
Requestor manufactures computerized point-of-care vaccine storage and dispensing systems (the “Refrigeration System”) for use in physicians’ offices. The Refrigeration System benefits vaccine management by tracking expiration dates, selecting the correct storage environment for each vaccine and performing tasks such as automated inventory counts, dose control, stock rotation and temperature monitoring.
Under the Arrangement, Requestor would enter into agreements with physicians who have not previously stocked adult vaccines or have done so in low volumes (“Physician Agreements”). Requestor would also enter into agreements with manufacturers of “Sole-Source Vaccines,” or vaccines made by only one manufacturer (“Manufacturer Agreements”). Participating physicians and manufacturers would be free to enter into similar arrangements with other vaccine storage equipment makers. For Physician Agreements, Requestor would install the Refrigeration System in the offices at no cost so long as the physician agrees to stock at least one Sole-Source Vaccine made by a participating manufacturer. The physicians would pay all operational costs associated with the Refrigeration System. The Refrigeration System could store and dispense any vaccine produced by any manufacturer as long as all Sole-Source Vaccines were covered by a Manufacturer Agreement.
Requestor would receive a fee from the manufacturers for each unit of the Sole-Source Vaccine administered from the Refrigeration System (“Per-Dispense Fee”). The participating physician would not receive any portion of the Per-Dispense Fee. Requestor would not be a party to any vaccine supply arrangements negotiated by the physicians or manufacturers. Supplying the vaccines would be up to the physician’s medical judgment, and Requestor would not promote any vaccine manufacturer or product.
OIG Analysis
OIG first expressed that there is substantial risk with the provision of free goods or services to an existing or potential referral source, in this case the participating physicians. While this arrangement does involve the provision of a free good to a referral source funded by an indirect payment by a vaccine manufacturer, several unique factors protect this arrangement from administrative sanctions.
- Any Sole-Source Vaccine manufacturer could enter into a Manufacturer Agreement, and physicians would be free to stock any other vaccines produced by any manufacturer (with the exception of a Sole-Source Vaccine not covered by a Manufacturer Agreement). Participating physicians could thus store vaccines for manufacturers other than the manufacturers who are funding the Refrigeration System. OIG opined that this factor would reduce the risk of unfair competition generally seen in such arrangements.
- Only Sole-Source Vaccine manufacturers would participate in Manufacturer Agreements and physicians could still stock other Sole-Source Vaccines from different manufacturers in other storage units. If a physician determines that a patient needs a Sole-Source Vaccine, the physician can choose which manufacturer to use.
- Requestor certified that no portion of the Per-Dispense Fee would be shared with participating physicians, Requestor would not promote the manufacturers products and physicians would not receive any remuneration for using the Refrigeration System. Further, the Arrangement would not require physicians to administer any certain number of vaccines in order to keep the Refrigeration System.
- The Arrangement focuses on vaccines that are administered in a limited manner and serve the purpose of protecting against preventable diseases.
- The Arrangement could facilitate the U.S. Center for Disease Control’s goal to improve adult vaccination rates, since vaccine storage and management is one hurdle for health care providers in administering adult vaccinations.
Practical Takeaways
OIG concluded that it would not impose sanctions under the AKS or CMP for this Arrangement due to several specific and unique factors. When structuring similar arrangements, entities should consider the following.
- Entities should not restrict physicians from contracting with a variety of manufacturers to supply vaccines;
- Physicians should have freedom to choose the vaccine manufacturer to use without financial incentives or arrangements to persuade them to use a specific manufacturer;
- Any payments to physicians should be carefully scrutinized; and
- Entities should avoid including any contractual terms in arrangements with third parties to stock dispensaries that would take into account the volume or value of referrals or require or promote any marketing or advertising of the utilized products.
This opinion demonstrates that OIG may look favorably on those relationships that facilitate stated goals of other government agencies. While this does not act as a waiver for problematic arrangements, it may serve to encourage other arrangements that advance these government goals.
If you have any questions regarding this Advisory Opinion or any other Fraud and Abuse concerns, please contact:
- Gregg M. Wallander at (317) 977-1431 or gwally@wp.hallrender.com;
- Erin M. Drummy at (317) 977-1470 or edrummy@wp.hallrender.com;
- Alyssa C. James at (317) 429-3640 or ajames@wp.hallrender.com;
- Allison P. Emhardt at (317) 429-3649 or aemhardt@wp.hallrender.com; or
- Your regular Hall Render attorney.
Special thanks to Abigail Kaericher, law clerk, for her assistance in the preparation of this Health Law News article.
Please visit the Hall Render Blog at http://blogs.hallrender.com/ or click here to sign up to receive Hall Render alerts on topics related to health care law.
