Needlestick injuries can expose health care personnel to infections as well as psychological distress, and may result in significant financial costs to health care facilities, particularly if these injuries happen because of a medical device (Device) failure.
The U.S. Department of Health and Human Services, Office of Inspector General (OIG) approved a medical device manufacturer’s (Manufacturer) proposed arrangement (Arrangement) to reimburse pharmacies, hospitals, clinics, and laboratories (Purchasers) up to $2,500 for the actual costs of certain services related to such injuries. OIG’s favorable Advisory Opinion (25-05) found that the Arrangement implicates the Federal Anti-Kickback Statute (AKS), but that it is protected by the regulatory safe harbor for warranties.
Under the Arrangement, Manufacturer warranties the Device’s safety mechanism, which is designed to protect personnel such as pharmacists, registered nurses, and medical doctors (Personnel) from needlestick injuries. If such Personnel are employed by or under contract with Purchaser and sustain a needlestick injury due to a failure of the Device’s safety mechanism (and not user error), Manufacturer will reimburse the Purchaser for certain costs related to the injury such as staff retraining, staff absence and replacement, counseling for injured workers, and legal fees or related consequences. Manufacturer’s payment is conditioned on Purchaser’s acknowledgement of an agreement with the terms of the Device’s warranty.
These warranty terms include:
- The Arrangement benefits only Purchasers, and not third-parties;
- Manufacturer warrants that the Device will not cause a needlestick injury if used in accordance with its descriptions and intended purpose;
- Manufacturer’s sole obligation, and the Purchaser’s sole remedy, is a payment of up to $2,500 for documented costs Purchaser incurs because of the Device’s failure and the resulting injury;
- Manufacturer will not be liable to the Purchaser or any third-party for any needlestick injury nor will Manufacturer indemnify any Purchaser or third-party related to a needlestick injury; and
- The “warranty period” lasts for one (1) year, starting from the date of purchase of the Device.
OIG observes that the Arrangement implicates the AKS because a payment of up to $2,500 for needlestick injuries could, in certain situations, induce Purchasers to buy the Device. Notably, OIG found that the above-referenced terms meet the warranty safe harbor for Purchasers and Manufacturer because:
- The warranty does not include any price reductions that trigger reporting obligations for either party;
- Manufacturer would not pay remuneration to any individual or entity—including Purchaser—for expenses incurred by Federal health care program enrollees;
- The warranty only covers the Device (no services) so there are no issues involving multiple Federal health care program payments;
- Manufacturer certified that payment is not conditioned on Purchaser’s exclusive use or minimum purchase of the Device; and
- The warranty guarantees the Device will not cause a needlestick injury for a period of one (1) year from the date of purchase if the Device is used as directed.
Manufacturers and Purchasers considering similar warranty programs should engage with qualified counsel to carefully assess compliance with AKS requirements and the potential applicability of the warranty safe harbor.
A complete copy of the Advisory Opinion is here.
Should you have any questions regarding the above or wish to have a proposed arrangement evaluated for compliance with applicable laws, please contact the authors, the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].
