OIG Opinion: Providing Sample Ostomy Products Does not Violate Anti-Kickback Statute

OIG advisory opinionAn ostomy product distributor can give free samples to Medicare patients without worrying about violating the federal Anti-Kickback Statute, according to a recent advisory opinion from the Office of Inspector General for the U.S. Department of Health and Human Services.

The Anti-Kickback Statute makes it a criminal offense to knowingly and willfully offer, pay, solicit or receive remuneration to induce or reward referrals of items or services reimbursable by a federal healthcare program.

In its request for an opinion, the unnamed distributor noted that while it sells products designed to collect human waste, it does not own nor operate any businesses that file claims for payment for the products. Instead, the products are sold by durable medical equipment (DME) suppliers.

The distributor said that after having surgery, patients usually are fitted with an ostomy product at the hospital. Under the proposed arrangement, the distributor provides a limited number of sample products to patients at no charge, along with educational and marketing materials, as well as a list of DME suppliers where patients can purchase future products. However, the patient is under no obligation to purchase future products distributed by the company or from the list of suppliers. The samples have a value of anywhere from $6 to $22, depending on the type used. The patients also are asked to fill out a customer satisfaction survey, but are under no obligation to do so.

The distributor said it contracts with an unaffiliated third-party to process requests for samples and administer the customer satisfaction survey. That third-party does not sell, distribute or supply the products and is not compensated based on the volume or value of the sales of the ostomy products.

Once the third-party provider receives a valid sample request, it is sent to a fulfillment center that ships the products. The fulfillment center receives approximately $5 for each sample request it fulfills, plus the cost of shipping and a flat fee of $200 per month, regardless of how many sample requests it fulfills each month. The center is not compensated based on the volume or value of the products shipped.

The OIG concluded that the arrangement would not violate the Anti-Kickback Statute because the remuneration provided under the arrangement would not influence the patient to make future purchases from a particular provider, practitioner or supplier. The OIG did go on to state that while the free samples may be intended to induce patients to “self-refer to the products in the future” and therefore could be a violation of the Anti-Kickback Statute, the arrangement presents “a low risk of fraud and abuse” under the statute.

It stated four reasons why it came to this conclusion:

  • Under the arrangement, neither patients nor federal health care programs should incur any costs for the sample products furnished by distributor.
  • The risk of inappropriate patient steering to the products under the arrangement is low because future purchases of ostomy products remain an exercise of each patient’s personal preferences.
  • The arrangement is unlikely to result in inappropriate utilization. The free sample lasts only a few days, after which patients need to purchase their own supplies.
  • The arrangement includes safeguards to limit the risk that the contractor is paid for product referrals.

It’s important to note that the Advisory Opinion is based on the facts specific to this arrangement. However, the opinion does provide an idea of what the OIG considers when reviewing other arrangements that may implicate the Anti-Kickback Statute. That’s why it’s always important to discuss such potential arrangements with legal counsel.

If you have any questions about arrangements you have in place or are considering, contact us at 305-358-4500 or send us an email to info@vitalehealthlaw.com.

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It is not intended as professional advice and should not be construed as such.