U.S. Senate Conducts Further Inquiry into Relationships Between Medical Device Manufacturers and Physicians

06/27/2011

Earlier this week, the U.S. Senate Finance Committee requested documents and information from a medical device manufacturer related to the financial relationship between the manufacturer and physicians who conducted clinical trials of one of its devices. The request echoes concerns from 2008 when the Committee made a similar request involving suspected kickbacks to physicians who prescribed or used the company’s devices. The request also comes on the heels of Senate criticism of the Office of Inspector General for the U.S. Department of Health and Human Services (“OIG”) for its failure to provide adequate guidance on the legality of physician-owned distributorships (“POD”). The Senate’s continued inquiry into manufacturer-physician relationships indicates that heightened scrutiny will be applied in the future.

Recent Senate Finance Committee Request for Documents

On June 21, Senators Charles Grassley (R-IA) and Max Baucus (D-MT) requested documents and information from the maker of Infuse in connection with Infuse medical trials. Infuse is a spinal surgery product which stimulates bone growth and creates a fusion between two vertebrae. The U.S. Food and Drug Administration (“FDA”) approved its use in 2002.

According to their letter, Senators Grassley and Baucus are “extremely troubled by press reports suggesting that doctors conducting clinical trials examining the safety and effectiveness of Infuse . . . were aware that [the product] may cause medical complications, but failed to report this in the medical literature.” The senators cited financial ties between these clinical investigators and the device manufacturer as additional cause for concern.

The senators’ request for documents was far-reaching, but generally consisted of two categories of documents. First, the senators requested “[a]ll documents and communications pertaining to adverse postoperative events and/or medical complications,” including communications with medical journals, clinical investigators, the FDA, and physician consultants.1 Second, the senators requested a “detailed account of payments made” by the manufacturer to all Infuse clinical investigators, including date of payment, payment description, amount of payment, and the year-end or year-to-date payment total. The request directed the manufacturer to not destroy, modify, or remove any responsive documents.

Senate Investigation Not the First Allegation of Wrongdoing

This recent Senate request is not the first time that concern over physician consulting agreements and other perks has surfaced. In 2008, Senator Grassley requested information from the same manufacturer concerning a somewhat related matter involving physicians’ use of Infuse.2 Citing allegations of kickbacks and an increase in off-label use of Infuse, Senator Grassley requested (1) information concerning the manufacturer’s plans, if any, to publicly disclose payments to physicians, (2) copies of consulting agreements between the manufacturer and physicians, (3) a list of adverse events resulting from off-label use of Infuse, and (4) details regarding a trip to Europe taken by one particular physician and paid for by the manufacturer.

In May of this year, The New York Times outlined allegations that other medical device manufacturers illegally promoted sales through lucrative consulting agreements with doctors.3

Even more recently, a bipartisan U.S. Senate Committee joined the fray concerning the legality of PODs.4 PODs, arrangements through which physicians own medical device distributorships and deal directly with manufacturers, potentially save hospitals millions of dollars by cutting out the middle man in the supply chain. However, critics argue PODS also incentivize physicians to choose certain devices based on pecuniary interest rather than the best interests of patients.

In light of these concerns, and citing a proliferation of PODs in recent years, a U.S. Senate Committee asked the OIG to provide guidance on the legality of such arrangements. Specifically, the committee asked the OIG to determine whether these arrangements would survive scrutiny under federal anti-kickback laws and whether they would have to be disclosed under recent federal healthcare reform requiring disclosure of manufacturers’ payments to physicians. Although the Senate request recognized that PODs might be helpful in reducing healthcare costs, it clearly expressed concern over the legality of some of these arrangements.

Are the Golden Days of Consulting Agreements for Doctors Over?

These Senate actions indicate an increased skepticism of, if not a distaste for, manufacturer-physician relationships. Indeed, recent OIG guidance advises physicians to exercise caution when entering into relationships with medical device manufacturers and ensure that any benefit received is truly in exchange for marketable services and not in excess of fair market value for those services.5

Skepticism surrounding manufacturer-physician relationships, especially from the media and Congress, can only be expected to grow with the passage of the Physician Payment Sunshine Protection Act in 2010. Under that Act, covered medical device manufacturers will be required to publicly disclose, in an easily accessible and searchable format, any transfer of value to a physician exceeding ten dollars.6 The new requirement takes effect March 31, 2013. Given the recent Senate inquiries and health reform legislation, it appears the days of consulting agreements for doctors are over. 

More Information 

For more information regarding this or other health care legal developments, please contact one of the following Haynes and Boone, LLP lawyers.

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1 The senators’ letter is available on the Senate Finance Committee website.
2 Senator Grassley’s letter may be viewed here
3 Barry Meier, Sales Tactics on Implants Raise Doubts, N.Y. Times, May 31, 2011.
4 See Haynes & Boone client alert titled “Senators Criticize OIG for Lack of Guidance on Physician Joint Ventures:  Request Study on Physician Owned Distributorships.”
5 U.S. Department of Health & Human Services, Officer of Inspector General, A Roadmap for New Physicians, Avoiding Medicare and Medicaid Fraud and Abuse, 22-23 available here.
6 42 U.S.C. 1320a-7h(a).

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