Was recently posed with an interesting question by our Marketing Department. Whereas, there are restrictions on HCPs receiving any form of discount or monetary reimbursement for promoting a company's product, are there any such restrictions for private citizens?

For example, we want to increase our products in the US market, and want to give a current user a $50.00 discount if they refer another user to purchase our product. Concurrently in lieu of the monetary reimbursement, we could even provide a company promotional material for the amount, or a gift certificate to an event, or...you get the idea.

Please advise, inform if your company has conducted such a program - while complying with all regulations of course.

Was recently posed with an interesting question by our Marketing Department. Whereas, there are restrictions on HCPs receiving any form of discount or monetary reimbursement for promoting a company's product, are there any such restrictions for private citizens?

For example, we want to increase our products in the US market, and want to give a current user a $50.00 discount if they refer another user to purchase our product. Concurrently in lieu of the monetary reimbursement, we could even provide a company promotional material for the amount, or a gift certificate to an event, or...you get the idea.

Please advise, inform if your company has conducted such a program - while complying with all regulations of course.Often, individual states of the USA have wildly varying laws on what kind of "gimmicks" an organization may use to "induce sales or sales referrals." It would be a relatively inexpensive fee to a law firm in the USA to have a paralegal do a computer search on http://www.lexisnexis.com/ and issue your organization a formal, written opinion on what you may and may not do.

Trust me on this: the money you spend on the law firm for the written opinion will be cheaper than answering even one legal complaint from one attorney general consumer affairs office (probably triggered by a jealous competitor of yours who was ticked off because he didn't think of and use the idea first.)

Wes is correct, you should do the background first. But, we have companies offering monetary incentives for recommending new customers all the time, so it cannot be too difficult. Cable companies, satellite companies, even car companies and many more offer a referrel bonus, usually in the form of discount checks to be applied to your own purchases/contract obligations. Find out your legal responsibilities, it may be well worth it.

A lot of direct-to-patient advertising of pharmaceuticals and devices is done in the US, attempting to get individuals to ask their doctor to prescribe X instead of Y or a generic. As far as I know, such marketing is legal as long as it doesn't involve claims of safety or efficacy that are not supported by the product's regulatory clearance or are otherwise inconsistent with legal constraints.

One potential entanglement would be if part of the purchase cost of the product in question is eligible for reimbursement by CMS or private insurance. CMS, in particular, might see rebate-marketing to increase the sales of such a product as an inducement for fraudulent activity, and as conspiratorial commercial behavior. That's really bad territory to get into, since the prosecutors can roll out RICO and some heavy penalties.

Thank you all! "Wes", yes I will have marketing check with California lawyer to see about legitimacy. As "Steel Maiden" wrote, other industries provide monetary incentive for referring customers. And to "Miregmgr" exactly- lot of direct-to-patient advertising is done in US. I feel little more stronger responding to the request now. Thank you all again. I'm liking this Elsmar Cove. :)

Wes is correct, you should do the background first. But, we have companies offering monetary incentives for recommending new customers all the time, so it cannot be too difficult. Cable companies, satellite companies, even car companies and many more offer a referrel bonus, usually in the form of discount checks to be applied to your own purchases/contract obligations. Find out your legal responsibilities, it may be well worth it.
The key here is that most of the organizations you cite are making these offers on a local or regional basis. If you look closely at the fine print, you will often see disclaimers like
"void in the following states: ________"
or
"this offer void where prohibited by law."

Organization walk a fine line when offers are advertised with such disclaimers in states where they are legal. Advertising targets are torn between:
"Wow! I'm getting a deal they can't get in Arkansas!"
and
"What's wrong with this deal that it is outlawed in New York?"

Conversely, folks in the states where the offer is not legal tend to think,
"Why is this organization discriminating against me by making an offer I can't take advantage of? If I can't get a rebate, I should get the product or service cheaper to begin with."

It is also necessary to consider many office supply scams abound where an individual buyer or purchasing agent is offered a "free prize" for ordering $X of merchandise (usually overpriced to more than cover the value of the so-called free gift.)

I am aware of at least 20 organizations which have banned purchases from such organizations merely because they make such offers, without further consideration of the merits of the products or their prices, simply because they don't want any appearance of self-dealing.

As long ago as 45 years, one of our best clients had a rule that forbade any employee from accepting anything of value from a supplier (beyond advertising logo gimmicks like pens and desk calendars or note pads.) Any lunch with a supplier HAD to be in the organization cafeteria with lunch paid by the organization and conversations open to eavesdropping by others in the room.