Antikickback: OIG Warns Industry to Stay Out of Trouble

Sherrie Conroy

April 1, 2007

5 Min Read
Antikickback: OIG Warns Industry to Stay Out of Trouble


Robinson cautioned the device industry to make sure payments are legal.

The Office of the Inspector General is increasing its focus on medical device companies that pay physicians or hospitals to use their devices. OIG will prosecute any firm participating in fraudulent practices, said Vicki Robinson. Robinson delivered that message at the AdvaMed annual meeting in April. She is chief of the Industry Guidance Branch of the Office of Counsel to the Inspector General (OIG) at HHS.

Device companies should not be surprised. When multiple cases arose in the pharmaceutical industry several years ago, Robinson said OIG decided then that it should also pay closer attention to activities in the device industry. “We had seen big kickback cases against labs and hospitals with pharmaceutical companies, and we began to think there was no good reason that the device industry was going to be immune to the scrutiny under the same fraud and abuse laws.”

It was this foresight that led OIG to include a footnote in its 2003 pharmaceutical compliance guide. The footnote made it clear that the guidance applied to the device industry as well.

Robinson said OIG is now prosecuting a number of cases in the device arena, noting that the media also are increasingly putting device companies under a microscope. Because of this scrutiny, she said that a number of hospitals are also restricting vendor access to physicians.

“With respect to arrangements with physicians, there can be no ostriches,” said Robinson. “You cannot bury your head in the sand and pretend that these issues do not exist.”

Robinson said that OIG views compliance as a top priority and that the device industry must do so as well. However, she acknowledged that compliance creates a number of challenges for the device industry, including the need to create a corporate culture that promotes ethical compliance.

OIG recognizes that device companies must have relationships with physicians in order to develop and design safe and effective products. “That also means OIG has to be looking at device companies very closely to ensure that the relationships are for bona fide reasons. Marketing goals create a powerful temptation to circumvent the rules in the interest of marketing the product,” she said.

She cautioned that customer expectations can also make it difficult to adhere to compliance. “There are customers in your market that expect to receive things—and they may even ask for them,” she said.

“There's also the issue of allocating compliance resources,” she said. “Device companies have a certain amount of resources to spend. I want to make the pitch to you to allocate the appropriate amount to compliance.”

Robinson stressed that a device company should want a robust and impressive compliance program. “It is far better to identify and resolve the problem yourself than to have the government knock at your door,” she said. “If you have an effective compliance program, you will save money on all of the expenses that come with having problems.”

For example, she said that companies with robust programs would likely avoid or decrease qui tam, or whistleblower, lawsuits. An effective program can help avoid or reduce corporate integrity agreements (CIAs) that might be imposed if a company does have a problem. “CIAs are mandatory compliance agreements. However, we do take into account when a company has a system or at least part of a system that already works,” she said.

“Industry codes are a starting point, but they are not get-out-of-jail-free cards,” cautioned Robinson. “It is good that this industry is interested in promoting industry compliance, and we commend you for doing it. The fact that you have an industry code, however, may not be enough to prevent fraud and abuse. Using them as a starting point will minimize risk.”

Having a compliance program that simply sits on a shelf is also not sufficient. “Putting it in a binder but not implementing it is not going to do. It's having the effective compliance program that is going to be the important thing to the government,” said Robinson.

Much of OIG's focus is on cases that fall under the antikickback statute. “This criminal intent–based statute prohibits the purposeful payment of anything of value to generate federal healthcare program business,” Robinson said. “It is illegal to buy and sell business with federal healthcare programs. Anyone who offers, pays, solicits, or receives anything of value to generate federal programs has committed a crime,” she said.

Robinson noted that there are safe-harbor regulations that enable device companies to engage in payment practices that are lawful. “In the safe harbor, you are lawful, but you have to be 100% in—if any part of your boat is sticking out of the harbor, you're not safe,” said Robinson. “We encourage you to use safe harbor where you can.” With the antikickback statute, she said, OIG simply has to show that one purpose of a payment was to get business. “If part of the payment is made for a lawful purpose, but part isn't, it won't save the arrangement.”

Robinson also shared some tips for minimizing risk under the statute. “A really important step companies can take is to separate their marketing function from their research and clinical functions,” she advised. “If the sales reps are awarding the research grants, that creates much more risk. Don't have sales reps use research contracts or royalty agreements as sales tools.”

Device companies must also ensure that educational funding is aboveboard. OIG looks for the following:

  • Is funding based on referrals?

  • Are physicians being selected based on the volume of business they generate?

  • Is the manufacturer controlling or influencing the price and content of the program?

  • Is the speaker or presenter paid by the manufacturer?

OIG has similar concerns with research, including whether fair market value is paid for services actually rendered and whether research is being directed by the marketers.

Contributions to physician foundations should be closely scrutinized, she advised. “We are hearing of situations in which these payments are actually conduits to pay for staff rather than for bona fide charitable research.”

The increased focus on these statutes presents significant risks for device manufacturers. “You want to pay for legitimate necessary services—not pay for business,” said Robinson. “You can reduce your risk with an effective compliance program.”

Copyright ©2007 Medical Device & Diagnostic Industry

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