Continuing the ongoing trend of transparency and disclosure in the health care industry, Forest Laboratories became the latest in an ever-growing list of companies to publicly report all payments it makes to physicians to develop, market, and educate colleagues on its products. According to Q2 Metrics’ Company & Physician Aggregate Spend Solution (COMPASS), Forest Labs doled out more than $11.1 million in payments to over 63,000 US-based physicians in Q1.
Payments disclosed by the company included those for consulting fees, speaking fees, travel expenses, educational items, meals, and independent physician research funding. Forest has a strong compliance program in place and values physician-industry relationships.
What is interesting about Forest Labs’ Q1 disclosure is that professional speaking fees represented a substantial 70% of Q1 payments (or $7.9M). Conversely, other professional service fees for consulting and independent research represented less than 4% of Forest Labs’ Q1 payments (or just over $200K). This spending on professional fees is in stark contrast to the practices of competitive firms.
In 2011, Eli Lilly (LLY) spent only 28% of its physician aggregate spend dollars on speaker fees despite spending a staggering 92% of its aggregate spend budget on professional fees. Similarly, Pfizer (PFE) spent only 17% of its physician aggregate spend dollars on speaker fees in 2011 while spending on professional fees in general represented a staggering 87% of its aggregate spend. The article pointed to many reasons “for the spending discrepancy on speaker fees.”
First, Q1 2012 represents the first reporting period for Forest Labs and as such, many of the consulting and research agreements the company has with physicians may not yet be complete. Resultantly, the company may not yet be obligated to fulfill the financial obligations underlying these consulting and research agreements.
Second, and maybe more importantly, Forest Labs is smaller than most pharma companies that are currently reporting physician payments, has a largely undifferentiated pipeline, and is not often first to market with products. Despite this, the company has demonstrated that it can successfully launch new drugs into mature markets (e.g. Lexapro, Namenda, & Bystolic), not an easy task without having a significant volume of clinicians speaking on your behalf.
The publication of Forest’s payment also comes in anticipation of the finalized rules for the Physician Payment Sunshine Act. However, as we recently noted, companies will not have to begin reporting payments until January 1, 2013. Nevertheless, a recent article from MedCity News noted that complying with the law will require an average of 1.74 full-time equivalents in the first year at a cost of $195,288 per organization.
“That amount does not include outside legal counsel or IT infrastructure,” said Sheva Sanders, a Twin Cities lawyer with Leonard, Street and Deinard, who was one of the presenters. “I think the cost has been underestimated.” “You cannot do this on a dime,” Sanders said. “It takes big effort.”