Feds investigate Invacare's co-op advertising

Sunday, January 21, 2007

ELYRIA, Ohio - The U.S. Department of Justice has subpoenaed Invacare for documents related to "three long-standing and well-know promotional and rebate programs" the manufacturer offers to HME providers.

Invacare revealed the news in a press release last week.

"If (the DOJ) is issuing a subpoena, it is serious in their minds," said healthcare attorney Neil Caesar, president of the Health Law Center in Greenville, S.C. "It doesn't mean that Invacare has done anything wrong, but it almost always means (the DOJ) has done some preliminary digging, and they think it is worth going further."

In its press release, Invacare stated that it "believes the programs described in the subpoena are in compliance with all applicable laws. The company is cooperating fully with the government inquiry, which is being conducted out of Washington, D.C."

Invacare Senior Vice President and General Counsel Dale LaPorte declined to name the programs being investigated, but they're still being offered, he said.

"We wrestled with what to say in that release," LaPorte said. "We don't want to get out ahead of the government people, and I don't want to spook anyone out in the market, either."

News of the Invacare subpoena comes about two months after the Office of Inspect General (OIG) issued an advisory opinion that questioned the legality of the advertising assistance some manufacturers offer providers.
The OIG gives an advisory opinion when asked a specific question about the legality of a particular action. The OIG keeps the name of they party asking the question confidential.

Invacare officials said they did not request the advisory opinion. That has led some industry watchers to speculate whether a competitor requested the opinion, hoping to disrupt Invacare's extensive branding and marketing efforts.

"A friend didn't ask that question," one source said.

The OIG stated in the advisory opinion that the advertising assistance in question "poses all the usual risks associated with kickbacks."

"There is a substantial risk of driving overutilization and increasing program costs," the opinion reads.

In the proposed arrangement the OIG examined, a manufacturer provides suppliers with free TV, Internet and print ads featuring its products. The ads direct consumers to suppliers or to a call center financed and operated by the manufacturer. The manufacturer selects suppliers based on demographics, historical market data and projected market potential.

The opinion irked some industry watchers who criticized the OIG for sticking its nose where it doesn't belong--in the free market.

"I hope Invacare fights this tooth and nail," said healthcare attorney Ann Berriman. "I think it is bad policy and limits access. They believe that direct-to-consumer marketing builds demand, and they want to be able to say that it is illegal. I have a difficult time believing that informing beneficiaries of what they are entitled to, if they have proper medical need, is illegal."