Financial Conflicts of Interest in Physicians' Relationships with the Pharmaceutical Industry — Self-Regulation in the Shadow of Federal Pro
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《新英格兰医药杂志》
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The past two years have witnessed extraordinary regulatory ferment in the area of conflicts of interest involving physicians, especially conflicts arising in relationships with the pharmaceutical industry. Professional regulatory bodies, the pharmaceutical industry, and the government have all decided that physicians and drug manufacturers need stronger advice about appropriate relationships. In 2002, three leading professional organizations — the American Medical Association,1 the American College of Physicians,2 and the Accreditation Council for Continuing Medical Education3 — issued or revamped guidelines regarding physicians' interactions with drug companies. In July 2002, acting through its trade association, the Pharmaceutical Research and Manufacturers of America, the industry adopted a broad code of conduct for its constituencies.4 In April 2003, the Office of the Inspector General of the Department of Health and Human Services released a set of guidelines with which manufacturers were urged to comply in order to guard against the risk of liability.5
Why has there been such a sudden increase in oversight of these relationships? A combination of forces appears to be at work. First, there is a growing realization, inside and outside medical circles, of the troubling influence that pharmaceutical marketing can have on patient care.6 Second, the Medicare program has adopted a prescription-drug benefit, and widespread concern about the costs of this new program7 will fuel federal prosecutors' interest in policing conflicts of interest that could increase public expenditures. Third, a body of federal law dealing with "fraud and abuse"8 has evolved to the point where it can and is being used by prosecutors to punish pharmaceutical companies and physicians involved in marketing practices that were once fairly common. Thus, the law has begun to annex terrain previously controlled by professional ethics.
The pharmaceutical industry and professional organizations have anticipated some elements of the gathering storm. Their voluntary initiatives in this heretofore largely unregulated area could be interpreted as an attempt to forestall sterner measures by addressing the kinds of activities that have drawn the attention of federal prosecutors. In this article, we explore the new ways in which federal fraud-and-abuse law is being used, and we discuss the effect of those changes on relationships between physicians and pharmaceutical companies. We conclude that government policing in this area is likely to intensify.
Emergence of Conflicts of Interest Involving Pharmaceutical Companies
Apprehension over conflicts of interest in medicine is rooted in a concern that professional judgments about the welfare of patients may be inappropriately influenced by a secondary interest — in this case, the personal gain derived from relationships with pharmaceutical companies.9 A drug company's primary interest is to maximize sales of its product. Physicians do not (or should not) share this goal, but they are the chief conduit for sales. Consequently, physicians have been the central target of marketing strategies, and they remain so even after the rise of direct-to-consumer marketing.10 The pharmaceutical industry spends approximately $12 billion annually on gifts and payments to physicians.11
To a significant extent, growth in promotional activity has paralleled the rise of the industry's importance as a funder of mainstream research and education. Approximately 60 percent of biomedical research and development today is privately funded.12,13 Pharmaceutical companies' share of funding for clinical trials is more than 70 percent14 and has grown sharply during the past decade.15 The industry also shoulders more than half of the costs of formal programs of continuing medical education.16,17
Financial entanglement has bred close ties between the industry and physicians. Contacts with trainees come early and adhere as physicians move to practice.18 There is hardly a physician practicing today who has not been the beneficiary of small "educational" gifts such as pens and memo pads or lunch for the office staff.19 Many physicians attend dinners to hear a hired expert talk about a product, take educational trips to resorts, or receive funds (explicitly without strings attached) in the form of research grants, trainee support, or lucrative consulting fees.20,21
These interactions are defended as a way to provide useful information for physicians as they address difficult problems in treating their patients. But at what point does the influence become corrosive to the good of the patient? In another article in this issue of the Journal, David Blumenthal surveys research that has addressed that question during the past decade.22
"Anti-Kickback" Law
Governance of the relationships between physicians and pharmaceutical companies has long relied on professional concern about potential conflicts of interest, rather than legal regulation. However, until recently, most major professional societies were mainly silent on this issue. The promulgation of voluntary guidelines by industry and professional organizations in the early 1990s (which suggested a limit of $100 on gifts that physicians can receive) appeared to forestall congressional activity on the issue. The extent of compliance with these guidelines remains unknown.23
Legal scholars recognize that the failure of ethical norms to deter behavior that is widely regarded as unacceptable is a classic trigger for the imposition of legal norms.24,25 Just such a phenomenon is occurring today with the insertion of the federal anti-kickback law into this arena by federal prosecutors. The anti-kickback statute26 was passed in 1972 to protect the Medicare and Medicaid programs against inappropriate use of services and unnecessary expenditures. It did so by criminalizing suppliers' efforts to induce use of products or services by providing "remuneration" to ordering physicians. Giving, accepting, or offering to give or accept such remuneration can result in severe criminal and civil penalties. Broad formulation of the term "kickback" in the law led to far-reaching interpretations by the federal courts,27,28 causing uncertainty among providers about the legality of established practices. Amendments in 1977, 1980, and 1987 sought to refine the statute's scope and application.
