Many physicians are calling our law office asking about generating passive income through referrals to dietary supplement manufacturers.
Sometimes medical doctors and osteopathic physicians call, and sometimes it is naturopathic physicians, chiropractors, acupuncturists, or massage therapists.
Sometimes they want to earn income in creative ways from dietary supplement sales.
Every state has different rules.
For example, in a recent search, I did not find any statutory references in Massachusetts to "dietary supplements" and physician sales. The only relevant citation I found to physician conflicts of interest had to do with referrals to physical therapy offices. In searching for physician conflict of interest or physician dietary supplement sales, I also did not find any relevant cases.
However, the Massachusetts Board of Registration in Medicine has a rule that is fairly explicit that it disfavors physician profit on in-office sales of health-related product. After quoting the AMA ethical opinion, which describes the practice a 'exploitative' (and includes in this "personal branding"), the Board adopts this policy:
"Physicians should not sell, lease or rent any product in a manner that has the potential to exploit patients, including but not limited to exclusive distributorships or personal branding. Physicians should not use their office or their professional relationship with patients to promote any business venture or solicit investors. In limited circumstances, when it is beneficial to the patient, it may be appropriate for physicians to sell durable medical goods essential to the patient's care. Prior to any such sale physicians should disclose to patients any financial interest they may have in the transaction. Patients should be informed that they are under no obligation to purchase durable medical goods from the physician and should be informed of the availability of the product or other equivalent product elsewhere. This information shall be conveyed via an easily understood notice prominently posted in the office."
Sometimes we advise health care practitioners to include on the invoice (and post prominently in the office) language that recaps that the language used in this rule. For example: "My office sells dietary supplements to you at a % markup from cost. This still represents a discount to you of % from what you would pay for the same products as a retail customer. However, you are under no obligation to purchase these products from my office; you may purchase the same products elsewhere; and your quality of care in my office will not be affected by your decision to purchase or not purchase products from my office."
However, the rule is fairly clear that the Board considers this practice unethical. The two examples that the Board gives of "when the sale of durable medical goods is appropriate" do not apply to your situation. These are: "Providing a patient with crutches from the physician's office rather than forcing the patient to travel to a medical equipment distributor. Providing a patient with impaired vision with corrective lenses when their vision would otherwise impair their ability to travel to another location."
There is also the concern, which is born out at least in one case from a New York appellate court, that profiting from supplement sales could lead to increased liability risk; in that case, the judge allowed a jury finding that selling sales was "greedy and reckless" and not merely negligent.
We want to support practices but in a legally defensible way. If you have questions, call our law offices.