The HHS Office of Inspector General issued an unfavorable advisory opinion this month, concluding that an orthopedic device company’s plan to pay physician consultants royalties tied to product-line revenue posed a heightened risk under the federal Anti-Kickback Statute.
Here are five things to know:
1. The company planned to pay physician “product line consultants” a percentage of revenue from products in the line they advised on. If they met minimum time and quality thresholds. Those who didn’t qualify would receive an hourly rate instead.
2. The OIG said no because the royalty could include revenue from the consultants’ own product recommendations, OIG found the pay structure was effectively tied to referral volume, disqualifying it from the personal services safe harbor and raising the specter of a “payment-for-referrals scheme.”
3. OIG flagged that consultants’ teaching, training and proctoring duties made the risk worse, putting them in direct contact with other providers who might subsequently order the company’s products.
4. OIG reiterated that physician consulting arrangements can be legitimate when they involve genuine clinical or technical expertise and are structured around fixed fair-market-value compensation, not revenue-sharing.
5. Device companies should audit any consultant pay structures that link compensation to product sales, even indirectly. The safest path is fixed fees tied to clearly documented services with no line of sight to referral volume.
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