For the first 20 years of the law's existence, federal prosecutors applied it in areas in which there was clearly an intent to increase referrals — for example, situations in which one physician kicked back a portion of the Medicare payment for a Holter monitor to the referring physician27 or a drug retailer paid a nursing home a monthly fee for the right to act as the facility's preferred supplier.28 In the early 1990s, questions arose about the level of intent to induce referrals that was required on the part of the accused. The issue has not yet been definitively resolved, but it is clear that the existence of a lawful purpose in the mix of motives for a payment will not confer immunity when the payment is also partially motivated by an unlawful purpose.5,27,29,30
Another important development during the 1990s was use of the anti-kickback statute in tandem with another federal law, the False Claims Act.31 The False Claims Act imposes civil liability on people or entities who knowingly submit a fraudulent claim for payment to the federal government. Violations are punished with stiff fines — $5,500 to $11,000 per claim plus three times the damages incurred by the government.
The legal argument for linking the statutes is that a request for reimbursement from Medicare or Medicaid for a service or product obtained as a result of a kickback scheme constitutes a false claim for purposes of the False Claims Act. This linkage is controversial in the law, and some courts have rejected it.32,33 But prosecutors continue to try to pair the two statutes because, strategically, the combination dramatically raises the stakes and the possibilities for enforcement. The False Claims Act also offers a powerful prosecutorial tool not available in the anti-kickback statute34: since 1986, the False Claims Act has provided for whistle-blower, or "qui tam," actions — lawsuits brought by private citizens on behalf of the government against those who submit false claims for payment. These private prosecutors, usually insiders such as former employees or customers who have specific knowledge of the company's business practices, receive 15 to 30 percent of the damages awarded to the government, sums that may run into millions of dollars if many false claims are at issue.35 The emergence of this bounty system has led to explosive growth in qui tam actions as a method of enforcement of health care fraud.36
Conflicts of Interest and the Lupron Case
Prosecutors have begun to apply the anti-kickback and false-claims laws widely in cases dealing with interactions between physicians and pharmaceutical companies. One case is particularly illustrative. In 1997, government investigators began to probe relationships between TAP Pharmaceuticals, a joint venture of Takeda Chemical Industries and Abbott Laboratories, and various urologists for the marketing of Lupron, a potent gonadotropin-releasing hormone agonist used in the treatment of prostate cancer.37 Aided by qui tam actions brought by a former TAP employee and a health plan administrator, the government determined that TAP encouraged the urologists to bill Medicare at the average wholesale price for Lupron, which they received free or at discounted prices. This arbitrage netted the urologists a substantial profit.
As the sentencing memorandum in the case makes clear, the investigators also found that TAP Pharmaceuticals encouraged the sale of Lupron in a variety of other ways.37 Specifically, the company employed doctors as "consultants" without requesting any significant services in return, took physicians on free trips to attend educational seminars, and awarded educational grants with no strings attached. The physicians did not bill TAP for their time, nor did they prepare reports.
