To the spoiler go the spoils: OIG approves limited product replacement program

A perennial question for manufacturers of drugs and biologicals that require specialized handling, storage, or reconstitution is how to handle circumstances in which the product is spoiled, breaks, or otherwise becomes unusable after purchase by physicians, clinics, and hospitals.  Many manufacturers have designed product replacement programs intended to strike a balance between assuring patient safety and the risk that replacing product in those circumstances can be seen as removing a business risk or subsidizing a provider’s business expense in a way that implicates the federal healthcare program anti-kickback statute.

In a recently issued Advisory Opinion, the U.S. Department of Health and Human Services Office of Inspector General (OIG) approved a manufacturer-proposed program to replace at no additional charge to the provider certain “spoiled products” that cannot be administered to a patient. OIG concluded that although the program cannot fit under the regulatory warranty safe harbor, the proposed program poses a low risk of fraud and abuse under the anti-kickback statute, and it would not be subject to administrative sanctions by OIG.

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