OIG Approves Proposal to Implement Computerized Point-of-Care Vaccine Storage and Dispensing Systems for use in Physicians’ Office
Printed in the Legal Intelligencer 11/1/2016
By: Vasilios J. Kalogredis, Esquire*
On September 16, 2016, the Department of Health and Human Services Office of the Inspector General (“OIG”) issued Advisory Opinion 16-09 which stated that the OIG would not impose sanctions against a company (“Requestor”) which proposed to provide physician offices with a computerized point-of-care vaccine storage and dispensing system free of charge, subject to certain other requirements (“Proposed Arrangement”). This Advisory Opinion is of significance because the OIG held that the Proposed Arrangement would not constitute grounds for the imposition of sanctions under the exclusion authority in Section 1128(b)(7) or the Social Security Act, of the civil monetary penalty provision of Section 1128A(a)(7), as those sections relate to the commission of acts described in Section 1128B(b), the Federal Anti-Kickback Statute (“AKS”).
AKS makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. See Section 1128B(b) of the Social Security Act. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, AKS is violated. By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible “kickback” transaction. For purposes of AKS, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.
Requestor is a company that manufactures a computerized point-of-care vaccine storage and dispensing system (“Refrigerator System”) for use in physician offices. The Refrigerator System, which is the size of a small refrigerator, is designed specifically for vaccine storage.
The Refrigerator System provides three principal vaccine management benefits to physicians:
1) selection of the correct storage environment for each vaccine based on the National Drug Code embedded in the vaccine’s package barcode, which is scanned when the vaccine is loaded into the Refrigerator System;
2) electronic tracking and notification of expiration dates; and
3) automated inventory counts, unit dose control, stock rotation, and temperature monitoring.
Requestor maintains the position that the Refrigerator System will encourage the administration of adult immunizations and improve adult immunization schedules to reduce serious health consequences of vaccine-preventable diseases among adults. Requestor cites recommendations and opinions provided by the U.S. Centers for Disease Control (“CDC”) and Prevention’s Advisory Committee on Immunization Practices to support the necessity of Requestor’s Refrigerator System. There are vaccines recommended by the CDC for routine use in adults that are manufactured by only a single manufacturer, Sole-Source Vaccines. Others are manufactured by multiple manufacturers. All adult vaccines recommended by the CDC are covered by Medicare. Coverage by Medicaid varies by state.
Under the Proposed Arrangement, Requester would enter into two different agreements: 1) agreements directly with physicians who have not previously stocked adult vaccines, or have done so in miniscule volumes, in their offices (“Physician Agreements”), and 2) agreements with any manufacturer of Sole-Source Vaccines (“Manufacturer Agreements”).
For Physician Agreements, Requestor would install the Refrigerator 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 (such as internet connectivity and utility costs) associated with the Refrigerator System. The Refrigerator 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 Refrigerator 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. The Agreements would not otherwise require participating physicians to purchase, or any participating manufacturer to sell any particular volume of any particular vaccine from or to each other. Supplying the vaccines would be up to the physician’s medical judgment, and Requestor would not promote any vaccine manufacturer or product. Requestor does not have any other lines of business related to items or services payable by any Federal health care programs.
In Opinion 16-09, the OIG expressed its concern that there is a substantial risk with the disbursement of free goods or services to an existing or potential referral source (i.e. the participating physicians). However, the OIG relied heavily on the unique facts set forth by Requester when describing the mechanics of the Proposed Agreement and ultimately determined that the Proposed Agreement would not be subject to administrative sanctions imposed by the OIG. Opinion 16-09 references five key points which led the OIG to reach its ultimate conclusion that the Proposed Agreement would not subject Requester to administrative sanctions.
First, the OIG explained that 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 Refrigerator System. The OIG stated that this set-up would reduce the risk of unfair competition which would tend to favor manufacturers directly funding the Refrigerator System.
Secondly, the Proposed Agreement does not limit a physician’s decision to administer a vaccine from a particular manufacturer. Only Sole-Source Vaccine manufacturers would participate in Manufacturer Agreements. If a physician determines that a patient needs the Sole-Source vaccine, the physician effectively selects the manufacturer at the same time. If a physician determines that a patient needs a Sole-Source Vaccine, it would not be possible to choose an alternative vaccine to be stored in the Refrigerator System.
Third, although the Proposed Arrangement would involve a Per-Dispense Fee structure, the participating manufacturers would pay the fee to Requestor, which would not be the party in a position to generate Federal health care program business. Requestor certified that no portion of the Per-Dispense Fee would be shared with participating physician. Additionally, Requestor would not promote any manufacturers or products and physicians would not receive any remuneration for using the Refrigerator System. And further, the Arrangement would not require physicians to administer any certain number of vaccines in order to keep the Refrigeration System.
Fourth, the Proposed Arrangement only focuses on adult vaccines, which are administered in a limited manner. Unlike drugs used to treat ongoing and chronic illnesses and diseases, adult vaccines are used to prevent diseases that could lead to additional and more costly services.
And finally, the Proposed Arrangement could facilitate the CDC’s goal to improve adult vaccine rates. The CDC calls on all health care professionals to take steps to ensure that their adult patients are fully vaccinated.
In sum, the OIG Advisory Opinion No. 16-09 concludes that the OIG would not impose sanctions under the Social Security Act or AKS for these types of arrangements which seem to encourage relationships that facilitate stated goals of other government agencies. If one is considering a similarly structured arrangement, there are a few factors to keep in mind. The entity should not restrict a physician’s right and ability to contract with other vaccine manufactures. These physicians must be able to make unbiased and medically supported decisions, without financial incentives, when choosing which vaccine manufacturer to use on a specific patient. And lastly, any direct or indirect payments to physicians or contractual terms that take into account the volume or value of referrals or require or promote any marketing or advertising of the utilized products should be carefully scrutinized and avoided.
To read the OIG Advisory Opinion 16-09, visit: https://oig.hhs.gov/fraud/docs/advisoryopinions/2016/AdvOpn16-09.pdf.
Vasilios (“Bill”) J. Kalogredis is Chairman of Lamb McErlane’s Health Law Department. Bill has been practicing Health Law for over 40 years, exclusively representing physicians, dentists, group practices and other health care professionals and health care-related entities locally and across the nation.
*Katherine E. LaDow, an associate with Lamb McErlane P.C., contributed to this article. Katherine is an associate in the litigation department. She concentrates her practice in the areas of state civil litigation, family and health law.
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