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Physician-Owned Distributorships under Federal Scrutiny

May 18, 2016

A recent report issued by the U.S. Senate's Finance Committee criticized physician-owned distributorships (PODs), specifically mentioning spinal implants, citing the likely incentive for doctors to give preference to devices that provide them a financial return, Mass Device reports.

In 2011, a Senate Finance panel report encouraged a group of senators to petition the U.S. Health and Human Services (HHS) Department's Inspector General to investigate PODs. The report revealed that PODs existed in 20 states, with over 40 in California alone.

A "Special Fraud Alert" was issued in 2012 by the HHS Office of the Inspector General (OIG) as "inherently suspect" under Medicare's anti-kickback rules. In 2013, the OIG, along with the Justice Department, warned that there may be a serious conflict of interest considering the influence doctors have over hospitals' purchasing practices.

The most recently released Senate Finance report found that PODs had spread to 43 states and the District of Columbia as of November 2015. Additionally, the report discovered that surgeons at PODs saw 24 percent more patients than non-POD physicians and performed almost twice the number of fusion procedures.

"The relationship between doctors and their patients should be one characterized by trust and a level of professionalism that is held to the highest standards," Finance chairman Utah Senator Orrin Hatch said. "Unfortunately, when surgeons have a financial interest in medical device companies, the data calls into question whether the best interest of the patient is considered," added Senator Hatch.

The assistant general counsel for AdvaMed, a trade association that advocates for the highest ethical standards, said, "AdvaMed has long raised concerns regarding PODs and has advocated for transparent, ethical business arrangements and ownership models for medical technology manufacturers and distributors under federal laws, consistent with the association's code of ethics," reports Mass Device.

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