Featured Expert Contributor—Life Sciences and Medtech Regulation

Matt Wetzel is a partner in the Washington, DC office of Goodwin Procter LLP.  Prior to joining Goodwin, Matt served as Chief Compliance Officer of a Silicon Valley biotech start-up; was the Vice President & Deputy General Counsel of the world’s largest medical technology trade association in Washington, DC, AdvaMed. 

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OIG Advisory Opinion 22-14 (June 29, 2022) could have significant implications for how life sciences companies (pharmaceutical, medical device, and diagnostics test makers) contribute towards continuing education (“CE”) programs for healthcare providers (“HCPs”).  Specifically, in AO 22-14, the U.S. Department of Health & Human Services Office of Inspector General (“OIG”) rejects a Requestor’s proposal to permit pharmaceutical and medical device industry sponsorship of a CE program for HCPs, noting that it could generate prohibited remuneration under the Federal Anti-Kickback Statute. 

Background

The Requestor in Advisory Opinion 22-14 is an ophthalmologic practice (“Requestor”).  Local optometrists from outside of the practice regularly refer patients to the Requestor for surgical procedures, after which the Requestor and the local optometrist will co-manage the patient’s care. 

The Requestor wants to create two CE programs for optometrists – full day and evening educational programming that is taught by experienced faculty (either Requestors’ practitioners or external faculty) on new technologies and pharmacological practice in the treatment of ophthalmic patients.  The CE programs would offer several hours of continuing education credit for the optometrists, and the Requestor has designed the program to meet state requirements for continuing education credits for optometrists to maintain licensure.  The program is open to all local optometrists and does not depend on whether the optometrist has previously referred patients or plans to refer patients to the Requestor.  

Proposals

The Requestor offers four proposals for how to organize and pay for the CE program:

  • Proposal A – Optometrist attendees pay a registration fee that covers the estimated fair market value of all costs and expenses of the program. If revenue from the registration fees does not cover the program’s expenses, Requestor would cover them.  If revenue exceeds expenses, Requestor will donate the excess to a charity.  Requestor has designed the program costs and fees to keep any overruns or shortfalls insubstantial.
  • Proposal B – Optometrist attendees do not pay any registration fee to attend; rather, the Requestor covers all costs of the program.
  • Proposal C – Optometrist attendees do not pay any registration fee to attend; rather, Requestor covers all costs of the program. The Requestor also seeks industry sponsorship funding in the form of grants from pharmaceutical and medical device manufacturers.
  • Proposal D – Optometrist attendees pay a registration fee; Requestor also seeks industry sponsorship funding in the form of grants from pharmaceutical and medical device manufacturers.

Analysis

OIG acknowledges that CE programs are a “mainstay” and valuable tools to “update [HCPs’] technical knowledge and skills and to learn about new or modified diagnostic and treatment options.”  OIG also recognizes that state licensure often requires the completion of CE hours during the year.  But, despite the educational nature of CE programs, they may also “constitute a vehicle to provide remuneration to referral sources in violation of the Federal anti-kickback statute.” 

OIG notes that each proposal involves remuneration that implicates the Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b).  Requestor is offering something of value (the CE programs and related credit) to local optometrists who are in a position to refer patients.  Requestor is offering remuneration to faculty as well in the form of honoraria.  And, OIG also notes that Proposals C and D also include remuneration to the Requestor, external faculty members, and attendees from pharmaceutical and medical device companies in the form of industry sponsorships. 

To analyze each arrangement, OIG starts by turning to its November 2020 Special Fraud Alert on Speaker Programs, noting that while these programs have an “overarching difference in scope” than the proposals at hand, OIG does view the “suspect characteristics” it identifies in the Nov. 2020 Special Fraud Alert as instructive.  Namely, OIG looks to whether:

  • A company is sponsoring a speaker program with little or no substantive information
  • Alcohol is available or a meal exceeding modest value is provided to attendees
  • The program is held at a location not conducive to the exchange of educational information
  • Selection of HCP speakers or attendees is based on past or expected revenue that these individuals have or will generate by prescribing or ordering the company’s products; and
  • A company pays HCP speakers more than fair market value for the speaking service or pays compensation that takes into account the volume or value of past business generated or potential future business generated by the HCPs.

As a general matter, OIG concludes that the CE program would not be considered “suspect” under any of these criteria.  OIG points to the educational content of the Requestor’s program; faculty who are experts; modest meals and non-alcoholic refreshments; an appropriate venue like an office or conference space; no recreational content; attendance is open to all local optometrists and not based on past or anticipated referral patterns; external faculty would be selected on expertise and not referrals; and faculty would be paid a fee that constitutes the fair market value of their services. 

Next, OIG examines each remuneration stream under the proposals.  In a decision that could have significant impact on the life sciences industry and how it sponsors CE programs, OIG concludes that only Proposal A—in which local optometrists pay their own way and Requestor does not seek industry sponsorship—would pass muster under the Anti-Kickback Statute. 

Under Proposals B and C, no registration fee would be charged and the CE program would be free and entirely funded by Requestor (Proposal B) or by industry (Proposal C).  OIG concludes:

  • Proposal B: With respect to Requestor’s funding of the registration fees, there is heightened risk this remuneration could induce attendees and faculty to refer patients, including Federal health care program beneficiaries, to Requestor and result in inappropriate patient steering.
  • Proposal C: With respect to pharmaceutical and medical device company sponsorship, there is heightened risk this remuneration could induce Requestor, faculty, and attendees to prescribe or order a sponsoring company’s products, including those payable by Federal health care programs, which could result in inappropriate patient steering or increased costs to Federal health care programs.

OIG’s analysis under Proposal D, however, may have the most significant impact on life sciences companies. 

OIG makes clear that it is not addressing programs in which a pharmaceutical or medical device company funds an educational grant in support of an independent third-party entity’s CE program.  These sorts of programs, implemented by “independent entities not directly involved in the provision of patient care (e.g., a professional organization),” are regularly subsidized by industry.  Rather, OIG is concerned programs in which a medical practice and “direct referral source for sponsoring medical device and pharmaceutical companies” is the CE program organizer.  OIG reasons that industry sponsors under Proposal D are paying for costs that Requestor would otherwise incur.  Further, if sponsorships exceed expenses for the CE program, Requestor’s ability to use these excess funds also constitutes remuneration.

OIG notes a concern about a pharmaceutical or medical device manufacturer rewarding high-prescribing or ordering physicians by directing a CE program organizer to select and pay these physicians to be CE faculty or to select only high-ordering physicians as attendees for industry-subsidized CE programs. 

As a result, OIG refuses to conclude that there is a low risk of fraud and abuse.

Conclusion

While OIG’s advisory opinion can only be relied upon by the Requestor, the agency’s conclusions about pharmaceutical and medical device industry sponsorship of a continuing education program that is organized and implemented by a health care provider or organization is informative and highlights the heightened risk in this area.  Life sciences companies should proceed with caution, especially if they fund any sort of continuing educational program organized and implemented by a healthcare provider (for example, funding of grand rounds or funding continuing educational programs organized by large integrated delivery networks or health systems).  (Conversely, medical practices, health systems, IDNs, and other large providers who implement continuing education programs should also pay attention to OIG’s conclusions about the level and scope of pharmaceutical and medical device industry sponsorship and funding.)

Whether we will see any enforcement in the continuing education space is unclear; however, life science companies and providers should consider taking steps to review their internal policies and processes for funding and organizing educational programs and to adopt appropriate controls to minimize risk in this space.