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The Quest to Ensure Transparency in Physician Relationships Continues
Mark Langdon
If you thought the spotlight on the orthopedic industry was dimming after five companies entered into agreements with the US Department of Justice last year to settle allegations related to the payment of kickbacks to orthopedic physicians, you were wrong. Recent developments at the Congressional level underscore the increased scrutiny that the industry can expect to receive this year.
In addition, enforcement officials have signaled that the physicians who serve as consultants to manufacturers also might be caught in the government’s crosshairs. This latter development is significant in that, for the most part, the enforcement focus thus far has been on the manufacturer side. A shift in emphasis to physicians is an indicator that the government feels strongly that the behavior it is seeking to deter in the orthopedic device arena cannot completely be addressed without devoting resources to those who solicit and receive kickbacks. Clearly, the government feels that those who receive illegal payments are just as guilty as those making the payments.
Recent testimony before Congress serves to highlight just how important it is that medical device companies’ relationships with physicians are appropriate and transparent. The Senate Aging Committee hearing, titled “Surgeons for Sale? Conflicts and Consultant Payments in the Medical Device Industry,” was focused primarily on the hip and knee industry, but the concepts and issues discussed were applicable to all segments of the orthopedic device industry. The hearing, held at the request of Sen. Herb Kohl (D-WI), chair of the Senate Special Committee on Aging, highlighted the results of a six-month Congressional investigation into circumstances surrounding payments for consultant fees, royalties, funding for clinical trials, travel and gifts for surgeons who implant devices. Dozens of orthopedic surgeons and sales representatives for device companies were interviewed by Congressional staff members as part of the review.
According to Kohl, the investigation revealed that many companies made excessive payments to surgeon-consultants for little to no work, and physicians often informed different device companies that they would be loyal to the highest bidder for their consultancy services. The assistant inspector general for legal affairs in the Office of Inspector General (OIG) of the Department of Health and Human Services, which is the federal agency charged with investigating fraud and abuse in Medicare and Medicaid programs, amplified these concerns by testifying that kickbacks offered to physicians by medical device companies can take a variety of forms, ranging from free practice management services to all-expenses-paid trips and sham consulting arrangements. In addition, the witness noted that the OIG has learned of medical device companies offering physicians lucrative consulting agreements to acquire new business and to maintain physician loyalty.
Noteworthy as well is the focus that was placed on physicians during the hearing. Kohl stressed that physicians who accept improper payments are as culpable as the medical device companies that offer or make the payments. On this point, the OIG testified that, in cases involving alleged violations of the anti-kickback statute, both the company and physicians are subject to criminal, civil and administrative prosecution. Significantly, the OIG stated that it is working with the Justice Department in New Jersey to determine if cases can be brought against individual physicians.
Following is a look at some of the recent initiatives designed to promote more transparency with regard to manufacturers’ relationships with physicians.
Areas of Interest
One major development at the Congressional level was the introduction of a federal law known as the “Physician Payments Sunshine Act.” Sponsored by Kohl and Senate Finance Committee Chair Charles Grassley (R-IA), the purpose of this legislation is to make medical device manufacturers’ relationships with physicians more transparent, as well as to deter manufacturers from making payments to physicians as a means of rewarding or inducing referrals. Companion legislation that mirrors the Senate bill also was introduced in the House of Representatives by Reps. Peter DeFazio (D-OR) and Pete Stark (D-CA).
If passed in its current form, the bill put forth by the senators would require device and pharmaceutical manufacturers with annual revenues that are greater than $100 million to file certain reports containing disclosures of financial relationships with physicians. The bill, which would require the reports to be filed on a quarterly basis to the federal government, would require disclosure about anything of value (greater than $25) given to physicians—items might include honoraria, gifts, food and travel. In addition, manufacturers would have to disclose the names of physicians receiving such payments. Penalties for violating the law would include fines of up to $100,000 per violation.
While it is unclear at this point whether this legislation has a real chance of passing in its current form, its mere introduction—and the substantial press coverage and discussion it has created—is significant because it signifies a growing demand by government officials for more transparency and accountability in relationships between manufacturers and physicians.
At the state level, the Massachusetts state Senate unanimously approved a sweeping law that would prohibit pharmaceutical manufacturers from giving any gifts to physicians. Similar bills have been discussed and/or proposed in various forms in other states during the past few years, and it is likely that more will follow the trend set by Massachusetts.
Outside the government, many academic medical centers already have enacted their own stringent policies prohibiting manufacturers’ sales representatives from offering gifts on campus. Further, the influential Association of American Medical Colleges recently recommended that pharmaceutical and medical device companies be prohibited from offering gifts to physicians and staff at medical colleges.
Although not all of these developments are specific to medical device manufacturers, and some apply solely to drug companies, these developments are worth following closely—particularly because enforcement initiatives in the pharmaceutical arena typically have been followed by similar actions in the medical device sector.
Device Manufacturers Take Action
While the focus of recent proposed legislation has been the requirement of greater transparency, some medical device manufacturers have become proactive in this regard by, for example, posting online the nature of their relationships with those in a position to order or purchase its products. Of course, the five companies that entered into agreements with the US Department of Justice last year to settle allegations related to the payment of kickbacks to orthopedic physicians were required, as a condition of those agreements, to make certain public postings of their financial relationships with physicians. However, other companies—small and large alike—are debating whether to take a similar course of action.
Many other companies in the medical device and pharmaceutical industries recently have promised to be more forthcoming about their spending. Specifically, several of the largest pharmaceutical and medical device manufacturers have advised Congress that they intend to publicly disclose the grants that they make to outside groups such as continuing medical education sponsors and patient advocacy organizations. Theses activities follow on the heels of a report issued last year by the Senate Finance Committee that said that the drug industry may be inappropriately using the medical education industry to advance certain messages about off-label uses of their drugs.
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In light of the inevitable investigations and legislation that will result from these recent developments, and the continued heightened scrutiny of the medical device sector, orthopedic companies would be well advised to consider a greater degree of transparency with respect to the nature and extent of their financial relationships with both physicians and outside organizations such as patient advocacy groups and physician practice associations. In particular, companies should assume that their financial relationships with these individuals and entities—including the amount of the compensation that is paid—will become public and, therefore, consider whether it would make sense to be proactive and actually disclose some or all of these relationships on their Web sites. Although such action technically is not required by law at this time, given the trend toward greater openness in the pharmaceutical and medical device arena, and the fact that a company might be able to reduce the likelihood that it will be required to enter into an onerous settlement agreement if it can demonstrate that it is adopting many of the safeguards outlined in the recent industry settlements and discussed in proposed legislation, making these types of disclosures could represent a prudent step.
