Physician Payment Sunshine: Media Missing the Mark – This Could be Sunset for Innovation
In the weeks following the issuance of the proposed rules to implement the Physician Payment Sunshine Act (“Sunshine Act”), there has been a tremendous amount of debate and media coverage of the impact these regulations will have on physicians and the life sciences industry. Some believe that the regulations were “badly needed,” because it will “allow patients to decide whether they need to worry about any possible conflicts of interest.”
However, the Centers for Medicare and Medicaid Services (CMS) nor any other empirical study we are aware have has shown data indicating how many people will actually use this information—of course whether they understand it is a whole different story. The public will have until Feb. 17 to comment on the proposals. After considering the comments, Medicare officials will issue final rules with the force of law.
The Sunshine Act requires that manufacturers of drugs, medical devices and medical supplies disclose all payments over $10 they make to doctors or teaching hospitals. The information, which would be posted on a government Web site. Manufacturers will have to report if they pay a doctor to help develop, assess and promote new products — or if, for example, a pharmaceutical sales agent delivers $25 worth of bagels and coffee to a doctor’s office for a meeting. Royalty payments to doctors, for inventions or discoveries, and payments to teaching hospitals for research or other activities will also have to be reported.
Manufacturers could be fined up to $150,000 a year for failing to report payments and up to $1 million a year for “knowingly” failing to report. Moreover, top executives are potentially liable because a senior official of each company — the chief executive, chief financial officer or chief compliance officer — must attest to the accuracy of each report.
The Obama administration estimates that more than 1,100 drug, device and medical supply companies will have to file reports, generating “large amounts of new data.” Federal officials said they would inspect and audit drug company records to make sure the reports were accurate and complete.
The web site where payments would be posted by CMS must be searchable and understandable so that patients and advocacy groups can see which doctors are being paid and how much. Some believe that the public posting of such payments could deter some questionable payments and it could help patients decide which doctors to rely on. Yet again, there is no evidence to support this claim or to show just how many patients will actually 1) use this information 2) understand this information and 3) change physicians. Moreover, there is no discussion of the fact that some patients my actually want their physicians to work with industry becomes it demonstrates expertise and clinical experience that is clearly valued.
While a recent article from the New York Times correctly recognized that “such payments can be for legitimate research and consulting,” it overemphasized and frankly attacked physician-industry collaboration by claiming that, “there is also a lot of cash being spread around to pay for doctors’ travel and entertainment or for gifts or modest meals for a prescribing doctor’s staff.” The article failed to provide any evidence to substantiate such claims.
The Times only claimed that, “Many researchers have found evidence that such payments can influence doctors’ treatment decisions and contribute to higher costs by encouraging the use of more expensive drugs and medical devices.” But the article failed to mention that over 75% of drugs prescribed in America are generics.
Consequently, the Times claimed that it “has found that doctors who take money from drug makers often practice medicine differently from those who do not and that they are more willing to prescribe drugs in risky and unapproved ways, such as prescribing powerful antipsychotic medicines for children.” But just exactly how did the Times find this information? How many doctors? Did they reach out to these physicians to determine what the payments were for, or to determine in each case why the physician chose the course of treatment or procedure? It is sad that the paper fails to meet scientific accuracy.
While legal advocates and officials believe that disclosures may increase the likelihood that doctors would make decisions in the best interests of patients, without regard to the doctors’ financial interests, this claim ignores what’s best for patients.
Doctors should have the freedom to choose whatever medication they believe is medically necessary for a patient based on objective factors, not the threat of publishing their name on a website that no patient will use or understand, and that only media and politicians will use to sell newspapers and get attention.
There is no question that such practices were rampant in the past, over the last several years, industry and various healthcare stakeholders have implemented significant firewalls, rules and regulations to prevent these kinds of arrangements from happening. Whether it is the PhRMA or AdvaMed Codes of Conduct, the various guidance’s for HHS OIG or FDA, the large settlements with DOJ, or the changes in institutional and provider policies such as NIH or Harvard, improper practices such as “gifts” are the exception today, not the practice.
Despite limited research on the true nature of physician-industry collaboration, the article cites a previous New York Times article, which discussed “some prominent doctors and researchers who have receive hundreds of thousands or even millions of dollars a year in exchange for providing advice to a company or giving lectures on its behalf.” Once again, the author fails to provide a fair analysis of such payments or discuss the “nature” of such payments—a requirement that even the Sunshine Act will post on their website.
