By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, MA.
A Health Care Provider Defense and Compliance Firm

In a favorable advisory opinion issued June 25, 2025, the U.S. Department of Health and Human Services Office of Inspector General (OIG) confirmed that a device manufacturer’s limited reimbursement program tied to safety failures would not violate the federal Anti-Kickback Statute (AKS). This decision is particularly instructive for medical device manufacturers and distributors serving health care providers—and equally reassuring for providers who may be weighing the compliance risks of similar product-based compensation structures.

The Device and the Warranty Offer

The device at issue is a specialty injection tool featuring a safety mechanism designed to prevent accidental needle sticks. The manufacturer, whose identity was redacted, proposed reimbursing its purchasers—hospitals, clinics, pharmacies, and laboratories—for actual costs (up to $2,500) incurred due to needle stick injuries arising from product failure (not user error). Covered costs include staff retraining, temporary staffing, legal expenses, and increased insurance premiums resulting from the incident.

The reimbursement would be offered under a one-year warranty with several key limitations:

• It applies only to the purchaser (not to patients or individual health care workers).
• It is not contingent on the purchaser buying a minimum quantity or using the device exclusively.
• It is not structured as an inducement for federal health care program referrals.
• It is limited to actual, documented costs.

Why the OIG Approved It

Though the arrangement does technically involve remuneration (i.e., something of value in return for a commercial transaction), the OIG concluded that the structure fits squarely within the safe harbor for Warranties under 42 C.F.R. § 1001.952(g).

Key factors supporting the opinion:

• The manufacturer offers no other services under the warranty, only reimbursement tied to a single device’s performance.
• There is no price reduction or “kickback” to the purchaser beyond what is allowed by the safe harbor.
• The reimbursement does not extend to federal health care program enrollees or patients.
• The arrangement is not linked to any exclusivity or volume requirements, mitigating risk of steering business.

In short, the OIG found that the reimbursement functions as a true performance warranty and not a disguised incentive to purchase more devices or refer more patients.

What This Means for Health Care Providers and Manufacturers

This opinion highlights the continued importance of structuring financial interactions with health care providers under clear, narrowly tailored warranty programs. For health care providers, especially outpatient clinics, retail pharmacies, and physician groups, this is an important green light that warranties for medical products can include reimbursement for actual harm, so long as:

• The reimbursement is limited, tied to product failure, and not extended to patient care costs.
• The program is transparent, documented, and structured in compliance with federal guidance.
• The program avoids inducing use of the product for federal beneficiaries.

Why It Matters to the Compliance Community

This advisory opinion reinforces a broader trend at OIG: structuring compliance around narrowly scoped, commercially reasonable transactions, especially those that genuinely mitigate risk or patient harm. It provides helpful compliance guardrails and offers reassurance that safety-focused reimbursement tied to medical device performance can be legally structured even in today’s heightened AKS enforcement environment.

To read the full OIG Advisory Opinion No. 25-05, click here.

If you have questions about how to structure warranty, rebate, or other performance-related arrangements with providers or suppliers, contact Parrella Health Law at 857.328.0382 or email Chris directly at cparrella@parrellahealthlaw.com.