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Pressure increases for disclosure of manufacturers payments to physicians
Physicians should prepare for payments received from manufacturers to soon be in the public eye.
The interactions between physicians and drug or device makers have long been scrutinized for their potential conflicts of interest. Until recently, self-restraint, ethical considerations, and good medical practice were relied upon to avoid undue influences.
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However, in the last several years, more than a dozen states have proposed laws that would require disclosure of payments to physicians. Several states have passed such laws, and now federal intervention appears likely in the aftermath of the recent device-industry shakeup following last fall’s settlements between the government and five large orthopedic device makers.
With momentum approaching the tipping point and federal action possible this year, patients and colleagues may soon become increasingly aware of physicians’ relationships with drug and device makers.
In late 2007, the landmark Department of Justice (DOJ) case against the orthopedic device manufacturers resulted in massive monetary settlements by four of the device makers as well as agreements to publicly disclose the names of physicians who receive payments and the amount of money received by all five.
This may have been the proverbial straw that broke the camel’s back, with the U.S. Senate once again taking up debate on a nationwide law to regulate physician-industry relationships. Because it appears that such relationships are rapidly shifting from a voluntary, self-policing framework to a mandatory, highly public system, it is important to understand how these relationships were managed thus far and how a national law would alter the existing dynamic.
Early reliance on self-policing
In 1990, the American Medical Association (AMA) adopted guidelines in response to what was perceived as manufacturers’ escalating use of “lavish” gifts to physicians. AMA Opinion 8.061 acknowledged that “[m]any gifts given to physicians ... serve an important and socially beneficial function,” but some gifts are not “consistent with the principals of medical ethics.” AMA thus advised that gifts to physicians should: benefit patients; serve an educational function; or relate to a physician’s work and should not interfere with the practice of medicine or have “strings attached.”
Pharmaceutical and device manufacturers adopted codes of ethics that reflected these guidelines. The Pharmaceutical Research and Manufacturers of America (PhRMA) Code and the Advanced Medical Technology Association (AdvaMed) Code of Ethics – both created by trade associations and adopted by nearly every manufacturer – further restrict the potential for the perception of undue influence, including creating a limit on the value of gifts to physicians.
Emerging state efforts
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Many states concluded that self-policing was insufficient and legal action was needed to manage physician-industry relationships. As of this writing, four states (Maine, Minnesota, Vermont, and West Virginia) and the District of Columbia passed laws that require drug companies to report payments to physicians. These laws generally require disclosure of all payments to physicians above a certain threshold; $25 in some states, $100 in others, including the costs of educational materials, food, and honoraria. Minnesota also limits total payments to a practitioner to $50 per year, excluding educational programs, honoraria, and consulting fees.
Such state efforts have demonstrated mixed results. Notably, only Minnesota requires that the information reported to the state also be made public, while Maine, West Virginia, and Washington DC have exempted the reported information from ordinary public access requirements.
Furthermore, a study published in Journal of the American Medical Association last year found that companies were not fully complying with the requirements or otherwise circumventing them. As a result, only 25% to 40% of the intended data were collected.
Eleven other states have considered similar laws. At least two are currently debating such measures: The Michigan legislature is considering a bill that would limit gifts to physicians to $100 per year, while Massachusetts may prohibit gifts of “any value” to physicians.
The federal response
Amidst the growing number of state laws, six Democratic U.S. senators introduced the Physician Payments Sunshine Act of 2007. This law would require drug or medical device manufacturers with more than $100 million in annual revenues to report the names of physicians who received payments from the company, the amount received and a description of the payment. This requirement would apply to payments greater than $25 and include any compensation, gifts, honoraria, consulting or speaking fees, travel, discounts, rebates, or other services.
The law would penalize noncompliant companies with a $10,000 to $100,000 penalty for each infraction.
Hearings were held in February by Sen. Herb Kohl (D-Wisc.), a sponsor of the Physician Payment Sunshine Act. The title of the hearing revealed the senator’s perspective on the law — Surgeons for Sale? Conflicts and Consultant Payments in the Medical Device Industry — but testimony from industry associations, manufacturers, a physician, and a federal enforcement agency also indicated widespread support for the law.
Industry support
PhRMA and AdvaMed, the industry associations for the pharmaceutical and medical device manufacturers respectively, each expressed support for the disclosure law. Both organizations emphasized that physician input and training are highly important to the development of medical devices, but acknowledged that some addressable abuse has occurred.
Notably, AdvaMed proposed three revisions to the Sunshine Act to foster even greater transparency. First, it argued that the law should create a nationwide standard and preempt state laws. Second, instead of relying on a revenue-based threshold, AdvaMed suggested that the law require disclosure from any company with more than $250,000 in annually-reportable physician payments. Third, AdvaMed recommended the requirement also apply to any company in which a physician has an equity ownership interest.
The senate committee also heard from several device makers, including one involved in the $311 million settlements and one that entered into a non-prosecution agreement last fall, as well as a small medical device company, Applied Medical Resources Corp. Each emphasized that the law should maintain a level playing field for all device makers, with Applied Medical’s CEO explaining that “grants have deteriorated, often quite creatively, into quid pro quo instruments,” which has led physicians to become biased gatekeepers for new technologies.
Continuing education
One physician echoed this perspective. Orthopedic surgeon Charles D. Rosen, MD, a professor at the University of California, Irvine, School of Medicine and president of the Association for Ethics in Spine Surgery, explained that the majority of his colleagues do not accept money from any company. But, Rosen also warned that these same physicians rely on continuing education that is largely financed by manufacturers. As a result, he argued that physicians are often unable to identify informational biases and are therefore unknowingly over-utilizing implants and procedures.
In a similar vein, the Department of Health and Human Services’ Office of Inspector General (OIG) stated that “the impulse to reciprocate for even small gifts has a powerful influence on behavior.” The OIG indicated that disclosure is a key driver of increased transparency and decreased financially-driven medical decisions, pointing to the landmark orthopedic device case as well as the January guilty plea of Patrick Chan, MD, for soliciting and accepting kickbacks from Blackstone Medical, which manufactures devices and implants used in spinal surgery. Chan admitted to being paid by the company to use only its products. The OIG stated that it intends to continue to include disclosure provisions in future settlement agreements and that the federal law would be a welcome addition.
What this means
When everyone, including drug and device makers, calls for federal regulation of physician-industry relationships, change is all but certain. Even without new legislation, any future government settlements are likely to require disclosure of related physician payments by manufacturers. Either way, it is likely that in the near future, patients and colleagues will be able to review the detailed nature and extent of manufacturers’ potential influence.
For more information:
- Brian D. Schneider, JD, can be reached at Arent Fox LLP, 1050 Connecticut Ave. N.W., Washington, DC 20036; 202-715-8590; e-mail: schneider.brian@arentfox.com.