May 02, 2022

OIG Issues Favorable Advisory Opinion for Free Genetic Testing and Counseling Program Offered by a Pharmaceutical Company

On April 11, 2022, the Office of Inspector General of the U.S. Department of Health and Human Services (OIG) issued Advisory Opinion No. 22-06 (AO 22-06), which approved a biopharmaceutical company’s proposed arrangement to provide free genetic testing and genetic counseling to patients.

Some have contended that the provision of free genetic tests by a pharmaceutical company to patients who might use the company’s drugs presents compliance concerns under the Anti-Kickback Statute (AKS) and the beneficiary inducement provisions of the Civil Money Penalties Law (CMP Law). For example, if a genetic test can confirm the diagnosis of a rare disease associated with specific genetic mutations, a company that manufactures a drug used for the disease may be able to increase its sales by sponsoring genetic tests. Using the language of the AKS, the provision of free genetic testing by the pharmaceutical company would constitute “remuneration” to the patient that arguably “induces” the patient to purchase the company’s drug.

Although it obviously is beneficial to society for patients to receive correct diagnoses and prescriptions for appropriate medications, critics of the provision of free genetic tests contend that the free testing could cause patients to be treated with the sponsoring company’s drug instead of alternative drug or non-drug therapies that could be equally effective. Although the OIG issued a favorable opinion to the biopharmaceutical company in AO 22-06, the OIG appears to share these concerns. The OIG cautioned that it “would likely reach a different conclusion” for “this type of arrangement” if the facts were different and if there were a “more direct nexus” between the provision of free genetic testing by a pharmaceutical company and the decision to order the company’s products.

Factual Background

In AO 22-06, the requestor was a biopharmaceutical company that manufactures medications that treat a rare disease, which can occur either spontaneously or as a hereditary disease and which can lead to heart failure and death. The disease is often misdiagnosed, leading to delays in proper treatment.

The majority of hereditary cases of the disease are caused by a specific gene mutation that can be identified through genetic testing, although only 10-20% of individuals with the mutation develop the disease. The only way to confirm a diagnosis of the disease is through clinical assessment, consisting of either a heart biopsy or certain non-invasive nuclear testing, coupled with additional diagnostic testing to rule out a different disease. While the genetic testing is not diagnostic for the disease in question, it can provide valuable information, such as whether a diagnosed patient has the hereditary or spontaneous variant, which provides information regarding the likely speed of disease progression. Testing can also be helpful for asymptomatic individuals who have relatives diagnosed with the disease in order to determine whether they should be monitored by a cardiologist for signs and symptoms of the disease.

Under the proposed arrangement, the biopharmaceutical company would provide a free genetic test furnished by an independent laboratory and up to 90 minutes of genetic counseling with an independent counseling service. The laboratory and the counseling service would contract directly with the biopharmaceutical company. Individuals who meet one of the following clinical criteria are eligible for the free testing and, potentially, counseling: (1) the individual has already been diagnosed with the disease; (2) the individual has not been diagnosed but their physician suspects they may have the disease based on clinical evidence; or (3) the individual is related to someone with a confirmed diagnosis of the hereditary form of the disease. Under the arrangement, a physician must order the genetic testing and counseling.

The biopharmaceutical company certified that it does not require or incentivize physicians who order a free test to recommend, prescribe or administer any of its products. The company also does not compensate physicians for specimen collection, although the specimen collection may be covered by federal health care programs. In addition, the company certified that, among other procedural safeguards, it does not provide information about the availability of free testing and counseling directly to patients, except to patients currently prescribed its medication; the company does not receive information regarding the patients tested to enable it to market to individual patients; and the genetic testing and counseling vendors do not promote use of the company’s products and do not discuss treatment options with patients.

Furthermore, the company certified that its sales representatives do not take into account a physician’s ordering of free tests or a physician’s history of prescribing the company’s medications when distributing materials or specimen collection kits to physicians. The company also limits the number of kits that its sales representatives may provide to any individual physician.

The OIG’s Analysis

According to the OIG, the proposed arrangement implicates the AKS because it results in remuneration to patients and physicians that may induce patients to purchase, or physicians to prescribe, the biopharmaceutical company’s medications or other products. The free testing and counseling services to patients are “inherently valuable” and constitute remuneration to patients. And the OIG reasoned that the proposed arrangement confers remuneration on physicians by enabling them to offer a service, at no cost to them or their patients, that “may create an opportunity for [them] to bill for other services, such as evaluation and management services involving genetic counseling, or other, unrelated services in the future.”

The OIG also found that the proposed arrangement implicated the beneficiary inducement provision of the CMP Law, which prohibits remuneration to Medicare beneficiaries that is likely to influence the beneficiary to select a particular provider, practitioner or supplier. The OIG reasoned that the pharmaceutical company’s provision of free testing could increase the likelihood that a patient might seek follow-up care from the physician that ordered the free testing.

Nonetheless, the OIG approved the proposed arrangement because it found that it presented a low risk of fraud and abuse. The OIG based this determination on three factors:

  1. Low risk of overutilization or inappropriate utilization. The OIG stated that the “perhaps most significant[]” fact is that the free genetic test does not serve to establish a diagnosis or support a clinical need for the biopharmaceutical company’s medications. The company certified that no data support prescribing its medications without a diagnosis, that it is outside accepted medical practice to prescribe the medications without a diagnosis, that the company does not promote its products to be used for patients without a diagnosis, and that the company has no other products to diagnose or treat the disease. Based on these facts, the OIG found that “the nexus” between the free tests and counseling and ordering or purchasing the company’s products is “attenuated.” At the same time, the OIG cautioned that it “would likely reach a different conclusion with respect to the risk presented by this type of arrangement if any of these facts were different and there were a more direct nexus between the remuneration and ordering or purchasing the manufacturer’s products.”
  2. Low risk of skewing clinical decision-making and low risk of patient safety/quality of care concerns. The OIG noted that the arrangement does not incentivize physicians to order or use the company’s products. In fact, the proposed arrangement could improve patient care.
  3. Safeguards to prevent the use of the arrangement as a marketing tool to induce the purchase or ordering of items or services. The OIG stated that it also relied on the multiple safeguards in place to ensure that the provision of free testing and counseling services would not be used as a marketing tool to induce patients or physicians to purchase or order any items or services from the biopharmaceutical company. These safeguards include: (i) the company’s sales representatives do not take into account a physician’s history of ordering the free tests or prescribing the company’s products when distributing materials and specimen collection kits; (ii) the company limits how many kits a sales representative may provide to any individual physician; (iii) the company will not receive information from the arrangement that will enable it to market to patients or to target physicians for marketing; (iv) the contract between the company and the testing vendor prohibit the vendor from promoting the arrangement to physicians; (v) the contract with the counseling vendor prohibits the vendor from discussing treatment options with patients or promoting the company’s medications or other products; and (vi) the company does not provide information about the free testing and counseling directly to patients.


In AO 22-06, the OIG stated that the provision of free genetic testing by pharmaceutical companies can pose compliance concerns under the AKS and the CMP Law, but the OIG approved the proposed arrangement under consideration. The OIG’s favorable opinion was largely the result of its conclusion that the nexus between the provision of free genetic testing by the biopharmaceutical company and the decision of a physician to order the company’s medications was not sufficiently “direct” to pose a risk of fraud and abuse. The OIG also relied on the fact that the proposed arrangement did not pose a risk of overutilization or patient harm and that the arrangement encompassed safeguards to prevent it from being used as a marketing tool.

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