OIG Issues Advisory Opinion on Provision of Samples by a Device Distributor

On April 30, 2018, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a favorable Advisory Opinion No. 18-02 regarding the provision of sample ostomy products to patients by a device distributor (the Arrangement). The OIG concluded that the beneficiary inducement civil money penalty (CMP) was not implicated, as the Arrangement would not influence a beneficiary to make any future purchases from a provider, practitioner or supplier. Specifically, the OIG reconfirmed its position that manufacturers and distributors are not considered a "provider, practitioner or supplier," unless the entity also owns or operates, directly or indirectly, pharmacies, pharmacy benefit managers (PBMs) or other entities that file claims for payment under the Medicare or Medicaid programs.

The Anti-Kickback Statute (AKS), however, is implicated, as the free samples may be intended to induce federal healthcare program beneficiaries to self-refer to the ostomy products in the future. In approving the Arrangement, the OIG concluded that the Arrangement presents a low risk of fraud and abuse, and declined to impose administrative sanctions for the following reasons:

• The Arrangement is unlikely to increase costs to patients of federal healthcare programs, as the patients are explicitly instructed that the samples cannot be billed to any third-party payor.
• The Arrangement does not contain any of the hallmarks associated with problematic "seeding" programs, such as barriers to switching between products or high costs of products compared to alternative treatments. Further, the provision of the sample is not contingent on any future purchases.
• The one-time sample covers a short period of time (two to three days) and is relatively low in value ($6 to $38).
• The Arrangement is unlikely to result in inappropriate utilization. Once the free sample is depleted, the patient will be subject to cost-sharing obligations and restrictions on the quantity of ostomy supplies that will be reimbursed by federal healthcare programs.