Senate hearing questions doctors' ties to medical device makers

The industry has made improper payments to physicians in an attempt to influence their medical judgment, senators said.

By Dave Hansen — Posted March 17, 2008

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Physician relationships with medical device makers came under fire at a Senate Special Committee on Aging hearing last month. So far, legislation is focused on manufacturers' conduct, but lawmakers and enforcement agencies expressed concern about doctors' potential conflicts of interest as well.

The Feb. 27 hearing was a continuation of a broader examination of physician dealings that Committee Chair Sen. Herb Kohl (D, Wis.) launched last year with a look at doctors' relationships with pharmaceutical companies. He sponsors a bill that would require large pharmaceutical, medical device and biologic companies to disclose gifts to physicians exceeding $25.

The American Medical Association is trying to modify some language in the bill, called the Physician Payments Sunshine Act. AMA ethical guidelines prohibit doctors from accepting gifts of substantial value, or with conditions attached, from medical device companies.

At the hearing, the Health and Human Services' Office of Inspector General offered several examples of conflicts of interest between the medical device industry and physicians. For example, between 2002 and 2006, the top four manufacturers of artificial hips and knees paid physicians more than $800 million in 6,500 consulting agreements, said Gregory E. Demske, OIG assistant inspector general for legal affairs.

While some of these payments were for legitimate services, the federal government found evidence of kickbacks disguised as consulting contracts, royalty agreements or gifts designed to influence the physicians' medical decisions, Demske said. In September 2007, the four companies entered into a settlement with the federal government for $311 million to resolve allegations that some payments were improper.

The OIG is concerned about the growing trend of physician ownership of medical device manufacturers, Demske added. "Given the strong potential for improper inducements between and among the physician investors, the entities, device vendors and device purchasers, we believe these ventures should be closely scrutinized under the fraud and abuse laws."

Demske did not take a position on Kohl's bill but called on the medical community to develop voluntary anti-fraud measures with the device and pharmaceutical industries. He noted that some efforts already are under way. For example, some health care systems and academic medical centers refuse to accept free gifts and food from drug and device makers.

Criticism at the hearing was not limited to device makers. Doctors who accept improper payments are equally culpable, Kohl said. "Physicians signaled to the industry that their loyalties are for sale to the highest bidder. So there are two groups here: companies and doctors."

Kohl asked Demske what the OIG was doing to crack down on physicians who have improper relationships. Demske noted that in kickback cases, both the company and doctors are subject to criminal, civil and administrative prosecution. The OIG is working with the Justice Dept. in New Jersey to see if cases can be brought against doctors, he said.

Doctors' role affirmed

Yet witnesses at the hearing agreed that physicians play a critical role in the development of medical devices and should not be penalized for legitimate activities.

Physicians often invent new devices and move innovative ideas to reality, said Christopher White, executive vice president, general counsel and secretary of the Advanced Medical Technology Assn., which represents manufacturers making almost 90% of health care technology purchased in the U.S.

Practicing doctors give valuable data on improving medical devices, he said. "Physician expertise, feedback and experience are critical to a robust and innovative medical technology industry."

AdvaMed feels strongly about ethical interactions between device makers and physicians, White said. It developed a code of ethics in 2004 limiting physician gifts to less than $100 in fair market value. It also supports Kohl's bill with modifications. The bill's disclosure requirements should apply to all companies, regardless of size, that are partially owned by physicians who realize a substantial amount of their revenue by using the companies' products, White said.

The industry's use of physician consultants may have been excessive, testified Chad F. Phipps, senior vice president, general counsel and secretary of Zimmer Holdings Inc. The company makes medical products and was one of the four manufacturers that entered into the September 2007 settlement. Zimmer did not admit any liability, Phipps said, and the U.S. attorney's office acknowledged that the agreement does not allege that the company's conduct adversely affected patient health or care.

Zimmer is taking steps that go beyond the settlement's requirements, Phipps said. The company now bans its sales team from involvement with physician consultants. It is reviewing its royalty agreements for hip and knee products to ensure that they are at fair market value. The company supports Kohl's bill, Phipps added.

Stryker Corp. Executive Vice President Edward B. Lipes also spoke at the hearing on the medical contributions doctors have made. For example, surgeons helped Stryker develop a hip implant system designed to secure initial fixation when implanted, he said. An orthopedic surgeon helped the company design a knee implant system. The company always paid fair market value for the services its consultants provided, Lipes said.

Stryker was investigated by the Dept. of Justice along with the four companies that entered into the September 2007 agreement. But it cooperated voluntarily before any other firm and entered into a separate agreement, said the District of New Jersey office of the Dept. of Justice.

Kohl agreed that congressional action should not disturb legitimate and productive relationships between the industry and physicians.

The committee's lead Republican, Sen. Gordon H. Smith of Oregon, cautioned against characterizing all industry-physician relationships as improper. "We want to expose and restrain bad practices, yet we do not want to stifle innovation nor impede good practices that result in beneficial and new cutting-edge products."

Kohl's legislation would exempt drug samples and funding for clinical trials from the reporting requirements. Failure to comply with the disclosure rules would trigger fines on companies of up to $100,000 per violation. Penalties would not extend to physicians.

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Device-case settlements

The Dept. of Health and Human Services' Office of Inspector General testified last month at a congressional hearing about several federal fraud and abuse settlements involving relationships between medical device makers and physicians:

New Jersey investigation of hip and knee device manufacturers. Four major medical device makers paid $311 million in September 2007 to resolve allegations that they had provided consulting agreements, lavish trips and other perks to induce physicians to choose their hip and knee products. The companies denied any wrongdoing.

Medtronic Inc. The device manufacturer paid $40 million in July 2006 to settle allegations that it had paid surgeons to choose spinal implant devices marketed by a subsidiary. The alleged kickbacks took several forms, including consulting agreements under which little or no work was performed; trips for physicians, their spouses or families; and meetings held at lavish venues. Medtronic denied any wrongdoing.

Advance Neuromodulation Systems Inc. The spinal cord stimulation device company paid $2.95 million in July 2007 to settle a lawsuit alleging that it had paid doctors $5,000 for every five new patients tested with its products. ANS denied any wrongdoing.

Patrick Chan, MD. The Arkansas neurologist pleaded guilty to charges that he had accepted kickbacks from several device companies. He agreed to pay a $1.5 million civil settlement in January.

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External links

U.S. Senate Special Committee on Aging hearing, "Surgeons for Sale: Conflicts and Consultant Payments in the Medical Device Industry," Feb. 27 (link)

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