Opening the door to providing free technology to telemedicine and remote patient monitoring patients to promote access to care.

On January 24, 2019, the Department of Health and Humans Services Office of Inspector General (“OIG”) issued OIG Advisory Opinion No. 19-02 (the “Opinion”), allowing the pharmaceutical manufacturer of an ingestible sensor Digital Medicine Drug (“DM Drug”) to provide free smartphones to certain patients on a temporary basis. OIG stated that, under the specific circumstances described in its Opinion, it would not impose administrative sanctions under the anti-kickback statute or civil monetary penalties for the proposed arrangement. Though OIG advisory opinions are narrow in scope and applicability, this Opinion demonstrates OIG’s willingness to remove barriers to adoption of healthcare technologies that may improve patient outcomes and reduce overall costs of care.  

The Facts

In their request for an Advisory Opinion, the DM Drug manufacturer and its affiliate (together, the “Manufacturer”) provided supporting evidence that patients’ lack of adherence to prescribed medication regimens leads to higher utilization of and increased costs to the healthcare system. The Manufacturer goes on to indicate that use of the DM Drug in conjunction with a smartphone improves patients’ medication adherence.

When a patient ingests the DM Drug, a sensor emits a signal that is recorded by an external patch worn on the patient’s abdomen, thereby indicating medication adherence. The patch transmits the ingestion data, along with data relevant to the patient’s rest patterns and activity, via Bluetooth to a smartphone app (the “App”). Via the App, patients can view their data and self-report additional data, which is then transmitted to their designated healthcare provider for review and action as necessary. Without a smartphone, tracking medication adherence and capturing relevant self-reported patient data is impossible.

The Manufacturer’s request for an opinion set forth a scenario whereby the Manufacturer would loan a refurbished iPhone or Android phone to patients who:

1.     Have a prescription for the digital medicine version of the Drug for on-label use;

2.     Meet applicable requirements required by the patient’s insurer;

3.     Have an annual income that falls below a certain percentage of the Federal poverty level;

4.     Do not already possess a smartphone capable of running the App; and

5.     Are U.S. citizens or permanent legal residents of the United States.

 The loaned smartphone would be locked in such a way that it would only be capable of running the required App and making domestic phone calls. According to the Manufacturer, the ability to place a phone call is necessary should patients need to access technical support for the program. The Manufacturer estimates that one session of patient therapy via the DM Drug would last 8 to 12 weeks. Patients would keep the loaned device for no more than two 12-week periods. This arrangement would not be advertised to patients, and prescribers would receive no additional reimbursement for prescribing the DM Drug over any other treatment.

Free Smartphones, the Anti-Kickback Statute, and Beneficiary Inducements

In its Opinion, OIG analyzed the proposed arrangement under the Civil Monetary Penalties section of the Social Security Act (“CMP”) and the Anti-Kickback Statute (“AKS”) – two particular areas of law that, in the past, have generally prevented healthcare companies and healthcare providers from providing free devices to patients.

The Beneficiary Inducements section of CMP imposes civil monetary penalties on any individual who offers any form of remuneration to a Medicare, Medicaid, or other State/Federal healthcare program beneficiary in order to influence the beneficiary’s selection of a provider of items or services payable under Medicare, Medicaid, or other State healthcare program.

The AKS imposes criminal penalties on anyone who knowingly and willingly offers, pays, solicits, or receives remuneration for the purpose of inducing or rewarding referrals of items or services paid for by a Federal healthcare program.

Typically, providing a free smartphone to patients would constitute improper remuneration under both doctrines.

Beneficiary Inducements and the “Promotes Access to Care Exception” 

According to OIG, although the Manufacturer’s proposed arrangement implicates the Beneficiary Inducements section of CMP, it falls within the “Promotes Access to Care Exception” because it (1) improve[s] a beneficiary’s ability to obtain items and services payable by Medicare; and (2) poses a sufficiently low risk of harm.

OIG concludes that the proposed arrangement improves a patient’s ability to obtain healthcare items and services because it allows patients who would not otherwise be able to access the App to do so. The App is required in order for a patient to view and report his/her data and for that data to be transmitted to the provider. Without access to the App, the patient cannot experience the full benefit of the DM Drug.

OIG concludes that, in this scenario, providing a smartphone to certain patients poses a sufficiently low risk of harm for a few reasons. First, OIG believes that doing so is unlikely to interfere with clinical decision making because only patients who meet specific requirements are eligible, and practitioners are unlikely to base a prescribing decision on the fact that a limited-use smartphone would be loaned to those patients.

Second, the proposed arrangement is unlikely to increase costs through over-utilization or inappropriate utilization because (a) it is only available to a limited number of patients; (b) providers are not incentivized to prescribe the Drug based on the provision of smartphones; (c) it is not advertised to patients; and (d) patients will only have the smartphone for a limited amount of time. OIG noted, however, that if the smartphones had additional functionality beyond the capability to use only the App and make domestic phone calls, the conclusion “would likely be different.”

Finally, OIG concluded the arrangement does not incite patient safety or quality-of-care concerns, but rather increases patient safety and quality of care because it enables the provider to track adherence.

The Anti-Kickback Statute analysis

OIG applied a similar analysis under AKS. The Opinion states that (a) because the loaned smartphone is integrally related to the Drug and available only to patients who would not otherwise be able to use it, and (b) patients would be unlikely to request the Drug for the sole purpose of obtaining a smartphone, OIG would not impose administrative sanctions under AKS on the Manufacturer in the proposed arrangement.

Free Smartphones for Patients: Key Takeaways

Unfortunately, OIG advisory opinions are extremely limited in scope and applicability; they are not legal opinions and may not be relied upon by anyone other than the requestor under the specific facts and laws discussed in the opinion. However, this Opinion demonstrates OIG’s openness to technological advancements in the healthcare industry and encourages creative solutions aimed at reducing access barriers to proven care solutions.  For Remote Patient Monitoring services providers and other healthcare entities, the Opinion suggest ways in which you can safeguard a particular arrangement against creating improper incentives for providers and patients.

As always, please seek the advice of experienced healthcare counsel when in doubt! Nixon Law Group attorneys are well-versed in the fraud and abuse laws, and we help our clients navigate risk and focus on compliance as well as business. Contact us to learn more.

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