On January 24, 2019, the Office of Inspector General (“OIG”) issued a favorable advisory opinion allowing a pharmaceutical manufacturer (“Manufacturer”) to temporarily loan limited-functionality smartphones to financially needy patients who lack the required technology to receive adherence data from a sensor embedded in a prescribed antipsychotic medication (“the Arrangement”). The OIG concluded that the Arrangement did not constitute grounds for penalties under the Civil Monetary Penalties law (“CMP”) and that although the Arrangement could potentially cause remuneration under the Anti-Kickback Statute (“AKS”), the OIG would not impose sanctions on the Manufacturer as related to the Arrangement based on the low-risk nature of the Arrangement.

The  manufacturer is an affiliate of a global pharmaceutical manufacturer, and the Food & Drug Administration recently approved a Digital Medicine (“DM”) version of one of its drugs. The DM drug is a tablet which includes an embedded, digestible sensor that gives off mild electrophysiological signals that are detected by a wearable patch on the patient’s abdomen. This patch then records and transmits data to an application accessed through the patient’s smartphone. Patients can also add information to the application for tracking purposes. The information from the application is then transmitted to a secure cloud-based server where health care providers can access it with patient consent.

In order to use the DM drug effectively, each patient must possess a smartphone with the application. Under the Arrangement, the manufacturer would loan a smartphone – an older-model iPhone or comparable Android device pre-loaded with the manufacturer’s application – with limited functionality only to patients who:

  • Have a prescription for the DM drug for on-label use;
  • Meet the applicable prior-authorization requirements through their insurance;
  • Have an annual income below a specified percentage of the Federal poverty level;
  • Do not already possess a smartphone capable of running the application; and
  • Are United States citizens or legal permanent residents.

Patients who receive a loaner smartphone would only be permitted to keep the device for up to two twelve-week periods. If a patient does not return the smartphone at the end of that period, or earlier if the patient is switched to a different drug, the manufacturer would remotely disable it.

The OIG noted that while the smartphone would have limited functionality, it would be capable of making domestic telephone calls to enable patients to access support for the DM drug system. Because the device would be able to make domestic calls, the OIG concluded that the Arrangement would constitute remuneration to the patient and thus implicate the AKS and the prohibition against beneficiary inducements under the CMP.

After analyzing the Arrangement, however, the OIG concluded that the Arrangement would satisfy the “Promotes Access to Care” exception to the beneficiary inducements prohibition under the CMP because it:

  • Promotes access to care by improving a patient’s ability to access the full scope of benefits of the DM drug; and
  • Is unlikely to interfere with clinical decision making, or to increase costs to Federal health care programs and beneficiaries through overutilization or inappropriate utilization, and it does not raise patient safety or quality of care concerns but actually could increase patient safety and quality of care.

The OIG also concluded that the Arrangement would not be subject to sanctions under the AKS, and stated that the “same analysis” applies to the OIG’s review of the Arrangement under the AKS as applied to its determination that the Arrangement meets the “Promotes Access to Care” exception to the prohibition on beneficiary inducements under the CMP.  The OIG also noted that the Arrangement is not going to be advertised to patients, which diminishes the risk that patients would request the DM drug for the purpose of obtaining the smartphone.

This Advisory Opinion provides some insight into the OIG’s apparent position that the analysis of the risk under the AKS that is posed by such an arrangement mirrors that required under the CMP where the Promotes Access to Care exception is implicated.


As the OIG has emphasized, Advisory Opinions are issued only to the requestors of the opinion, and have no application to, and cannot be relied upon by, any individual or entity, nor may they be introduced into evidence by anyone other than the requestors to prove the individual or entity did not violate the anti-kickback statute, or any other law.

This post was co-authored by Alyssa Ferreone, legal intern at Robinson+Cole. Alyssa is not yet admitted to practice law.