Healthcare Business News

Quid pro quo

The nothing-to-see-here relationships between physicians and medical-products companies could soon be coming to a close

By Shawn Rhea
Posted: January 4, 2010 - 12:01 am ET

When Senate lawmakers began probing in 2007 whether undisclosed financial relationships between physicians and medical-product companies influence patient-treatment decisions, the vast majority of companies and providers resisted efforts to make those relationships public.

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Those protesting voices have quieted over the past year, however, largely because of a litany of high-profile cases where physicians appear to have put lucrative consulting agreements ahead of patient safety. One of the most glaring examples came to light last March when Baystate Medical Center, Springfield, Mass., said it had discovered that Scott Reuben, an anesthesiologist with the 653-bed hospital, fabricated results in 21 painkiller studies, many appearing in the journal Anesthesia & Analgesia.

Two of the pain relievers—Celebrex and the recalled Bextra—that Reuben published favorable findings on were from Pfizer, which paid him a still undisclosed amount in speaker fees and gave him five research grants between 2002 and 2007. During that period, both Celebrex and Bextra were linked to heart attacks in patients using the drugs, and in January 2008 Pfizer reached an agreement with federal prosecutors to pay $2.3 billion in fines to settle charges that it illegally marketed Bextra. Many of Reuben’s studies on those and other drugs have been used by clinicians as guidelines for prescribing pain treatment regimens.

Reuben’s case is hardly isolated, and such revelations have pushed companies and providers alike to acknowledge and grapple with the question of how to prevent such abuses. “When we held our first hearing 2 years ago, the industry denied there was a problem,” said an aide with the Senate Special Committee on Aging, which under the leadership of its chairman, Sen. Herb Kohl (D-Wis.), is one of two Senate committees leading the probe. The aide spoke on the condition of anonymity.

But now the healthcare industry appears poised, even if reluctant, to remove the veil that has cloaked industry-provider financial ties. An increasing number of provider organizations, medical-device companies and drugmakers have begun voluntarily disclosing those relationships, and the proposed Physician Payments Sunshine Act, which would mandate disclosure, may soon become law as part of Congress’ healthcare overhaul. The proposed law could require online publication of everything from how much companies spend to sponsor specific continuing medical-education events to their donations and grants to patient advocacy groups, fees to doctors for teaching, royalty and speaking engagements and research awards to provider and professional-medical organizations.

Still, much to do

But even with such progress, advocates of the current disclosure movement say much work remains to be done if the proposed law is going to have sufficient teeth and achieve the type of transparency needed to ensure patient care is free of financially induced bias.

“The real question is the level and depth of disclosure,” said Eric Campbell, the director of research at the James J. Mongan Institute for Health Policy at Harvard University. “Disclosure is a very broad word, and voluntary policies about who you have to tell and what you have to disclose in terms of the dollar amount aren’t consistent.”

A federal law requiring disclosure is an important step in rectifying such discrepancies, Campbell said. But he also insisted that a new law will have little success in tempering undue industry influence on doctors’ prescribing habits and treatment decisions unless it has enough consequences for violators. Success “depends on what penalties are in place for noncompliance,” Campbell said. “If it’s going to cost companies $25,000 for a penalty and $200,000 to set up a (disclosure) database, then they’re likely just to pay the penalty.”

Supporters of the proposed disclosure legislation are hard-pressed to say whether the Sunshine Act would achieve full transparency or what the final law, if passed, would look like. To begin with, the Senate and House versions of the bill have significant differences in their reach and penalties, and while stakeholders are resigned to supporting some version of the proposed law, they differ on how extensive they think it should be. Depending on who wins the battle to shape the scope of the law, the final legislation could look much different than what’s currently being proposed.

The drug industry lobbying group Pharmaceutical Research and Manufacturers of America declined to comment.

Christopher White, general counsel for the medical-device lobby group Advanced Medical Technology Association, also known as AdvaMed, said his organization is supporting the Senate version of the bill, which would require companies to disclose payments made to a smaller number of provider groups.

“The Senate has conducted a long-term exploration and has a greater understanding” of the demands of disclosure, White said. He added that AdvaMed, which in 2008 updated its physician-payment guidelines for devicemakers, hasn’t created a policy for tracking and disclosing payments for a broader set of providers and related organizations, and they worry that the current House version of the bill would place too heavy a burden on companies. “I’m not suggesting that companies don’t have records of those payments, but there are administrative challenges associated with tracking payments, which can be made through multiple divisions, and then putting them into one report to be put into a database.”

