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OIG Advisory Opinion Allows Smartphone Loan for Needy Patients Taking Digital Drug

Last week, the Office of the Inspector General for the Department of Health and Human Services (OIG) issued a favorable Advisory Opinion regarding a proposal by a pharmaceutical manufacturer (Manufacturer) to loan a limited-use smartphone to financially needy patients taking the digital version of an antipsychotic drug.  The OIG concluded that the arrangement would not constitute grounds for the imposition of civil monetary penalties (CMPs) under the prohibition on beneficiary inducement (the “Beneficiary Inducement CMP”) or administrative sanctions under the Anti-Kickback Statute (AKS).

The Proposed Arrangement

The Manufacturer produces a medication in tablet form (the “Drug”) that is embedded with an ingestible sensor that gives off an electrophysiological signal that is detected by a sensor worn by the patient. The sensor records certain information, including adherence data, which is then transmitted to an app accessed through the patient’s smartphone.

To use the Drug effectively, a patient must possess a smartphone that is able to run the app. Under the proposed arrangement, the Manufacturer would loan such a limited-use smartphone to patients who meet certain criteria, including an income that is below a specific percentage of the federal poverty level. The smartphone would have the app already installed and would only have the capability to make domestic calls. All other functionality commonly associated with smartphones would be disabled, including text messaging applications, music applications, the camera, games, and internet browsers.  The program would not be advertised, and the smartphone would be loaned for up to 24 weeks. The smartphone would be remotely disabled if the patient did not return it within a certain period of time. 

The Beneficiary Inducements CMP

In considering whether the Beneficiary Inducements CMP would apply to the proposed arrangement, the OIG made clear that its analysis did not focus on whether the loaned smartphone would influence a patient to select the Drug or the Manufacturer because the Beneficiary Inducements CMP is limited to whether a beneficiary is induced to select a particular “provider, practitioner, or supplier.” Rather, the OIG considered whether the proposed arrangement would likely influence a patient’s selection of a particular prescriber or pharmacy.

Even though the OIG found that the proposed arrangement would implicate the Beneficiary Inducements CMP, the OIG concluded that the loaned smartphone would not constitute “remuneration” under the Beneficiary Inducements CMP because the “Promotes Access to Care Exception” would apply for the following reasons:

  • The proposed arrangement would allow beneficiaries to access the full scope of benefits of the Drug.
  • The program would be unlikely to interfere with the clinical decision making of prescribers.
  • The proposed arrangement would likely not lead to increased costs for federal health care programs or beneficiaries through overutilization or inappropriate utilization. First, the devices are loaned only for a limited period, which prevents patients from using the drug for additional lengths of time in order to retain the loaned device.  Second, the device has no independent value to most beneficiaries, as 95% of Americans have some sort of cellphone, and it is only capable of making domestic calls.  However, the OIG noted that it would likely have reached a different conclusion if the smartphone had additional functionality (e.g., access to an internet browser or a camera, or the ability to add other apps).
  • The proposed arrangement would not likely pose patient safety or quality of care concerns, but, to the contrary, could actually increase safety and quality.

The Anti-Kickback Statute

The OIG applied a similar analysis to determine whether: (i) the loaned smartphone might influence a beneficiary to select a particular provider, practitioner, or supplier; and (ii) the device could influence a person to select an item or service that is reimbursable by federal health care programs. The OIG concluded that it would not impose administrative sanctions under the AKS based on the presence of the following safeguards:

  • The loaned device is integrally related to the Drug and would be available, on a temporary basis, only to those patients who otherwise would not be able to use the Drug.
  • Due to the fact that the program is not advertised, patients are unlikely to request the Drug for the purpose of obtaining the loaned device.


As digital health options continue to expand, and pharmaceutical manufacturers, medical device companies, and health care providers seek to ensure equal access for all patients, they must consider what safeguards are necessary to implement compliant arrangements.  While the OIG did approve of the provision of a limited-use smartphone in this particular case, its conclusion likely would have been different if additional functionality (such as internet access) was necessary, or if the availability of the smartphone were advertised in any way.  Because this Advisory Opinion is limited to the facts certified by the requesting parties, reliance on it in developing such arrangements presents risk.  Experienced counsel  should be consulted for guidance.

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About this Author

Karen Lovitch Mintz DC Health Care Compliance, Fraud & Abuse, and Regulatory Counseling Medicare, Medicaid & Commercial Coverage & Reimbursement Health Care Transactions Health Care Transactional Due Diligence Health Care Enforcement & Investigations

Karen focuses her practice on representing health care companies in regulatory, transactional, and operational matters. She has a substantial health care regulatory background and advises clients on matters pertaining to the federal anti-kickback statute, the Stark law, state statutes prohibiting kickbacks and self-referrals, the Clinical Laboratory Improvement Amendments of 1988, and the federal Physician Payments Sunshine Act. Karen often applies her strategic insight on these matters to counsel companies on regulatory issues arising in connection with mergers and acquisitions and other...


Matt advises health care clients on regulatory and transactional matters, including fraud and abuse, HIPAA privacy and security, and general contracting.

Prior to joining Mintz, Matt worked as in-house counsel at an independent hospital and outpatient facility, where he provided guidance on a range of fraud and abuse issues, including compliance with the Stark Law, the Anti-Kickback Statute, and the False Claims Act. He also counseled on HIPAA privacy and security as well as other regulatory matters. Matt handled the structuring and negotiation of physician and referral source arrangements, negotiated vendor contracts, and assisted in the formation of a Medicare Shared Savings Program Accountable Care Organization. In addition, Matt conducted due diligence and drafted, negotiated, and finalized complex transactions for the facility. He also regularly provided guidance on corporate governance issues and prepared regulatory and corporate filings.

Matt received the Health Law Certificate at the University of Maryland ‘s Francis King Carey School of Law and was a law clerk in the Office of the General Counsel at the Johns Hopkins Health System and at the Maryland Department of Health and Mental Hygiene.