Senators Press Device Industry on Excessive Payments to Consulting Docs

Democrats on the Senate Special Committee on Aging grilled device industry representatives at a Feb. 27 hearing about the extent and depth of payments made to physicians for consultancies and educational grants.

Sen. Herb Kohl, D-Wis., chair of the committee, called the hearing to highlight the results of a six-month investigation by the panel into conditions surrounding payments for consultant fees, royalties, funding for clinical trials, travel and gifts for surgeons who implant devices, many of which "have been alleged to be grossly excessive, illegitimate and often not properly documented," Kohl said.

The hearing, which included testimony from AdvaMed, Zimmer and Stryker, was also designed to get input from the device industry, physicians and HHS' Office of Inspector General on the Physician Payments Sunshine Act (S. 2029).

The bill would require device and drug makers with over $100 million in annual revenue to submit quarterly electronic reports to HHS on their financial relationships with physicians. It is intended to discourage payments to reward or encourage business from physicians.

Since the bill was introduced by Kohl and Finance Committee Chair Chuck Grassley, R-Iowa, last September, device lobbyists have met multiple times with committee members to push certain revisions, though not with the intention of killing the bill. Reps. Peter DeFazio, D-Ore., and Pete Stark, D-Calif., are planning to introduce companion legislation in the House that will mirror S. 2029, according to staffers on the Hill.

Investigation Identifies "Inappropriate Influence"

Over the past several months, Senate staff has interviewed dozens of surgeons and medical device industry sales reps to learn about device industry practices for paying physician consultants.

In addition to finding excessive payments by companies for negligible work by surgeon-consultants, Kohl said he heard from witnesses that some physicians will tell different device companies that they will be loyal to the highest bidder for their consultant services. Another surgeon wrote to the committee about payment offers explicitly intended to induce her to use particular medical device products, Kohl said.

"It's not hard to see that these financial relationships create conflicts of interest, and can exert inappropriate influence over medical decisions," the senator remarked.

Pointed Questioning For Zimmer

Sen. Claire McCaskill, D-Mo., pointedly questioned Chad Phipps, general counsel for orthopedic company Zimmer, about large royalty payments in the thousands and millions of dollars that consultants received after their names were added to company project teams - in some cases, when the projects were more than halfway done, according to OIG.

Specifically, she cited one case in which an individual doctor was paid $1.87 million in 2007.

Phipps acknowledged that 75% of the payments that Zimmer made to consultants were for royalties. He told the senator, "there were excesses in the past at Zimmer, just as there were" at other device companies.

McCaskill lambasted Phipps over Zimmer's alleged practice of using corporate jets to fly physician-consultants back and forth to medical conferences, and the company's alleged under-accounting of the costs for those private jet flights.

"What kind of private jets does Zimmer own?" McCaskill asked Phipps. When Phipps replied that one of the Zimmer planes is a Challenger jet, McCaskill asked him how the company could report that the value of a trip on a Challenger flight cost only $138, "when you can't even park a jet at an airport for $138."

OIG Says More Authority Is Needed

Gregory Demske, HHS assistant inspector general for legal affairs, related details to committee members of a Sept. 27 $311 million agreement with Zimmer and three other hip and knee implant manufacturers - Johnson & Johnson/Depuy, Biomet and Smith & Nephew - to settle kickback charges related to consulting and education agreements with physicians.

During that OIG/Justice Department investigation, Demske said the government found that consultants were typically paid $5,000 for providing quarterly reports on their consultancy work, which included only "cursory descriptions" on market trends, operating room activity or product issues.

Consultants were also paid $5,000 per day - supposedly for a full day's work - as panelists at device industry meetings in resort locations in which they would only speak for 10 minutes, Demske said.

Including Stryker -which also settled with the government in September, but did not have to pay a fine, in return for its cooperation - the five companies paid out more than $250 million to surgeons in 2007, according to disclosures made by the companies as part of the settlements.

Demske told the committee that the existing anti-kickback law was insufficient to provide the government with enough legal tools to enforce its Compliance Program Guidance for Pharmaceutical Manufacturers issued in May 2003, and that further legislation in this area would be welcomed by OIG.

The OIG guidance provides information that device makers should consider to avoid fraud and abuse risk areas in their relationships with physicians. AdvaMed adopted an industry "code of ethics" for interactions with health care providers in 2003 to assist companies in complying with the OIG guidelines.

Orthopedic Industry Remains In The Crosshairs

In addition to the five-company settlement, Demske summarized other recent investigations involving device industry payments to health care providers, including Medtronic's $40 million settlement with the U.S. Department of Justice in 2006 over alleged kickbacks from its spinal unit, and Advanced Neuromodulation Systems' $2.95 million settlement.

Also, J&J/Depuy was brought up a second time in the hearing by Charles Rosen, a professor and spine surgeon with University of California-Irvine, testifying as a representative of the Association for Ethics in Spine Surgery. Rosen reiterated previous public criticisms of the struggling Charité artificial lumbar spine disc, charging that the researchers conducting the pivotal trial for the device, PMA-approved in 2004, were paid consultants of the manufacturer.

On the same day as the Aging Committee hearing, Sen. Grassley sent letters to Swiss spinal device firm Synthes and FDA asking for more information about financial relationships between the company and clinical investigators for the pivotal trial ProDisc artificial disc, PMA approved in August 2006.

In the letters, Grassley cited a New York Times report that said clinical investigators at half the 17 research centers testing the device stood to profit from FDA approval of the spinal disc. "This suggests a dangerous conflict of inflict," Grassley remarked. Synthes had no comment on the letter.

Industry Is On Board, But Has Stipulations

Industry participants in the hearing acknowledged the need for legislation to curb some of the abuses investigated by the panel. Various states have already moved ahead with similar provisions to S. 2029.

AdvaMed's General Counsel Christopher White, along with Stryker and Zimmer reps, said they could line up behind the Sunshine Act if several changes were made that better reflected the industry's need to closely collaborate with physicians, who are often the inventors of device companies' products.

On the day prior to the hearing, AdvaMed released a 22-point agenda for revising the bill, but White said industry was pressing primarily for four main changes.

A bill, he said, should expressly pre-empt state laws requiring disclosure. Final legislation should also replace the bill's current exemption of companies that make less than $100 million in annual revenue to require disclosure by any company that has paid more than $250,000 to physicians in one year, White said. And the bill should explicitly include device companies in which physicians have an equity ownership interest in the requirements.

Finally, if the law requires a public database to report payments to doctors, companies should have an opportunity "to provide the context of those payments" so that every one is not automatically viewed as suspect, White said.

"We should not forget that physician innovation and collaboration with the device industry has led to groundbreaking advances in patient care," he said.

- Sue Darcey (s.darcey@elsevier.com)