After years of government skepticism and enforcement activity targeting physician-owned medical device companies, a recent favorable advisory opinion by the Office of Inspector General for the U.S. Department of Health & Human Services (OIG) may offer a degree of comfort to certain manufacturers of innovative medical devices and their institutional health care customers.1 This advisory opinion is significant as it represents the first time OIG has applied the factors set forth in its 2013 Special Fraud Alert on Physician-Owned Entities (the POD SFA) to conclude that physician ownership in a medical device company presents an acceptably low level of risk under the federal fraud and abuse laws. The opinion also provides welcome guidance on how parties might compliantly structure physician ownership interests in medical device companies to avoid triggering potential scrutiny under the Anti-Kickback Statute (AKS).
In March 2013, the OIG took a shot across the bow at certain physician-owned medical device companies through issuance of the POD SFA. The OIG construed a physician-owned distributorship, or “POD,” as “any physician-owned entity that derives revenue from selling, or arranging for the sale of, implantable medical devices and includes physician-owned entities that purport to design or manufacture, typically under contractual arrangements, their own medical devices or instrumentation.”2 While not explicitly stated, the POD SFA was largely focused on entities that...
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