Federal prosecutors charged TAP with criminal violations of the Prescription Drug Marketing Act,38 alleged that both the arbitrage scheme and the other blandishments were intended to induce prescriptions for Lupron and therefore constituted kickbacks, and charged that the practices resulted in false claims. TAP entered into a settlement with the government in which it agreed to pay $290 million in criminal fines plus $585 million in civil penalties. The whistle-blowers received nearly $100 million of the total damages. TAP also faces a series of private class-action lawsuits brought by insurers and patients for unnecessary and costly services.39
The case against TAP went beyond the arbitrage. The government's characterization of the blandishments the physicians received as kickbacks was very significant. The government was clearly addressing, with criminal and civil penalties, practices that had heretofore been a matter of ethical oversight. Although most observers would regard the aggressiveness of these marketing practices as over-the-top, some of the practices are virtual fixtures in medical practice. The outcome of the government's case against TAP and regulatory-guidance documents issued by the Office of the Inspector General show that the propriety of trips to resorts, consulting arrangements that involve meager or no work products, and open-ended educational grants has stepped beyond the realm of academic debate regarding professional ethics and conflicts of interest.
The successful prosecution of TAP has spawned a series of other cases. In 2003, AstraZeneca settled criminal-fraud charges of $355 million in a case dealing with the drug Zoladex, a case that involved not only arbitrage issues but also marketing inducements similar to those in the Lupron litigation.40 On July 14, 2004, Schering-Plough pleaded guilty and paid a fine of $350 million, in part for providing grants to private physicians to conduct educational programs, which prosecutors characterized as kickbacks.41 Schering-Plough faces an ongoing investigation into whether it used sham consulting arrangements and clinical trials to remunerate physicians for prescribing its hepatitis drug, Intron A.42 Prosecuters' momentum is unlikely to be slowed by the unsuccessful criminal prosecution of certain TAP employees by the U.S. attorney in Massachusetts.43 Moreover, the prosecution of specific physicians in this case may add a potent dimension to enforcement.44
Clearly, a range of activities that have become ubiquitous within the triangle of pharmaceutical firms, physicians, and academic medical centers may be construed today as illegal inducements to prescribe medications. The shift has not escaped the notice of the pharmaceutical industry and professional regulators, for whom passivity is no longer a tenable strategy.
Responses of the Industry and the Medical Profession
The Lupron case provoked a flurry of self-regulatory activity in 2002 and 2003, much of it targeting actions that the settlement identified as violations of anti-kickback law. The timing of this stepped-up policing strongly suggests that at least one motive was fear that the federal government's interest in punitive and costly litigation to address conflicts of interest would expand.
The pharmaceutical industry is responsible for what is arguably the strongest move. In July 2002, the Pharmaceutical Research and Manufacturers of America adopted its Code on Interactions with Healthcare Professionals.4 The detailed new code is a significant departure from the brief, loose, and outdated set of industry guidelines it supplants.
The preamble to the code states that "ethical relationships of healthcare professionals are critical to our mission of helping patients." However, effective marketing is also recognized as necessary to ensure access to and the correct use of the industry's products. Table 1 summarizes statements of permissible and impermissible conduct that follow in the code. Financial support for meetings and conferences, other than those that are run explicitly by pharmaceutical companies themselves, is addressed by interposing the meeting organizer as a neutral intermediary. Control over the content and arrangements of the meeting should reside with the organizer. The disbursement of funds to support the attendance of medical students, fellows, and residents is handled in a similar way, and the host training institution must retain control over the selection of recipients of such support.
Table 1. Selected Provisions of Recent Conflict-of-Interest Guidelines Regarding Physicians' Relationships with the Pharmaceutical Industry.
The code also addresses the nature of consultant relationships, which played so prominently in the Lupron litigation. Reasonable compensation for "bona fide" (as opposed to "token") consulting arrangements is deemed acceptable, and specific measures for establishing a bona fide arrangement are prescribed. The code condones the recruitment and training of physicians to act as part of a speakers' bureau, subject to criteria similar to those for consultants, plus compulsory education of speakers regarding requirements of the Food and Drug Administration for communications about pharmaceutical products. Finally, the code limits gifts to physicians to items that "are not of substantial value," defined as $100 or less. The gifts must also be ostensibly for the benefit of patients (e.g., pens, notepads, and stethoscopes).
