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Mark Brager
October 24, 2013

AdvaMed Commends OIG Physician-Owned Distributors Report

PODs Raise Conflict-of-Interest Concerns, May Increase Medicare Costs 

WASHINGTON, D.C. – Christopher L. White, senior executive vice president, general counsel, at the Advanced Medical Technology Association (AdvaMed), issued the following statement today after the HHS Office of the Inspector General issued a report on spinal devices supplied by physician-owned distributors (PODs):

“AdvaMed commends today’s report by the HHS Office of the Inspector General (OIG), which raises serious concerns with PODs. Key among OIG’s findings were that POD-supplied devices do not lower costs, contrary to the claims of supporters of physician-owned distributors. For the device categories examined by OIG, ‘PODs’ devices either cost the same as or more than devices from companies not owned by physicians,’ the report notes.

“In addition, the OIG’s findings indicate PODs are driving increased utilization of certain spinal procedures. The report states that ‘the growth in the rate of spinal surgery after hospitals began purchasing from PODs was three times that for all hospitals.’ And hospitals that purchased devices from PODs performed over a quarter more spinal surgeries than hospitals that did not purchase from PODs.

“The lack of savings and increased utilization driven by PODs ‘may increase the cost of spinal surgery to Medicare overtime,’ OIG concludes.

“Finally, the report highlights the increased potential for conflicts-of-interest posed by PODs due to the lack of consistency in hospitals’ policies requiring physicians to report their involvement in a POD.

“The data in today’s report are compelling and reinforce the findings from OIG’s Special Fraud Alert from March of this year that PODs ‘produce substantial fraud and abuse risk and pose dangers to patient safety.’

“AdvaMed believes that transparent, ethical interactions between health care professionals and medical technology companies are critical to innovation and improved patient care. We have long been concerned that companies – such as PODs – with equity investments by physicians who are also major revenue generators for the companies, raise important legal and policy issues relating to the potential effect on clinical decisions by physicians. 

“AdvaMed would also like to recognize Sens. Orrin Hatch (R-Utah), Max Baucus (D-Mont.), Chuck Grassley (R-Iowa), Bob Corker (R-Tenn.) and former Sen. Herb Kohl (D-Wis.) for their interest and leadership on this issue and their calls in 2011 for OIG and CMS to analyze PODs, which prompted today’s report and the March Special Fraud Alert.”

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AdvaMed member companies produce the medical devices, diagnostic products and health information systems that are transforming health care through earlier disease detection, less invasive procedures and more effective treatments. AdvaMed members range from the largest to the smallest medical technology innovators and companies.