Drug and Device Manufacturers Should Take Note of OIG Special Fraud Alert on Laboratory Payments

By Alan M. Kirschenbaum –

Today the Office of the Inspector General (OIG) of the Department of Health and Human Services issued a “Special Fraud Alert on Laboratory Payments to Referring Physicians.”  Despite the focus of the Special Fraud Alert on activities of laboratories, drug and device manufacturers would do well to heed the OIG’s warnings about one of those practices – registry payments. 

The Special Fraud Alert contains strong warnings that even registries with a public health benefit are not immune from prosecution under the Federal health care program antikickback law, if the registry is intended as a vehicle to reward or induce referrals.  The OIG cautions that “claims that Registries are intended to promote and support clinical research and treatment are not sufficient to disprove unlawful intent.  Even legitimate actions taken to substantiate such claims, including, for example, retaining an independent Institutional Review Board to develop study protocols and participation guidelines, will not protect a Registry Arrangement if one purpose of the arrangement is to induce or reward referrals.”  The Special Fraud Alert identifies a number of suspect registry characteristics that may be evidence of unlawful purpose.  Some of these are specific to laboratories, but others could easily be extrapolated to drug or device registries:

• The registry sponsor requires that physicians conduct a certain number of procedures in order to obtain compensation
• Compensation is on a per-patient or other basis that takes into account value or volume of referrals
• Compensation is greater than fair market value for the physicians’ efforts in collecting and reporting patient data
• The participating physicians’ efforts are not supported by timely submitted documentation
• The registry collects data only on the registry sponsor’s own product
• Participants are selected based on their prior or anticipated referral volume

The OIG also cautions that “carving out” Federal health care program beneficiaries (by paying physicians only for data collected on non-Federal beneficiary patients) may not protect the arrangement.

For drug and device manufacturers who conduct registries that have been required or requested by FDA, the OIG’s warnings should ordinarily not be of concern.  However, manufacturers conducting other registries should read this Special Fraud Alert and take note that even a well-designed  registry that generates useful scientific or treatment data may be at risk if there is evidence of a marketing motivation.