The Department of Health and Human Services, Office of Inspector General (OIG) recently issued a favorable advisory opinion (Advisory Opinion 25-07) regarding a pharmaceutical manufacturer’s program to sponsor free companion diagnostic testing for certain oncology patients.

Though the program implicates the federal Anti-Kickback Statute (AKS) and could generate prohibited remuneration if the requisite intent were present, OIG concluded that the program poses a sufficiently low risk of fraud and abuse. For the same reasons, OIG concluded that the program would not generate prohibited remuneration under the Civil Monetary Penalty Law (CMPL) because it satisfies the “Promotes Access to Care” exception to the CMPL.

Diagnostic Testing Offered at No Cost to Eligible Patients

The advisory opinion addresses a straightforward sponsorship arrangement. The manufacturer is obligated contractually to pay a laboratory to perform a next-generation sequencing-based companion diagnostic test for eligible patients. The test is required by the drug’s labeling and determines whether a patient’s tumor exhibits a particular genetic deficiency that would make them a candidate for the manufacturer’s drug.

Pursuant to their agreement, the lab provides the manufacturer with monthly reports containing limited, aggregated, de-identified data regarding the program’s operations, including, among other things, the volume of testing performed and the number and type of outreach to the arrangement’s dedicated website or contacts to the lab about the arrangement. The manufacturer restricts access to these reports to its centralized leadership teams and has controls in place to prohibit their access and use in the field. Neither the manufacturer nor the lab uses the reports to target providers or patients, and the manufacturer certified that the information is used to perform obligations under its agreement with the lab, including remitting appropriate payment to the lab for tests performed, and to develop real-world evidence related to patients missed by standard testing protocols for the disease states treated by its drug.

The lab is contractually prohibited from promoting the program or its other offerings to individuals identified through the program, and the manufacturer raises awareness about the program through pre-approved leave-behind and digital pamphlets without any branding for or reference to its drug and through online search results targeted to the disease state only, without reference to or ability to return “hits” based on its drug. Importantly, no prescribing providers or field personnel receive remuneration related to the program, and communication with providers related to the program is limited to the lab’s efforts to obtain attestations, verify patient eligibility, coordinate receipt of samples for testing, communicating results, and sharing limited educational information about the disease state itself.

OIG’s Analysis: Low Risk of Fraud and Abuse

From an AKS perspective, OIG stated that the program provides something of value to both patients (free testing or, if testing were covered by insurance, waiver of cost sharing associated with it) and providers (a no-cost service that could lead to reimbursable follow-up care). However, OIG concluded that the program is unlikely to result in overutilization or inappropriate utilization, skew clinical decision-making, or result in unfair competition for the following reasons:

• The test is a required, FDA-approved companion diagnostic for the manufacturer’s drug, meaning it is clinically necessary to determine whether the drug is even an option, and the drug is potentially life-extending.
• Providers who order the test have no obligations or incentives to use any of the manufacturer’s products.
• The test is as likely to rule out the manufacturer’s drug as it is to confirm its appropriateness.
• A competitor drug is indicated for patients who test positive or negative—stated differently, even if the test is positive, providers may prescribe either the manufacturer’s drug or a competitor drug.
• Sales representatives are not allowed to discuss the manufacturer’s drug vis-à-vis the program.
• Apart from potential follow-up care, providers do not otherwise receive any remuneration from the manufacturer related to the program.

OIG also pointed to the following marketing safeguards as measures that sufficiently limit the program’s use as a promotional tool and support the manufacturer’s certification that sales representatives’ do not target high program usage or high prescribing providers:

• Sales representatives do not target high program usage or high prescribing providers, do not discuss the program, and only make providers aware of the program by leaving behind pre-approved, non-branded pamphlets.
• All program materials are tightly controlled and devoid of references to the manufacturer’s drug.
• With respect to program data that the lab provides to the manufacturer, none of it is provider- or patient-identifiable, field personnel cannot access or use it, and the manufacturer does not otherwise leverage it for sales initiatives.
• The lab is contractually prohibited from promoting the program; the lab may only communicate with providers for operational purposes and with patients to comply with law.
• The manufacturer does not proactively disseminate information about the Program to providers or patients.

These findings led OIG to conclude that the program does not merit enforcement action under the AKS, and OIG likewise pointed to these findings to conclude that the program qualifies for the “Promotes Access to Care” exception under the CMPL.

Key Takeaways

In this advisory opinion OIG described its suspicious view of providing free products or services to patients as “longstanding and continuing.” Two recent settlements corroborate that statement. In December 2023 a pharmaceutical company paid $6 million to resolve allegations that it provided kickbacks to induce prescriptions and referrals for its drug by providing free genetic testing and paying fees to obtain results from that testing for marketing purposes. And in November 2024, a pharmaceutical company paid $43 million to resolve allegations that it provided kickbacks to induce claims for its drug by offering free breath testing services.

OIG also recently issued unfavorable advisory opinions regarding device manufacturers’ proposals to provide free services to providers. In Advisory Opinion 25-04, which we covered in detail here, a device manufacturer proposed paying a third-party company to provide screening and monitoring reports to its health care facility customers. OIG viewed the proposal as an inducement that posed “risks of inappropriate steering” because the manufacturer would be alleviating its customers of a financial burden. In Advisory Opinion 25-08, which we covered in detail here, OIG pointed to those same risks with respect to a device manufacturer’s proposal to pay for software to process its health care facility customers’ transactions to purchase certain of the manufacturer’s products. In both advisory opinions, the customers “would request or require” the manufacturers to pay for the respective administrative services. And, in both cases, OIG stated that “different fact patterns” may have resulted in favorable opinions.

Nevertheless, Advisory Opinion 25-07 is the latest in a series of opinions that show OIG’s willingness to permit the provision of free products or services to patients in appropriate circumstances. Like Advisory Opinion 25-07, OIG also approved pharmaceutical manufacturers’ arrangements for providing free diagnostic genetic testing to patients in Advisory Opinions 22-06 and 24-12. In those opinions, OIG emphasized that it would have “likely” issued unfavorable opinions if there were “a more direct nexus” between the free genetic testing and orders for the manufacturers’ drugs or, in the case of Advisory Opinion 24-12, if the data shared pursuant to the arrangement would have allowed the manufacturer to “target marketing” of its drug based on the arrangement.

Taken together, these five advisory opinions show that there is room for companies to structure arrangements involving the provision of free products or services to patients or providers in ways that OIG finds compliant.

First, companies should mitigate any manageable risks. For example, in Advisory Opinion 25-07, the manufacturer implemented tight controls over sales, marketing, and promotional activities and materials.

Second, companies should deploy only these arrangements in favorable circumstances. For example, Advisory Opinion 25-07 involved patient access to potentially life-extending treatment, and the manufacturer offered FDA-approved companion diagnostic testing that was equally likely to indicate the appropriateness of its drug and a competitor drug. By contrast, Advisory Opinions 25-04 and 25-08 involved providers’ making commercial demands on manufacturers for administrative services that were limited to the specific arrangements between the providers and the manufacturers and did not deliver a benefit to patients facing difficult treatment realities.

Reed Smith will continue to monitor developments in federal fraud and abuse enforcement and OIG’s advisory opinions. If you have any questions about this advisory opinion or its implications, please contact the health care lawyers at Reed Smith.