OIG Advisory Opinion 26‑10 Signals Scrutiny of Royalty‑Based HCP Consulting Arrangements

By Lisa Damhof

In May 2026, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinion 26‑10 (Opinion) and concluded that a medical technology company’s proposed consulting and royalty arrangement with health care provider (HCP) consultants presented fraud and abuse concerns under the federal Anti‑Kickback Statute (AKS) and therefore received an unfavorable opinion from OIG. While royalty-based compensation arrangements are not inherently problematic and may be appropriate in certain circumstances, the Opinion provides important guidance regarding compensation structures tied to product sales that the compensated HCP may be in a position to influence.

Summary of Advisory Opinion 26-10

The requestor in the Opinion, a medical technology company, presented a proposed arrangement with HCP consultants to provide a broad range of services across the requestor’s product line. The services would include, among others, training, proctoring, clinical feedback, and discussing strategic initiatives. HCP consultants would be required to meet minimum service thresholds, which would be determined through performance evaluations by a panel created by the requestor to assess the quality of each HCP consultant's services. Compensation for the HCP consultants would be dependent upon the outcome of these evaluations and structured in two tiers: HCP consultants who failed to meet performance thresholds would be paid an hourly fair market value (FMV) rate, while HCP consultants who met the performance threshold requirements would receive quarterly royalty payments equal to a specified percentage of product‑line sales. 

The opinion follows OIG Advisory Opinion 25-11, which addressed discount and rebate structures and similarly emphasized structure, transparency, and documented AKS risk analysis.

OIG first concluded that the proposed arrangement would not satisfy the safe harbor for personal services and management contracts and outcomes-based payment arrangements. OIG then separately analyzed whether the arrangement nevertheless presented a sufficiently low risk of fraud and abuse and concluded that it did not. OIG concluded that the royalty compensation methodology could take into account business generated between the parties because the royalty payments were based on product-line sales that the HCP consultants were in a position to influence through their consulting activities and professional roles. OIG further concluded that the arrangement presented more than a sufficiently low risk of fraud and abuse because it could skew clinical decision-making, encourage inappropriate utilization, create unfair competition, and increase costs to federal health care programs.

Despite safeguards such as FMV certifications and exclusions for certain services, OIG determined that the proposed arrangement posed a heightened risk of improper remuneration. OIG expressed concern that royalty payments based on overall product-line sales could incentivize physicians to favor, recommend, or promote the requestor's products. OIG was particularly concerned because the physician consultants were in a position to influence utilization and purchasing decisions involving the same product lines on which their royalty payments would be calculated, creating a risk that compensation could function as a reward for business generation rather than payment solely for bona fide services.

What Does OIG Advisory Opinion 26-10 Mean for HCP Consulting Arrangements?

Advisory Opinion 26-10 highlights OIG's concerns with compensation structures that tie physician consultant compensation to broad product-line sales, particularly where the consultants are in a position to influence utilization or purchasing of those products.

Manufacturers should consider the following compliance measures when reviewing existing consulting and advisory arrangements and designing new programs:

Compensation should be clearly tied to specific, well‑defined services or deliverables that are outlined in advance in a written agreement with the HCP. 

Arrangements that compensate HCP consultants based on broad product-line sales or other metrics that may be influenced by the consultant's referrals, recommendations, or purchasing influence warrant heightened scrutiny.

Compensation should be consistent with FMV and structured to avoid rewarding referrals, product utilization, or other business generation.

Royalty arrangements should be carefully structured to ensure they are tied to legitimate contributions. Compensation should be paid solely in exchange for bona fide services that are actually rendered pursuant to a written agreement.

Oversight and documentation are critical. 

A comprehensive compliance approach in structuring and executing the arrangement, including ongoing oversight, should be in place, along with clear documentation that supports the legitimacy of the manufacturer’s need and services provided.

“Engagements with HCPs require close compliance oversight. Advisory Opinion 26‑10 underscores the importance of clearly defined services and ensuring compensation is limited to bona fide HCP services. Broad consulting roles and compensation tied to product-line sales that a consultant may be able to influence present heightened AKS risk.”
Lisa Damhof, Associate Attorney

Bottom Line

AO 26-10 serves as a reminder that consulting and royalty arrangements involving HCPs should be carefully structured and documented, particularly when compensation is tied to product sales or other metrics that the consultant may be in a position to influence. Compensation structures that resemble rewards for product utilization, purchasing influence, or business generation remain a significant AKS concern.

How Gardner Law Can Help

Our team advises medical technology companies on HCP consulting and compensation arrangements and agreements, working to mitigate AKS risk and align with OIG guidance.