The special attention that the code paid to concerns raised in the Lupron case, such as extravagant gifts and no-strings-attached consulting relationships, is noteworthy and sends a clear signal that the organization is eager to ward off future litigation of this sort. If the industry adheres to the letter of the code, it could eliminate some of the worst practices. However, such adherence does not recognize, as the literature now does, that even small gifts create a sense of indebtedness, which can lead to inappropriate prescribing.45,46
The code's authority is purely exhortative; no enforcement mechanism backs it. Perhaps none is needed if the federal government's active enforcement of the anti-kickback law provides a sufficiently menacing "stick." Because the code is one of the most detailed statements available on acceptable practices in industry–physician relations, physicians and researchers should be aware of it. Although the code does not substitute for more thorough and physician-guided standards for controlling conflicts of interest in relationships between physicians and pharmaceutical companies, it does provide a reasonable beginning.
In 2002 and 2003, the American Medical Association, the American College of Physicians, and the Accreditation Council for Continuing Medical Education all echoed the move by the Pharmaceutical Research and Manufacturers of America by overhauling their own codes of conduct (Table 1). The resulting statements share a focus on the major inducements brought to light in the Lupron litigation. Though the statements differ in scope and specificity, the harmony is striking among the recommendations that cross codes. Again, the degree of adherence to and self-enforcement of these measures among the various constituencies remains to be seen. However, the looming threat of litigation under the anti-kickback and false-claims statutes should bolster voluntary compliance.
Guidance of the Office of the Inspector General
In April 2003, the Office of the Inspector General published a guidance document for internal compliance programs at pharmaceutical companies,5 explaining which industry practices are likely to provoke government prosecution under fraud-and-abuse laws and which are not. The document sets out a series of considerations that will influence prosecutorial decisions. It is noteworthy that physicians appear to be every bit as exposed as manufacturers if the Office of the Inspector General should determine that their relationships are suspect.
The guidance document suggests that, when possible, pharmaceutical companies should structure their relationships with physicians to fit within one of several statutory "safe harbors." The anti-kickback statute describes a number of common business arrangements that will not give rise to prosecutions, provided that the company strictly follows the prescribed conditions. In cases in which such arrangements are not applicable, the document indicates that the government will weigh four factors in deciding whether a payment to a physician constitutes a kickback. First, how likely is the arrangement to interfere with clinical decision making by diminishing the objectivity of professional judgment? Relevant considerations include the value of the remuneration and the manner in which payment is determined — in particular, whether it is conditioned on referrals. Second, how likely is the arrangement to increase the use of a company's products? A key factor here is the degree of influence the physician has on the generation of sales for the company. Third, how likely is the arrangement to increase costs to federal health care programs? Such an increase could occur if the arrangement boosted either sales or prices. Finally, does the arrangement raise concern about patient safety or the quality of care?
With respect to educational programs, the guidance document clarifies that physicians and researchers face potential exposure to liability whenever a manufacturer has influence over the substance of a program, a risk that can best be managed by separating grant-making functions from sales and marketing functions within pharmaceutical companies. The guidance also cautions manufacturers to ensure that organizers of conferences for continuing medical education are not improperly channeling funds to physicians. The code of conduct of the Accreditation Council for Continuing Medical Education is referred to as a "useful starting point" for manufacturers.
With respect to commercially funded research, the guidance notes that research must be valid and originate from the manufacturer's scientific division, not its sales or marketing division. In addressing consulting and business courtesies, it clarifies that consulting or advisory services that result in fair-market-value payments for small numbers of physicians are unlikely to raise concern, but paying physicians as consultants to attend meetings and engaging physicians to work in manufacturers' marketing and sales activities are more suspect. Entertainment, recreation, travel, meals, gifts, and gratuities are all potentially subject to anti-kickback prohibitions.
