The Office of Inspector General (“OIG”) of the Department of Health and Human Services, generally, would have concerns about a potential or existing referral source receiving free goods or services, since these free goods and services could be used to provide unlawful payments for the referral of Federal health care program business. However, under Advisory Opinion 16-09, the OIG decided not to pursue sanctions against a company that provides computerized point-of-care storage and dispensing systems for vaccines (the “Dispensing System”) to physicians free of charge due to the specific circumstances in this arrangement.
The Arrangement: A manufacturer of a refrigerated vaccine storage and dispensing system (the “Dispensing System”) would retain title to their Dispensing System and the internal data, but would provide the system free of charge to certain physicians. The manufacturer would enter into two types of agreements:
1) Sole-Source Vaccine Agreement – The Dispensing System manufacturer would enter into an agreement with manufacturers who are the sole suppliers of a vaccine (“Sole-Source Vaccine”). The Sole-Source Vaccine manufacturer would pay the Dispensing System manufacturer a fee for each unit of vaccine that a participating physician dispenses out of the Dispensing System (the “Dispense Fee”).
2) Physician Agreement – Dispensing System manufacturer would enter into agreements with only those Physicians who had not previously stocked adult vaccines previously, or only stocked vaccines sporadically or in low volumes. The Dispensing System would be free of charge to physicians, provided the physician agrees to stock at least one Sole-Source Vaccine that has an Agreement with the Sole-Source Vaccine manufacturer. The physician would be responsible for the internet connectivity and utilities for the system. The physician could use the Dispensing System to store other vaccines. However, the physician may only store Sole-Source Vaccines if the vaccine manufacturer has an agreement with the Dispensing System manufacturer.
OIG’s Analysis: Due to the following “unique factors” the OIG concluded that the following arrangement would be permissible.
- No Dispense Fee is shared with the physicians.
- The Dispense Fee is paid directly to the Dispensing System manufacturer, who does not generate Federal healthcare program business.
- The risk of unfair competition is reduced because (1) only Sole-Source Vaccine manufacturers can enter into an agreement with the Dispensing System manufacturer; (2) More than one Sole-Source Vaccine manufacturer can have their vaccines in any machine and each would be paying the Dispense Fee; and (4) Since a physician needs the Sole-Source Vaccine for patient, the physician has inherently chosen the manufacturer, since they cannot get the vaccine from anywhere else.
- Physicians may store any non-sole-source vaccines in the Dispensing System that they wish.
- The manufacturer will not advertise, market or promote any specific vaccine.
- Adult vaccines are administered in limited manner and serve to prevent diseases, which if not prevented could lead to costlier services to federal payors.
- The Arrangement helps achieve the CDC’s goal to improve adult vaccination rates which is a benefit from a public policy perspective.
- The Dispensing System helps mitigate one of the key challenges – proper vaccine storage and management
While it appears the opinion is likely limited to the discrete issue of vaccine storage, it does demonstate that the OIG may be willing to entertain proposals that align with public health concerns or other government agency goals, even in situations where there could be a risk of fraud or abuse to federal payor programs.
If your practice is interested in guidance regarding free vaccine dispensing systems or similar arrangements, be sure to consult experienced counsel.