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OIG Gives the OK to Free Genetic Testing & Counseling Arrangement

by | May 30, 2022

New OIG Advisory Opinion offers valuable insight into where the agency draws the line on free genetic tests.

Genetic tests give doctors and patients the ability to prevent and provide personalized treatment for diseases and harmful medical conditions. But they also pose significant risks of fraud and abuse. After sounding the alarm on free genetic tests for years, the U.S. Department of Health and Human Services Office of Inspector General (OIG) has now given the green light to an actual free test arrangement. The new OIG Advisory Opinion (OIG Advisory Opinion, No. 22-06) offers valuable insight into where the agency draws the line on free genetic tests.

OIG Raises the Red Flag on Free Genetic Tests

As compared to 2016 to 2019, the number of labs that have received over $1 million in Medicare payments for genetic tests has nearly tripled, while the number of providers ordering such tests has more than doubled. So, it’s hardly surprising that free genetic test arrangements have been on the OIG’s radar for several years.

For example, in June 2021, the agency issued a fraud alert warning Medicare beneficiaries to watch out for genetic testing company representatives offering “free” DNA screenings, cancer screenings, hereditary testing, and other genetic tests. The reps comb health fairs and parking lots looking for senior citizens. The pitch: Let us take your cheek swab and we’ll do the tests for free to help avoid diseases or find the right medications. All we ask for in return is that you give us your Medicare number. The results, all too often, are identity theft, payment of kickbacks to physicians for ordering the tests without seeing the patient, and subsequent false billing for those tests.

It’s not just the labs and test makers. There’s also concern that pharma companies that manufacture drugs to treat the illnesses and conditions that genetic test results reveal are paying genetic testing labs and companies to provide free genetic tests to patients who may subsequently decide to use those drug products. The amount of money to be made from these arrangements is particularly great for pharma companies that sell drugs for rare diseases associated with specific genetic mutations. Paying a lab or genetic test company to provide free tests can be quite a lucrative investment in customer development if the patient tests positive and needs the pharma company’s drug.

The OIG Advisory Opinion

In this context, a positive OIG Advisory Opinion on free genetic tests may be fairly surprising. The request for the Advisory Opinion came from a biopharma company that manufactures two FDA-approved drugs for treatment of a rare disease that may occur as a result of a hereditary condition that can lead to heart failure and death. The company’s plan: Offer a free genetic test to screen patients for gene mutations associated with the disease and provide free genetic counseling. The arrangement included a number of safeguards to guard against fraud and abuse. The offering would be limited to persons ages 18 and older who’ve been diagnosed with the disease or who haven’t been diagnosed but either have a family member with a confirmed diagnosis of the disease or whose physician suspects the disease based on clinical evidence.

While any physician could order genetic testing for any patient who meets the criteria, he/she would have to attest both that the patient is eligible for the test and that the test is clinically appropriate. Those eligible to receive a genetic test would also have the option of receiving genetic counseling, if requested by the ordering physician. The company wouldn’t in any way require or incentivize a physician who orders the tests to recommend or prescribe any of its other products. Nor would it provide information about the tests or counseling to patients or potential patients, other than to patient advocacy groups upon request or to patients already taking either of its two drugs.

In addition, the company would contract with and directly pay the vendors that provide the tests and counseling services, while banning the vendors from billing the patients or any third-party payors. Vendors would also be banned from promoting their other services to the ordering physician, patients, or family members and be required to submit a monthly report to the requestor attesting to their compliance.

The OIG’s Ruling

The arrangement would raise issues under the Anti-Kickback Statute (AKS) and Civil Monetary Penalty (CMP) law to the extent it results in remuneration to both eligible patients and their physicians, the OIG acknowledged. Free genetic tests and counseling could induce patients to purchase the company’s other products or influence their selection of a provider, practitioner, or supplier; the arrangement also confers value to physicians that may induce prescriptions by creating an opportunity for physicians to bill for other services. Even so, the OIG concluded that the arrangement posed a low risk of fraud and abuse under the AKS and the CMP, based on three factors:

1. Unlikely to Lead to Overuse or Inappropriate Use

The OIG noted that the results of the genetic test indicate only whether a patient has one of the gene mutations. First of all, it was far from assured that the company would reap a significant commercial advantage from the free tests. By itself, presence of a gene mutation doesn’t determine whether a patient has, or will develop, the disease and is thus not a medically appropriate basis to prescribe the manufacturer’s medications. The OIG also cited the company’s certification that it neither promotes use of the medications for patients who haven’t been diagnosed with the disease nor has any financial interest in any other items or services used to treat or diagnose the disorder or related disease.

2. Unlikely to Skew Clinical Decision-Making

The OIG also downplayed risks of skewed decision-making and care quality and safety by noting that the company doesn’t require or otherwise incentivize providers who order the free testing to recommend, prescribe, or use the company’s products. Use of the genetic testing may actually help improve patient safety and quality of care by helping patients get a correct diagnosis and avoid inappropriate or harmful treatments, the OIG reasoned.

3. Safeguards Minimize Kickback Risks

Finally, the OIG concluded that there were ample safeguards to manage the risks of the arrangement’s being abused as a sales or marketing tool, including:

  • The company’s sales representatives don’t distribute materials or specimen collection kits so as to take into account a provider’s historical prescribing of the company’s products or any other therapy used for the disease;
  • The company imposes caps on the number of kits a sales representative may distribute to any physician; and
  • There are limitations on the exchange of data relating to the arrangement.


While free genetic test schemes remain highly problematic, the new Advisory Opinion is the first, concrete sign that the OIG also recognizes the potential benefits of such arrangements and is prepared to allow them, provided that motives are pure, marketing risks are controlled, and the likelihood of medically necessary diagnosis and treatment is advanced.

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