It is important to emphasize that the guidance document and the statutes discussed above represent legal constraints; ethical values set by the profession could be more stringent. To illustrate the distinction, consider the stipulation that ghostwritten papers could attract scrutiny under anti-kickback law, a risk that is not eliminated by disclosure alone. From an ethical perspective, most physicians would regard ghostwriting practices as unacceptable, no matter what the legal implications.
Conclusions
The amount of regulatory, self-regulatory, and prosecutorial activity that is currently focused on conflicts of interest in the interactions between physicians and pharmaceutical companies is remarkable. Four years ago, this area was chiefly of interest to medical ethicists and others concerned about the threat posed to clinical decision making by the growing influence of drug companies. Today, professional organizations, the pharmaceutical industry, the Department of Health and Human Services, and a cadre of federal prosecutors are all actively engaged in defining the boundaries of acceptable behavior. The federal authorities in particular are using the powers granted them under the anti-kickback and false-claims statutes to step up their policing efforts.
We believe that such oversight will grow more intense, for the same reasons it has swelled to its present dimensions. With the continuing publication of studies showing that even minor gratuities can influence the behavior of physicians, the government will grow more aggressive in anti-kickback enforcement. Moreover, as the cost of drugs continues to rise and Medicare becomes an increasingly prominent payer (owing to the prescription-drug benefit and the aging of the population), the government will seek any means available to reduce the overuse and cost of drugs. The Medicare program has a stake in the game as never before and will act accordingly to address any practices that are perceived to increase costs unnecessarily.
The pharmaceutical industry may be facing the same kind of sea change in business practices and industry oversight that other segments of corporate America faced in the wake of Enron and other corporate scandals. In these cases, high-stakes, widely publicized government investigations exposed practices that passed neither ethical nor legal muster, provoking an intense regulatory response. The pharmaceutical and health care industries have the opportunity to maximize the extent to which they are leaders, rather than targets, of regulatory initiatives by continuing to develop and enforce stronger ethical standards regarding relationships between physicians and pharmaceutical companies. The increasingly long arm of anti-kickback law should remove any doubt that such proactivism is overdue.
We are indebted to Timothy Jost for his helpful comments on this article.
Source Information
From the Harvard School of Public Health (D.M.S., M.M.M., T.A.B.) and Harvard Medical School (T.A.B.) — both in Boston.
Address reprint requests to Dr. Brennan at Brigham and Women's Hospital, 75 Francis St., PBB4, Boston, MA 02115, or at tabrennan@partners.org.
References
American Medical Association. Opinion of the Council on Ethical and Judicial Affairs, E-8.061. (Accessed October 7, 2004, at http://www.ama-assn.org/ama/pub/category/4001.html.)
Coyle SL. Physician-industry relations. 1. Individual physicians. Ann Intern Med 2002;136:396-402.
Accreditation Council for Continuing Medical Education. Standards for commercial support of continuing medical education. (Accessed October 7, 2004, at http://www.accme.org/incoming/17_system98_essential_areas.pdf.)
Pharmaceutical Research and Manufacturers of America. Code on interactions with healthcare professionals. (Accessed October 7, 2004, at http://www.phrma.org/publications/policy/2004-01-19.391.pdf.)
Department of Health and Human Services, Office of Inspector General. OIG compliance program guidance for pharmaceutical manufacturers. Fed Regist 2003;68:23731-23743.
Kassirer JP. A piece of my mind: financial indigestion. JAMA 2000;284:2156-2157.
Altman DE. The new Medicare prescription-drug legislation. N Engl J Med 2004;350:9-10.
Havighurst CC, Blumstein JF, Brennan TA. Health care law and policy: readings, notes, and questions. 2nd ed. New York: Foundation Press, 1998.
Thompson DF. Understanding financial conflicts of interest. N Engl J Med 1993;329:573-576.
Rosenthal MB, Berndt ER, Donohue JM, Frank RG, Epstein AM. Promotion of prescription drugs to consumers. N Engl J Med 2002;346:498-505.
Katz D, Caplan AL, Merz JF. All gifts large and small: toward an understanding of the ethics of pharmaceutical industry gift-giving. Am J Bioeth 2003;3:39-46.
