In an Advisory Opinion issued on September 23, 2016, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) announced that  it would not impose administrative sanctions against the manufacturer of a vaccine refrigeration system (the “Requestor”) for providing the devices to physicians without charge.  This development comes at a critical time when many are focused on creatively addressing the risks posed by infectious diseases and viruses like Zika. 

Under the proposed arrangement, the Requestor would install the refrigerator system in participating physicians’ offices at no cost, so long as the physicians agree to stock at least one sole-source vaccine from a vaccine manufacturer with whom Requestor contracted.  Under the contract between the Requestor and the sole-source vaccine manufacturer, the manufacturer would pay the Requestor a Per-Dispense Fee for each unit of its vaccine administered by the physician (though the physician would not receive any portion of the fee).

Physicians would be free to use the refrigerator system to stock any vaccine, except that a physician could not stock a sole-source vaccine made by a manufacturer who did not contract with the Requestor.  Nonetheless, “[e]ach participating physician would be free to exercise his or her independent medical judgment as to whether and to whom to administer a vaccine.”

The OIG acknowledged that there is always a substantial risk that providing free goods or services to a referral source (here, the participating physicians) could be used as a disguise for an unlawful payment for referrals. The refrigerator system would be indirectly funded by the participating sole-source manufacturers’ Per-Dispense Fee.  In other words, those vaccine manufacturers would be enabling the free use of a valuable item that facilitates and encourages the use of its products by the referral sources.

Notwithstanding this “problematic aspect” of the arrangement, the OIG concluded that such an arrangement would not be subject to administrative sanctions, finding that the following “unique combination” of factors mitigated the risk of fraud and abuse:

  1. Any sole-source manufacturer could contract with the Requestor, and the physician is free to store vaccines from other manufacturers, thus reducing the risk that most or all of the physicians’ business would be referred back to the entity providing the free equipment;
  2. If a sole-source manufacturer chooses not to contract with the Requestor, the physician may still stock that manufacturer’s vaccine as long as it is in a different storage unit;
  3. Although the Per-Dispense Fee structure inherently reflects the volume or value of vaccines administered, the fee is paid to the Requestor, who does not have the ability to generate Federal health care program business;
  4. Adult vaccines are administered in a limited manner, unlike drugs used to treat ongoing chronic conditions or illnesses;
  5. The arrangement may facilitate the CDC’s goal of improving adult vaccination rates.

Although OIG advisory opinions generally may only be relied upon by the person requesting the opinion, it does provide insights on the type of safeguards that might help mitigate risks in similar arrangements.

Additionally, please refer to the Health Law Pulse’s prior coverage of issues related to Zika: