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OIG Greenlights Digital Health Program Offering Free Smartphones to Patients

Last week, the federal HHS Office of Inspector General (OIG) gave the green light to allow a virtual care company and pharmaceutical manufacturer to loan patients free smartphones, so the patients (which include Medicare beneficiaries) could use the smartphones to track their drug therapy adherence via a mobile digital health app. The OIG’s recent Advisory Opinion marks the sixth favorable telemedicine/digital health advisory opinion issued by OIG to date. This article describes the drug and digital health technology, outlines the proposed program for free smartphones, and explains why OIG issued a favorable advisory opinion.

The Digital Health Therapeutic Technology

The company requesting the advisory opinion is an affiliate of a global pharmaceutical manufacturer which developed a drug used as an adjunctive treatment for a specific disorder (note: OIG redacted the drug’s identifying information). According to the company, medication nonadherence is a problem in this specific patient population due to factors associated with the disorder itself. The company provided clinical research articles demonstrating that medication nonadherence for these patients results in higher utilization of health care services and increased costs.

In addition, the FDA recently approved a digital therapeutics version of the drug, which consists of a tablet of the drug embedded with an ingestible sensor (an ingestion event marker or IEM). When a patient ingests the drug, the IEM gives off a mild electrophysiological signal that is detected by a wearable sensor (a patch) on the patient’s abdomen. The patch records when the patient ingests the drug and records certain physiologic indicators of the patient’s rest patterns and activity. A third element of the digital health therapy is a smartphone app, which uses Bluetooth to wirelessly collect the information generated via the patch.

The app also allows patients to self-report information such as how well they rested and their current mood. All the information collected in the app is transmitted to a secure cloud-based server where the patient’s health care providers can remotely monitor and access that information through web-based portals.

The Proposed Arrangement

Under the arrangement, the company wanted to loan free smartphones to patients, including Medicare beneficiaries, who have been prescribed the drug. This way, the patients could enjoy the full functionality of the digital health therapy, even if they do not own a smartphone.

There were some important limitations on the program. The company would only loan the free smartphones to patients who: (1) have been prescribed the drug; (2) meet any applicable approval or other insurer requirements; (3) have an income level below a certain percentage of the Federal poverty level; (4) do not already own a device capable of supporting and using the app; and (5) are United States citizens.

The smartphones (refurbished iPhones or Android devices) have limited functionality and can only be used to operate the preloaded app and make domestic telephone calls. At the end of the 8-12 week drug therapy regimen, the company will retrieve the smartphone from the patient (or remotely disable it if not returned). The program will not be advertised directly to patients. Instead, the company will educate prescribing doctors about the program, explaining how doctors could screen potential patient-applicants and enroll them in the program on behalf of their patients.

The "Promotes Access to Care Exception"

Even though the smartphone is locked, it remains something of value to patients because it can make domestic phone calls. Thus, it constitutes remuneration under both the Civil Monetary Penalties Law and the Anti-Kickback Statute. Yet, OIG concluded the arrangement satisfied the Promotes Access to Care Exception to “remuneration” under Social Security Act § 1128A(i)(6)(F) and 42 C.F.R. § 1003.110 (“Incentives given to individuals to promote the delivery of preventive care services where the delivery of such services is not tied (directly or indirectly) to the provision of other services reimbursed in whole or in part by Medicare or an applicable State health care program.”)

The OIG concluded the program satisfied the Access to Care Exception for the following five main reasons:

  • The smartphone app was essential to the patient accessing the full scope of benefits of the digital health therapy, and loaning a smartphone to make that possible would improve patients’ ability to benefit from the drug.

  • The program was unlikely to interfere with clinical decision making because only certain patients who met specific conditions (e.g., financial need, no pre-existing device) would be eligible for the free smartphone. Moreover, a doctor would likely prescribe the digital therapy drug based on its ability to transmit data via RPM technologies, not based on the fact the doctor’s patient could get a free smartphone for 8-12 weeks.

  • The free smartphone itself would not likely lead to increased utilization or costs to Federal health care programs.

  • The fact that the program would not be directly advertised to patients was an important safeguard against improper beneficiary influence or inducements.

  • The limited smartphone functionality and 12-week duration were favorable elements, and OIG notably stated if the phone offered additional functionality (e.g., internet access), they might have reached a different conclusion on the proposed arrangement.

What it Means for Telemedicine & Digital Health Companies

OIG included its traditional disclaimer that the advisory opinion can only be relied upon by the specific company that requested it, and the opinion would be null if any material facts were not disclosed. Companies offering similar digital health therapeutics or remote patient monitoring programs should closely review the opinion because it offers insight into the government’s view on how technology can promote access to care. Companies evaluating or developing similar programs offering free or discounted technology should carefully consider the safeguards enumerated in OIG’s analysis prior to launch.

© 2019 Foley & Lardner LLP

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About this Author

Nathaniel Lacktman, Health Care Attorney, Foley and Lardner Law Firm
Partner

Nathaniel (Nate) Lacktman is a partner and health care lawyer with Foley & Lardner LLP, and a Certified Compliance & Ethics Professional (CCEP). His practice focuses on health care compliance, counseling, enforcement and litigation, as well as telemedicine and telehealth. Mr. Lacktman is a member of the firm’s Health Care Industry Team which was named “Law Firm of the Year — Health Care Law” for three of the past four years on the U.S. News – Best Lawyers® “Best Law Firms” list. 

813-225-4127
Emily Wein Health Care Lawyer
Of Counsel

Emily H. Wein is of counsel and a health care lawyer with Foley & Lardner LLP, and member of the firm’s national Telemedicine & Digital Health Industry Team. Emily understands and identifies with the business and strategic goals of virtual care and digital health companies. She delivers practical legal guidance molded to accomplish each individual client’s unique operational goals. Emily works with a diverse bench of organizations – including large interdisciplinary hospital systems, skilled nursing facilities, multi-state clinical practices, and fast-moving entrepreneurs. Emily’s energy and enthusiasm mirrors that of her health innovation clients where she consistently drives to improve some of the most important and unmet health needs in the industry today, particularly women’s health, substance use disorder, mental health, and preventative wellness.

Emily wields notable depth on advising telemedicine and digital health clients on the highly technical, traditional healthcare regulatory issues of Medicare and Medicaid enrollment, billing and coding, interjurisdictional claims submission and reassignment, compliance with Conditions of Participation, and medical staff credentialing and privileging.

Real-World Industry Knowledge

Having earned both a law degree and an MBA, Emily understands the importance of practical business perspectives while maintaining that sense of urgency essential to the success of any innovative health technology offering. Whether an emerging start-up entrepreneur with a novel or breakthrough idea or an established health system with many constituents to align, Emily works efficiently and effectively to meet the distinctive requirements of each organization. Additionally, she spent five years as in-house counsel at a nationally-known academic medical center health system, where she led the development of its virtual care service programs, including tele-stroke and tele-cardiology, and had primary legal responsibility for fraud and abuse compliance of all Medicare enrollment and physician-hospital contracting arrangements.

Thought Leadership

  • Original member of the Clear Health Quality Institute’s Telehealth Accreditation Standards Committee, where she helped develop the standards and requirements for telehealth companies seeking CHQI accreditation.

  • Helped create the Maryland Telehealth Alliance; a mission-driven organization to advance telehealth law in the State of Maryland. She serves as its Chief Legal Officer.

  • Serves on the Advisory Board of Nest Collaborative, a telehealth provider specializing in women’s and pediatric services.

  • Co-authored The Telehealth Law Handbook: A Practical Guide to Virtual Care.

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