Too much froth?

The cost associated with reporting such payments may be another concern. “Some doctors do feel that the administrative part of it could be extensive,” said Jack Lewin, CEO of the American College of Cardiology, which supports passage of the Sunshine Act. “But there is some level of reporting that could be important and some level that could be absurd. And, the administrative cost could outweigh the benefit. We don’t need to report down to a cappuccino” received from a medical-products vendor.

AdvaMed’s White said that his organization hasn’t collected data on the cost of reporting from devicemakers that have begun voluntary disclosure of payments to providers, but such information data would be valuable in analyzing the overall effects of a disclosure mandate.

Under the original Senate version of the Sunshine Act, written by Sen. Chuck Grassley (R-Iowa), ranking member of the Finance Committee, and Kohl, medical-product companies would be required to disclose payments of greater than $10 in value made to individual physicians and teaching hospitals. Posting of payments to a searchable federal database would begin in September 2013, and would cover physician consulting fees and compensation for other services, gifts or entertainment; food; travel; continuing medical education, or CME, and other educational sponsorship; research grants; charitable contributions; and royalty or licensing fees paid to doctors and teaching hospitals.

Manufacturers and group purchasing organizations would also be required to disclose any physician owners. Companies and GPOs that fail to disclose payments would be penalized between $1,000 and $100,000 per violation, but could be fined no more than $1 million annually.

The House bill, widely considered the more stringent version, would require medical-product companies to report payments of greater than $5 in value made to a broader range of recipients, including: physicians; group practices; prescribers such as nurse practitioners; pharmacists and pharmacy benefits managers; insurers; hospitals; medical schools; CME organizers; patient advocacy groups; researchers; and professional medical associations. Manufacturers and GPOs would be required to report any physician ownership, and payments would be posted to a searchable federal database beginning in March 2011—2 years earlier than under the Senate bill.

Similar to the Senate bill, disclosure would cover physician consulting fees and compensation for other services, gifts, entertainment, food, travel, CME and other educational sponsorship, research grants, charitable contributions and royalty or licensing fees paid to companies and GPOs. Manufacturers and GPOs that fail to report such payments could be fined between $1,000 and $100,000 per violation. The maximum annual penalty would be the greater of $1 million or 0.1% of an organization’s annual revenue.

Specialty areas of care that use high-tech medical devices in the treatment of patients have been particularly linked to the type of consulting deals that drove lawmakers to consider the Sunshine Act. In September 2007, for example, four orthopedic-device makers—Biomet, DePuy Orthopaedics, Smith & Nephew and Zimmer Holdings—agreed to pay $311 million in fines and publicly disclose the financial details of their consulting deals with surgeons. The agreement settled federal kickback charges by the U.S. attorney’s office in Newark, N.J., which said the companies used phony consulting agreements to induce surgeons to use their particular products.

Since that time, the American Academy of Orthopaedic Surgeons has beefed up its requirements for its leadership to disclose consulting deals to the organization, and the group plans to begin posting online the financial support it receives from industry later this month. The move, said AAOS President Joseph Zuckerman, is in response to the growing demand for transparency as well as an effort to shine light on any relationships that could be a cause of concern.

But Zuckerman, like many others, believes such consulting relationships are critically important to medical innovation and that legitimate relationships should not be a target of attack. “We don’t think they should end because those relationships enhance patient care,” he said.

Many endorsers of the Sunshine Act are supportive of a federal disclosure law largely because they see the action as less disruptive than the current trend of states adopting their own laws, some observers say. Currently five states—Maine, Massachusetts, Minnesota, Vermont and West Virginia—and the District of Columbia have laws requiring manufacturers to disclose payments made to healthcare professionals and organizations. In December 2009, New Jersey Attorney General Anne Milgram urged her state’s medical licensing boards to consider mandatory payment disclosure regulations. Many medical-products companies and their lobby groups are supporting passage of a federal Sunshine Act in an effort to avoid proliferation of such state-by-state mandates, which vary in their requirements and stringency.

“We support Sen. Grassley’s bill as long as it provides a meaningful pre-emption of state laws,” said Mary Anne Rhyne, a spokeswoman for drugmaker GlaxoSmithKline.