The article claimed that about a quarter of all doctors take some cash payments from drug or device makers and nearly two-thirds accept meals or food gifts. Analysts contend that even seemingly trivial gifts can influence doctors to prescribe expensive drugs that may not be best for a patient’s health or pocketbook. But where is the evidence? The only evidence we are aware of is an old study conducted by Wazana et al, which did not use patient outcomes and is therefore completely invalid. Moreover, social science experiments and the use of brain imaging equipment is hardly an evidence-based method.
Despite offering no fair balance of the issue, or discussing the important role and impact physician-industry collaboration has had on increased longevity of life and improved outcomes in heart disease, cancer, and hypertension, the author unequivocally claims that, “The new rules should give a welcome boost to otherwise spotty efforts by some companies, medical centers, scientific journals, states and ethical codes to eliminate, minimize or at least disclose financial interests that might cloud medical judgments.” The suggestion that policies such as those at major medical centers or the AdvaMed and PhRMA Codes, or the various mechanism that companies have in place due to corporate integrity agreements as “spotty” is misguided.
Discussion
Allan J. Coukell, a pharmacist and consumer advocate at the Pew Charitable Trusts, said: “Patients want to know they are getting treatment based on medical evidence, not a lunch or a financial relationship. They want to know if their doctor has a financial relationship with a pharmaceutical company, but they are often uncomfortable asking the doctor directly.” While CMS noted in its preamble to the proposed rules that physician-industry relations can “lead to conflicts of interests that may affect clinical decision-making” and “threaten the underlying integrity of the health care system,” CMS also recognized that “patients can benefit when doctors and the industry work together to develop life-saving drugs and devices.”
Moreover, even if such relationships pose a risk or potential for conflict, CMS clearly asserted that it has “has no empirical basis for estimating the frequency of such problems (inappropriate use), the likelihood that transparent reporting will reduce them, or the likely resulting effects on reducing the costs of medical care.” In fact, the Congressional Budget Office (CBO) does not even predict immediate savings, which is problematic considering the regulations will cost over $224 million to implement, which is a rough estimate. Instead, CBO believes that, “over time, disclosure has the potential to reduce spending,” by reducing instances of overprescribing. Yet, CMS has no evidence to substantiate this claim.
Christopher L. White, executive vice president of the Advanced Medical Technology Association, which represents makers of medical devices, said the payment data could be used by federal law enforcement agencies, plaintiffs’ lawyers and whistleblowers.
“Some companies fear that doctors may no longer want to engage in consulting arrangements, and such reluctance could chill innovation,” Mr. White said.
Matthew D. Bennett, a senior vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA), said the industry “supported transparency of physician payment information.” However, he said, it is important that payment data be presented in a proper context, emphasizing that interactions between doctors and drug companies played a critical role in improving care, educating doctors and fostering appropriate use of medicines.
Alan E. Reider, JD, MPH, an attorney in the healthcare practice at Arnold & Porter noted that the Sunshine regulations have a considerable chance for a negative effect on eye care professionals. His “concern is that the information is going to be misunderstood and abused by the press, by enforcers and by whistleblowers.” He is “concerned about the potential adverse impact this may have on the relationship between physicians and industry, which is so critical to developing new technology.”
Reider further emphasized the potential “chilling effect” the provision may have, leading to fewer legitimate financial ties between physicians and industry, along with the openness potentially leading to a surge of whistleblower lawsuits. “What you really need to do is make sure that you’re comfortable with your financial relationships … because you may find that this is going to be in the press, and you need to be sure that you’re comfortable and you can defend what you’re doing,” Mr. Reider said.
Consequently, a recent presentation on physician-industry collaboration highlighted some of the significant problems the Sunshine Act will impose on physicians and the healthcare system overall. The presentation, given by Stefanos A. Zenios, PhD Professor of Healthcare Management Stanford University first looked at the crucial role physicians play in medical device innovation. He noted that “Physician involvement is a necessary part of maturing the technology so that it can be applicable to patients” and that, “The industry cannot do anything without physicians and physicians could do very, very little without industry.”
However, because of more rules and regulations, he noted that product development today is more difficult. “There seems to be an ever “increasingly more complex set of barriers… the regulatory environment has gotten worse, the reimbursement environment has gotten worse, the costs to advance these projects are more expensive.” He quoted Warren Watson who noted that one “of the greatest risks “in the nation today is the social-political environment that is attempting to separate physicians from industry.”
