The New Hampshire State Senate held a hearing on April 19, 2012 regarding HB 1725, a new measure that would prohibit all health care practitioners from prescribing or referring any U.S. Food and Drug Administration class II or class III implantable medical device if the practitioner stands to “profit indirectly or directly from the sale of [the] medical device by any supplier in which the health care practitioner has a direct or indirect ownership interest.” The testimony from supporters and opponents at the hearing, as well as recent commentary on the bill, indicate that there is significant disagreement over the reach of the measure and in particular whether the definition of “ownership interest” will include “royalty arrangements” between practitioners and medical device manufacturers.
As currently drafted, HB 1725 incorporates the following broad definition of “ownership interest”:
Any and all ownership interest by a healthcare practitioner or such person’s spouse or child, including, but not limited to, any membership, proprietary interest, stock interest, partnership interest, co-ownership in any form, or any profit-sharing arrangement. It shall not include ownership of investment securities purchased by the practitioner on terms available to the general public and which are publicly traded.
At the hearing, supporters of the bill clearly stated that the bill’s purpose is to address growing concerns regarding physician-owned distributors (“PODs”), which can implicate state and federal anti-kickback prohibitions. Opponents, however, argued that the current definition of “ownership interest” could reach much further. On the one hand, “royalty arrangements” between practitioners and medical device manufacturers could arguably be deemed “compensation arrangements” involving the transfer of intellectual property rather than “ownership interests,” and hence fall outside of the bill’s proscriptions. At the same time, the broad definition in the proposed legislation of “any and all ownership interests” followed by a non-exclusive list of examples, and the current significant disagreement over the measure’s reach, suggest that the bill would benefit from additional drafting for clarity.
We will continue to monitor developments in this area. To view our previous post on this topic, click here.