But even without a federal law, critics acknowledge progress has been made to disclose industry payments and curtail the influence they may have on doctors’ and healthcare organizations’ treatment decisions.

In the three years since launching their probe, Grassley and Kohl have sent nearly 100 letters to medical schools, professional-medical organizations and patient advocacy groups asking them to detail their financial ties to drug and medical-device companies. What’s more, numerous federal advisory committees and standards groups have published recommendations for greater disclosure and regulation of industry consulting deals.

In response, over the past year alone at least four academic medical institutions, three professional-medical organizations, six drug and medical-device companies and a healthcare system announced plans to publicly disclose financial relationships. Among the organizations disclosing or making plans to disclose are drug companies and devicemakers such as Abbott Laboratories, Edward Lifesciences Corp., Eli Lilly and Co., GlaxoSmithKline, Medtronic and Merck & Co.

In 2008, the Cleveland Clinic began posting financial disclosure information for any doctor receiving more than $5,000 in annual compensation from industry sources, and in March of last year the University of Pennsylvania School of Medicine and its health system launched a name-searchable database that contains some general financial information about physicians’ industry-compensated work. Other providers have since followed suit, either launching or announcing plans to begin disclosure.

While the efforts are encouraging, industry watchdogs say only a law with comprehensive, uniform requirements for disclosure and real penalties will succeed in identifying such influence and potentially bring down the cost of care by curbing overuse of expensive medical treatments.

“It’s just a tiny minority of companies and medical schools that are disclosing: We’re nowhere near comprehensive disclosure, and if you do it company by company the information is not that useable,” said Allan Coukell, director of the Pew Prescription Project, a consumer safety initiative of the Pew Charitable Trusts.

A Senate Finance Committee aide who spoke on the condition of anonymity, called the current voluntary disclosure efforts “scattershot,” and said the companies follow no universal standard for what they disclose about consulting and research agreements between healthcare professionals and medical-products companies. For example, while some companies disclose consulting fees paid to physicians, others only disclose grant payments. Each of the companies that voluntarily disclose payments has a different dollar-amount threshold for when they begin to disclose. “None of the databases are searchable from what I can see,” the Finance Committee aide said.

As a result, patients and even providers themselves have no accurate estimate of how pervasive the relationships are and how influential the financial incentives can be on the delivery of healthcare. However, several recently reported cases suggest that not only are the deals widespread, but also in some cases they’re detrimental to the kind of care patients receive and costly to consumers and insurers.

In December, devicemaker Boston Scientific Corp. agreed to pay $22 million to settle allegations that Guidant Corp., a company it purchased in 2006, paid physicians between $1,000 and $1,500 each to participate in four clinical studies of its pacemakers and defibrillators. The payments were used as disguised incentives to boost sales of its products, federal investigators alleged. Guidant billed Medicare for reimbursement for the devices. Boston Scientific did not admit wrongdoing as part of the civil settlement.

Cases linked to Medtronic

There also have been at least two publicized conflict-of-interest cases involving Medtronic. Both cases concerned the company’s bone-growth product Infuse, which was being promoted as a device that had high success in helping to heal soldiers’ shattered legs.

According to news reports, former Army surgeon and Washington University medical professor Timothy Kuklo falsified published research on the device. Kuklo was paid roughly $800,000 by Medtronic between 2001 and 2009. Kuklo reportedly failed to disclose or seek approval from Army officials for his involvement in such activities.

Also, Minnesota-based spine surgeon David Polly failed to disclose during his 2006 testimony before a Senate committee that he had received nearly $1.2 million in consulting, research and lobbying fees from Medtronic. During the hearing, Polly urged Congress to provide more funding for combat-injury research.

Early last year, a report from HHS’ inspector general’s office found that 42% of Food and Drug Administration-approved product marketing applications were missing required financial-disclosure information, and that neither the FDA nor clinical-trial sponsors took steps to minimize potential investigator bias in 20% of the applications that disclosed financial conflicts.

Among other steps, the report recommended that FDA officials make disclosure reporting of clinical investigators’ financial interests a mandatory part of the pretrial application and that they also ensure that reviewers consistently study those disclosures and take action when appropriate.

“The real issue,” said the Mongan Institute’s Campbell, “is how all of this leads to waste, fraud and abuse.”

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