Bekelman JE, Li Y, Gross CP. Scope and impact of financial conflicts of interest in biomedical research: a systematic review. JAMA 2003;289:454-465.
DiMasi JA, Hansen RW, Grabowski HG. The price of innovation: new estimates of drug development costs. J Health Econ 2003;22:151-185.
Bodenheimer T. Uneasy alliance: clinical investigators and the pharmaceutical industry. N Engl J Med 2000;342:1539-1544.
Morin K, Rakatansky H, Riddick FA Jr, et al. Managing conflicts of interest in the conduct of clinical trials. JAMA 2002;287:78-84.
Greider K. The big fix: how the pharmaceutical industry rips off American consumers. New York: Public Affairs, 2003.
Relman AS. Defending professional independence: ACCME's proposed new guidelines for commercial support of CME. JAMA 2003;289:2418-2420.
Steinman MA, Shlipak MG, McPhee SJ. Of principles and pens: attitudes and practices of medicine housestaff toward pharmaceutical industry promotions. Am J Med 2001;110:551-557.
Wazana A. Physicians and the pharmaceutical industry: is a gift ever just a gift? JAMA 2000;283:373-380.
Moses H III, Braunwald E, Martin JB, Thier SO. Collaborating with industry -- choices for the academic medical center. N Engl J Med 2002;347:1371-1375.
Chren MM, Landefeld CS. Physicians' behavior and their interactions with drug companies: a controlled study of physicians who requested additions to a hospital drug formulary. JAMA 1994;271:684-689.
Blumenthal D. Doctors and drug companies. N Engl J Med 2004;351:1885-1890.
Department of Health and Human Services, Office of Inspector General. Prescription drug promotion involving payments and gifts: physicians' perspectives. OEI-01-90-00481, July 1992. (Accessed October 7, 2004, at http://oig.hhs.gov/oei/reports/oei-01-90-00481.pdf.)
Devlin P. The enforcement of morals. London: Oxford University Press, 1965.
Hart HLA. Law, liberty, and morality. London: Oxford University Press, 1963.
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Krause JH. "Promises to keep": health care providers and the civil False Claims Act. Cardozo Law Rev 2002;23:1363-1418.
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Rabecs RN. Kickbacks as false claims: the use of the civil False Claims Act to prosecute violations of the federal health care program's anti-kickback statute. Mich State Law Rev 2001;Spring:1-84.
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The past two years have witnessed extraordinary regulatory ferment in the area of conflicts of interest involving physicians, especially conflicts arising in relationships with the pharmaceutical industry. Professional regulatory bodies, the pharmaceutical industry, and the government have all decided that physicians and drug manufacturers need stronger advice about appropriate relationships. In 2002, three leading professional organizations — the American Medical Association,1 the American College of Physicians,2 and the Accreditation Council for Continuing Medical Education3 — issued or revamped guidelines regarding physicians' interactions with drug companies. In July 2002, acting through its trade association, the Pharmaceutical Research and Manufacturers of America, the industry adopted a broad code of conduct for its constituencies.4 In April 2003, the Office of the Inspector General of the Department of Health and Human Services released a set of guidelines with which manufacturers were urged to comply in order to guard against the risk of liability.5
Why has there been such a sudden increase in oversight of these relationships? A combination of forces appears to be at work. First, there is a growing realization, inside and outside medical circles, of the troubling influence that pharmaceutical marketing can have on patient care.6 Second, the Medicare program has adopted a prescription-drug benefit, and widespread concern about the costs of this new program7 will fuel federal prosecutors' interest in policing conflicts of interest that could increase public expenditures. Third, a body of federal law dealing with "fraud and abuse"8 has evolved to the point where it can and is being used by prosecutors to punish pharmaceutical companies and physicians involved in marketing practices that were once fairly common. Thus, the law has begun to annex terrain previously controlled by professional ethics.
