March 27 A U.S. government watchdog has
issued a warning about the risk for fraud in arrangements under
which doctors buy an ownership interest in a medical device
distributor and then share in its profits from sales to
In a March 26 report, the Office of Inspector General said
its longstanding guidance "makes clear that the opportunity for
a referring physician to earn a profit, including through an
investment in an entity for which he or she generates business,
could constitute illegal remuneration under the anti-kickback
It what is known as a Special Fraud Alert, the regulator was
addressing Physician Owned Distributors, called PODs, which are
most commonly used in orthopedics.
"The anti-kickback statute is violated if even one purpose
of the remuneration is to induce such referrals," the report
In a research note, Cowen & Co brokerage said, "We believe
the strong language in the OIG's Special Fraud Alert will serve
as a disincentive for hospitals to utilize and physicians to
Wells Fargo said it believes OIG is taking a critical view
of the POD business model and that any curtailment of PODs would
be a positive development for the large manufacturers of spinal
devices, including Medtronic Inc, Johnson &
Johnson, and Nuvasive Inc.
These big companies do not participate in PODs.