Dr. Zenios presentation then went into the various roles physicians play through physician-industry collaboration. During the early-stage of such collaborations physicians are inventors:
- Physician identifies “need” through clinical work
- May patent technology and develops product in partnership with team of engineers to address it
- Partnership with company to license technology or develop product
Physicians are also entrepreneurs:
- Physician involved in every step of building a company from invention, writing patents, and taking operating roles in start-ups
- Some physicians may continue to practice medicine after joining start-up company
Physicians also act as product design consultants for device companies, in which they offer their expertise on design specific features for a product or to advise on modification of existing design. Physicians are also “co-developers” who collaborate extensively with device companies to design and commercialize a product.
In Early and Late Stage Roles, physicians act as clinical researchers. Physicians are retained by a device company to conduct clinical trials, which can either be early-stage trials to help refine product or later stage. Doctors can also sit on a company advisory board or board of directors of a medical device company.
“Once the product is commercial the company has an interest in making sure that as many people as possible understand the benefits of the product and so they would do clinical studies and try to get those clinical studies, get doctors to talk about those clinical findings on the podium, etc. There maybe, those doctors may play a role as a consultant to the company again.”—Fischell.
Accordingly, physicians also have Late Stage Roles. Physicians act as “educators” who train and educate other physicians on the use of the product and help get other physicians “up to speed” on the new technology, thereby helping to boost adoption post-launch. Physicians also serve as general consultants for a company to advise them about overall product development and research, and they may be hired to consult on an ongoing basis or for a stand-alone projects. Doctors also serve on at least three (3) types of panels, which may be ongoing or one-off in nature:
- Advisory panel: explore new areas of interest or assess strategic goals of the company
- Product performance panel: analyze product performance data and help improve it
- Product development panel: help guide early product development
The presentation then discussed a three step process for determining level of compensation for a physician;
First, Ensure direct link between compensation and work. Increasingly companies have gone away from the model of paying physicians monthly or annual retainers.
Avoid situations where physicians receive payments for companies without providing an actual service.
Assess opportunity cost of physician’s time. Ensure that physicians are compensated at a rate roughly equal to what they would earn from seeing patients in their practice. Companies should also try to appropriately value physician’s time; ensuring that they are not significant incentives to spend more time consulting to companies.
Match prevailing compensation rates. Companies should try to match physician compensation to the prevailing rate of compensation paid by other companies in the industry because the tendency might be to over-pay otherwise.
The presentation then gave some examples of conflicts of interest that may arise in collaborations
- Disputes over who actually owns the IP for a co-developed product
- Physicians may be more likely to use the products of the company with which they have existing relationships
- Physicians entitled to large royalties for products may be more likely to use these products in their clinical practice
- Physicians who have a stake in a product or company are unlikely to be unbiased clinical investigators
Accordingly, the presentation then examined key considerations for assessing conflicts of interest. In the early stage of relationships, companies must consider whether a physician is the inventor/entrepreneur or they have some significant stake in success of the company or product. Late stage, companies must ask whether the physician is acting in more than one role, such as an advisor or consultant while also acting as a clinical investigator.
Companies must also consider what how physicians are compensated for their role. Is it upfront cash or consulting arrangements or is it deferred payments through equity or royalties that are tied to commercial success of a product. Companies should also consider at what stage of development a product is in that a relationship may be in place for. Is it in pre or post-approval stage of development? If the physician continues to practice, there may be some potential impact on his prescribing behavior depending on his “ties” to the product.
While these factors are important to consider, the presentation noted that for major conflicts are likely to center on two main parties: Clinical investigators who receive royalties or equity from device companies and Clinicians in daily practice who receive cash payments from companies with approved products.
Consequently, he noted that “Conflicts will always be there . . . it is how you handle it. Separate the physician’s role in company creation/growth from involvement in clinical trials “If I’m allowed to be a principal investor (in a company), I can sometimes be a co-investigator in trials. I (however) cannot be the principal investigator, and that’s appropriate. “—Tim Fischell
Tightly link compensation to services rendered “We attempted to create a very tight linkage between the work they (physicians) did and the payment that they received . . . no more retainers.” —Warren Watson. Moreover, these relationships are constantly being managed by industry itself through a code of ethics (e.g., AdvaMed) and transparency. There is also physician self regulation: Medical training, mentors, senior and peer review, desire not to hurt patients or professional reputation.
Ultimately, he concluded by noting that “clinician-company collaborations are vital to the creation of new medical devices. He noted relationships are subject to conflicts of interest especially in two dimensions: Pre-approval: Investigators compensated with equity or royalties. Post-approval: Advisors practicing medicine compensated in cash. This kind of increasing scrutiny increases the cost of doing business in the U.S. and pushes activities that would otherwise be done in the U.S. outside the country. Accordingly, he asserted that industry can self regulate and avoid the outright prohibition of relationships that can benefit patients.