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Think Again: Payments to doctors By Eric Novack

Eric NovackI am frankly a bit surprised at the lack of comment at THCB on the recent orthopedic device
manufacturers’ settlement
with the government for concerns about illegal payments to physicians.  I would have expected Matthew or Maggie, at least, to be sounding the alarm over the dangers of the private sector in healthcare. The most interesting byproduct of the settlement is the development of a public database where you can search by company to see who is getting the ‘big bucks’.

But like many simple statistics, the data can be misleading.

Let me be clear—paying a surgeon for ‘work’ with the real expectation that he or she will use a specific product is unethical, not to mention illegal (but a problem inherent in our 3rd party paymentsystem in medicine, but that is another issue entirely…).

One Phoenix area surgeon has been paid $3 million this year by Stryker.

‘Outrageous’, you say. “Ah- ha—see, all doctors are corrupt and need to be controlled”, others exclaim.  But what are the facts?  In this case, the surgeon helped develop some of the early hip and knee replacement designs… These designs have served as the basis for literally millions of replaced joints over the last 20 years.  He owns a piece of the patent.Is it immoral to get paid for people using a product you work hard to develop?  Should Google’s founders still benefit?  How about those who own patents on everything vacuum cleaners to hair care products?

Of course they should– because our society encourages innovation by protecting the value of innovation.

Other names in the database are, and should be, areas for concern.
While I do not want 3rd parties to define what my ‘value’ is for
services I provide, clearly some of the amounts appear to be so far
outside the ‘norm’ as to necessitate questions. If surgeons or
organizations are effectively getting ‘kickbacks’ for nearly
exclusively utilizing products in high volume—and threatening, in any
way, to cease using the implants unless payment is forthcoming—they
should be identified and their actions be made very public.

Patients ought to be able to know and understand the nature of those
relationships and decide whether or not they want to seek care, or
opinions, from as many other surgeons as they wish.

Regulators ought to understand that their goal ought to be fraud
protection and prevention—not with the aim of punishment of providers
(though, understandably this is at times necessary)—but rather withthe aim to PROTECT THE RIGHTS OF INDIVIDUALS.

EDITOR’S NOTE: For more on the issues involving questionable payments to physicians by device manufacturers, see this very detailed post by Roy Poses at Brown.

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9 replies »

  1. Crime and Punishment: Enough for Corporate Wrongdoing?
    Corporate crime should not be a new concept to many. However, it has evolved into more troubling ways- not only in regards to its severity, but the methods of deterrence now being implemented against corporations. So it may be becoming progressively worse for U.S. citizens as a result.
    Rather than speak of all corporations, what will be discussed is government health care fraud. Fraud basically is deception with the potential to harm others. In the case of pharma companies, this may include improper promotion and marketing, meaning that such tactics are or may be deceptive misconduct that may be illegal. In addition, there are the crimes of kickbacks and lesser crimes of misbranding products. Probably more methods of wrongdoing as well do in fact exist and happen. Yet the point is that drug companies should not engage in such wrongdoing to enrich their faceless existence with profiting off those who are ill in illegal ways.
    How is such conduct discovered? Typically by whistleblowers who worked for the described pharma company, and such people are rare for a number of reasons. The whistleblower then seeks legal agents and files what is called a qui tam false claims act with a district attorney’s office (Boston or Philadelphia, if you want prosecutors to take you seriously). After the case is filed, the whistleblower verbally acknowledges the charges and evidence to the chosen prosecutors and others.
    Such cases usually take years for unclear reasons, yet in the past two years, the settlements from such cases has approached 2 billion dollars after investigations ended that took years, which is tax dollars returned to the American public with these settlements.
    So, what has been happening once a pharma company is busted. Criminal indictment by the district prosecutor? Hardly, yet appropriate. Usually, the prosecutor’s objective is to dismiss the case, but give the impression that such activities will not be tolerated by our government. So Corporate Integrity Agreements are mandated to the pharma company, but not really taken seriously, as some have more than one of these agreements active still. It’s an invisible ankle bracelet. A pharma company can and have committed equal or worse crimes while under such an agreement.
    This Agreement is issued after the deferred or non prosecution agreement is sentenced to the law-breaking corporation, which basically is a pre-trial diversion. Essentialy, it’s just parole, which is supported by the DOJ and the administration. The criminals admit wrongdoing, but not guilt. And they pay a settlement in the neighborhood of hundreds of millions of dollars. Not that shocking, if you consider the income of big pharma companies. These agreements are relatively new and partially a result of suggestions from what was known as a Thompson memo, which basically was created by a DOJ guy as commandments for prosecuting corporations and variables to consider when doing so, which ultimately offered responses as to why a greater degree of punishment was not enforced.
    We are one of three countries in the world with the most prisoners behind bars, yet those that do similar if not greater harm to others get out of jail free. Double standard, I would say. Is this behavior by our legal system towards corporations an effective deterrent? Most think not. It rather seems like tacit approval of their conduct. And health care fraud may be more damaging than other types in other industries, yet lack of regulation allows such crimes to continue.
    Citizens should make the laws in our country. Justice would then finally exist. Yes, a rather utopic concept.
    “Corporations cannot commit treason, nor be outlawed, nor excommunicated, for they have no souls.”
    —- Edward Coke
    Dan Abshear

