Health Law Daily Digital medicine manufacturer can loan smartphones without sanctions
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Wednesday, January 30, 2019

Digital medicine manufacturer can loan smartphones without sanctions

By Jeffrey H. Brochin, J.D.

A drug manufacturer’s temporary loan of a smartphone to patients using digital medicine tablets would not constitute grounds for the imposition of sanctions.

An OIG advisory opinion issued in response to the proposal of a digital medicine manufacturer to loan, on a temporary basis, a limited-functionality smartphone to patients who lack the technology necessary to receive data from a sensor embedded in an antipsychotic medication, has concluded that such a loan would not constitute a kickback resulting in civil monetary penalties. Although the Social Security Act (SSA) defines "remuneration" for purposes of the beneficiary inducements civil money penalty (CMP) as including transfers of items or services for free or for other than fair market value, the term does not apply to remuneration which promotes access to care and poses a low risk of harm to patients (OIG Advisory Opinion, No. 19-02, January 24, 2019).

Sensor-embedded drugs. The FDA recently approved a Digital Medicine (DM) version of an antipsychotic drug which consists of a tablet embedded with an ingestible sensor, also known as an ingestion event marker or "IEM". When a patient ingests the DM drug, the IEM gives off a mild electrophysiological signal that is detected by a wearable sensor patch on the patient’s abdomen. The patch records that the patient ingested the DM drug and also records certain indicators of the patient’s rest patterns and activity. A third component to proper use of the DM drug is an app which must be accessed through a smartphone. The information collected by the patch is transmitted via a Bluetooth® connection to the app, and then transmitted via a secure protocol to a secure cloud-based server. With the patient’s consent, the information can be accessed by the patient’s health care providers and caregivers. Financially needy patients who do not have the technology necessary to receive adherence data from the embedded sensor cannot benefit from the DM antipsychotic drug.

Smartphone loan proposal. To address the above problem, a DM drug manufacturer has proposed a program of loaning smartphones to financially needy patients on the following terms: the loaner phone would be a refurbished, older-model device, would come preloaded only with the app and functionality to make domestic telephone calls, all other features would be disabled, and the patient would be unable to download or use any other applications such as for text messaging, music, camera, games, or an internet browser.

Patients would use the loaner device for the duration of their DM drug therapy, which was projected to last for 8 to 12 weeks. At the 11-week mark, use of the smartphone would require reauthorization from the patient’s health care provider for the patient to continue taking the DM drug rather than switching to a different drug. A patient would be eligible to keep the smartphone for no more than two 12-week periods, at the end of which, the Specialty Pharmacy would send a preaddressed mailer bag for return of the device.

Need for advisory opinion. The Anti-Kickback Statute (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. By its terms, the AKS ascribes criminal liability to parties on both sides of an impermissible "kickback" transaction. Under the AKS, "remuneration" includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind, and the statute has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals. Out of concern over possibly violating the AKS, the DM drug manufacturer requested that the OIG render its opinion.

"Promotes access to care" exception. The advisory opinion noted that the AKS’s definition of "remuneration" does not apply to remuneration which promotes access to care and poses a low risk of harm to patients and federal health care programs, which has been interpreted to include items or services that improve a beneficiary’s ability to obtain items and services payable by Medicare or Medicaid, and pose a low risk of harm to Medicare and Medicaid beneficiaries and the Medicare and Medicaid programs.

Based on the facts submitted by the DM drug manufacturer, the OIG concluded that the proposal would not constitute grounds for the imposition of civil monetary penalties under section 1128A(a)(5) of the Act; and (ii) although the proposal could potentially generate prohibited remuneration under the AKS if the requisite intent to induce or reward referrals of federal health care program business were present, the OIG would not impose administrative sanctions on the manufacturer under sections 1128(b)(7) or 1128A(a)(7) of the Act in connection with the proposed smartphone loan program.

MainStory: TopStory OIGAdvisoryOpinions CMSNews AntikickbackNews MDeviceNews PrescriptionDrugNews ProgramIntegrityNews

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