Physician Owned Distributorships (PODs) and Strategic Distribution Companies
The formation and use of PODs and strategic distribution companies has become increasingly common in the last few years. With dramatic reductions in physician reimbursement along with the increased demands being placed on physicians, physicians must look for sustainable, ancillary sources of revenue. POD structures can be useful in achieving cost-savings compared to traditional distribution channels. PODs can negotiate directly with manufacturers to obtain a lower price on items, which it may then sell directly to a hospital, eliminating middle channels of distribution. Physicians may also add value to these distributorships in providing product review and consultation services as well as implementing evidence based practices and educational programs to successfully reduce surgical site infections, length of stay, and other measures which help promote cost-savings to hospitals and other healthcare providers.
POD strategic distribution company models should be carefully structured with the advice of legal counsel. If structured properly, PODs and strategic distribution companies can be a legal mechanism to allow physicians an ancillary source of revenue while achieving substantial cost-savings. If not structured properly, however, physician ownership in PODs or strategic distribution companies may run afoul of laws such as the federal Stark law, anti-kickback statute as well as applicable state laws.
BMD has assisted clients nationwide in developing compliant POD and strategic distribution company models that use non-physician investors, independent marketing personal, and implement other safeguards to protect against legal and regulatory concerns such as over-utilization and conflicts of interest. We have also represented clients who have decided to invest directly in device manufacturing companies.