  2. We were just billed $1036 for a 25 minute office visit where the doctor checked an x-ray and said “it’s a slight fracture, . . rest and have him keep the brace (which we already had) on for a few days.”
    It seems outrageous to pay this much? What can we do?
    Wayne in Champaign, IL

  3. It is the sheer number of “consultants” that convict these firms, Eric. Can you honestly argue that there are potential safety issues depending crucially on which company’s implants are used? Give us another break! This is sophistry, not an honest argument. No doubt there are a lot of honest orthopods. There were also a lot of greedy ones.

  4. Barry-
    1. ‘volume-based’ purchasing works in every industry, and ought to exist in healthcare as well. My small business pays much more for printer paper and other supplies than a company of 1000 employees. There are lower costs to the seller…
    It works for us as consumers as well at places like Costco and Wal-Mart…
    2. The overwhelming majority of orthopedists and doctors are extremely ethical. I have maintained, and will continue to maintain, that those in the health care professions are as or more ethical than any other profession.
    As I try to expain in talks, there are generally several (at least) “RIGHT WAYS” to approach problems– again, this is true in nearly all areas of our lives and in business… Reasonable, ethical people can vehemently disagree as to which of the “right ways’ is best, even if they can all work.
    When it comes to implant choice, since there is a limited connection between the purchasers (insurance company and hospitals), users (surgeons), selllers (implant companies, and patients from a financial perspective— and the surgeon is the one ‘holding the bag’ if there is a problem… you have an impossible situation where ‘central planners’ will never be able to understand the ‘facts on the ground’ in specific situations.
    That, of course, is a bit of a non-answer.
    Here is the answer— to paraphrase former Supreme Court Justice Potter Stuart— when is the behavior by implant companies and surgeons really a ‘kickback’ and frauduent? “I know it when I see it.”

  5. I think the device manufacturers also have a lot to answer for with respect to price transparency. A senior NYC based orthopedic surgeon told investors at a conference last year that a high volume hospital like the Hospital for Special Surgery might pay as little as $3,500 for a device used in hip replacement, for example, as compared to a list price of $11,000. However, the hospital is prohibited under the terms of a confidentiality agreement from disclosing its purchasing terms to other hospitals. So, lower volume hospitals wind up paying far higher prices for the same product which, of course, helps to contribute to runaway healthcare and health insurance costs while enriching device manufacturers.
    Second, maybe Eric can speak to this. My understanding is that orthopedic surgeons, based on their experience, reading the literature, and talking with their colleagues, come to conclude that a particular device works better than a competitor’s either for most patients or for patients with certain risk profiles. It seems unlikely that they would knowingly use the less effective device just because its manufacturer offers the surgeon a financial incentive to do so. As for which devices hospitals buy, surgeons’ input based on experience with patients is (or at least should be) the most important factor.

  6. I believe tc and Peter missed the point (my fault?)… the numbers, as always, do not tell the whole story.
    There is a big difference from making money for something you helped create (intellectual property and patents) and making money so another party can make more money (kickbacks). The numbers aone do not make this distinction.
    And tc, it is very difficult to fight the government and win, no matter who you are (I am certainly not saying that there is complete innocence here)… step away from healthcare for a moment… under enough pressure and threats from government— many of us would admit to something to make it stop… I woud hope some of the readers ‘on the left’ of THCB would agree…

  7. Give us a break, Eric. You know exactly what these companies were doing. They were paying surgeons hundreds of thousands of dollars in kickbacks to use their company’s products. Legitimate consulting payments to people who actually developed unique devices in one thing; paying many hundreds of doctors hundreds of thousands of dollars each is quite another. The purpose was explicitly anti-competitive; to prevent the hospitals at which they practiced and GPO’s who represented them from using their market power to cut the outrageous costs of medical devices. Let’s use the correct term for this widespread practice: it was corruption and the federal government was right to step in. Why would these companies have agreed to hundreds of millions in fines if they had not in full knowledge broken the law. They got off easy!

  8. What’s the argument here Eric? Doctors or anyone else should be rewarded for product invention/development. But what you describe is nothing less than stockbrokers hawking stocks they own and have a vested financial gain to be made by selling up their own conflict of interest without divulging to the patient/sucker. How about the right of patients to expect unbiased medical advice not device promotion. Let docs decide how they want to earn their income, patient care or patent promotion.

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