Health Law Checkup - January 2013
Trends to Watch in 2013: Physician-Owned Distributors


Trends to Watch in 2013: Physician-Owned Distributors
by Eric L. Kintner

Physician-owned distributors (PODs) that sell medical devices have seen substantial growth over the last few years as well as increased regulatory scrutiny. We expect both trends to continue in 2013. PODs are arrangements in which a physician purchases an ownership interest in a medical device distributor and then shares in the profits received by the distributor from sales to hospitals and surgery centers. Proponents of PODs believe they help reduce medical device costs as compared to traditional distribution channels because the device manufacturer does not have to spend the time and expense to market to these physicians. Opponents of PODs see them as the next big health care scandal, citing concerns regarding physician conflicts of interest, overutilization, anti-competitive effects and violation of the federal Anti-Kickback Statute (AKS).

The primary federal regulator, the Office of Inspector General for the U.S. Department of Health and Human Services (OIG), has indicated that it will focus on the sales practices of spinal implant PODs. However, there has been little enforcement action against PODs to date, so the jury is still out on whether PODs comply with applicable regulatory requirements. Health care providers that choose to invest in or contract with PODs should be aware that there are various models for how PODs can be operated, and some models seem to pose less regulatory scrutiny than others.

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