The pharmaceutical industry and professional organizations have anticipated some elements of the gathering storm. Their voluntary initiatives in this heretofore largely unregulated area could be interpreted as an attempt to forestall sterner measures by addressing the kinds of activities that have drawn the attention of federal prosecutors. In this article, we explore the new ways in which federal fraud-and-abuse law is being used, and we discuss the effect of those changes on relationships between physicians and pharmaceutical companies. We conclude that government policing in this area is likely to intensify.
Emergence of Conflicts of Interest Involving Pharmaceutical Companies
Apprehension over conflicts of interest in medicine is rooted in a concern that professional judgments about the welfare of patients may be inappropriately influenced by a secondary interest — in this case, the personal gain derived from relationships with pharmaceutical companies.9 A drug company's primary interest is to maximize sales of its product. Physicians do not (or should not) share this goal, but they are the chief conduit for sales. Consequently, physicians have been the central target of marketing strategies, and they remain so even after the rise of direct-to-consumer marketing.10 The pharmaceutical industry spends approximately $12 billion annually on gifts and payments to physicians.11
To a significant extent, growth in promotional activity has paralleled the rise of the industry's importance as a funder of mainstream research and education. Approximately 60 percent of biomedical research and development today is privately funded.12,13 Pharmaceutical companies' share of funding for clinical trials is more than 70 percent14 and has grown sharply during the past decade.15 The industry also shoulders more than half of the costs of formal programs of continuing medical education.16,17
Financial entanglement has bred close ties between the industry and physicians. Contacts with trainees come early and adhere as physicians move to practice.18 There is hardly a physician practicing today who has not been the beneficiary of small "educational" gifts such as pens and memo pads or lunch for the office staff.19 Many physicians attend dinners to hear a hired expert talk about a product, take educational trips to resorts, or receive funds (explicitly without strings attached) in the form of research grants, trainee support, or lucrative consulting fees.20,21
These interactions are defended as a way to provide useful information for physicians as they address difficult problems in treating their patients. But at what point does the influence become corrosive to the good of the patient? In another article in this issue of the Journal, David Blumenthal surveys research that has addressed that question during the past decade.22
"Anti-Kickback" Law
Governance of the relationships between physicians and pharmaceutical companies has long relied on professional concern about potential conflicts of interest, rather than legal regulation. However, until recently, most major professional societies were mainly silent on this issue. The promulgation of voluntary guidelines by industry and professional organizations in the early 1990s (which suggested a limit of $100 on gifts that physicians can receive) appeared to forestall congressional activity on the issue. The extent of compliance with these guidelines remains unknown.23
Legal scholars recognize that the failure of ethical norms to deter behavior that is widely regarded as unacceptable is a classic trigger for the imposition of legal norms.24,25 Just such a phenomenon is occurring today with the insertion of the federal anti-kickback law into this arena by federal prosecutors. The anti-kickback statute26 was passed in 1972 to protect the Medicare and Medicaid programs against inappropriate use of services and unnecessary expenditures. It did so by criminalizing suppliers' efforts to induce use of products or services by providing "remuneration" to ordering physicians. Giving, accepting, or offering to give or accept such remuneration can result in severe criminal and civil penalties. Broad formulation of the term "kickback" in the law led to far-reaching interpretations by the federal courts,27,28 causing uncertainty among providers about the legality of established practices. Amendments in 1977, 1980, and 1987 sought to refine the statute's scope and application.
For the first 20 years of the law's existence, federal prosecutors applied it in areas in which there was clearly an intent to increase referrals — for example, situations in which one physician kicked back a portion of the Medicare payment for a Holter monitor to the referring physician27 or a drug retailer paid a nursing home a monthly fee for the right to act as the facility's preferred supplier.28 In the early 1990s, questions arose about the level of intent to induce referrals that was required on the part of the accused. The issue has not yet been definitively resolved, but it is clear that the existence of a lawful purpose in the mix of motives for a payment will not confer immunity when the payment is also partially motivated by an unlawful purpose.5,27,29,30
Another important development during the 1990s was use of the anti-kickback statute in tandem with another federal law, the False Claims Act.31 The False Claims Act imposes civil liability on people or entities who knowingly submit a fraudulent claim for payment to the federal government. Violations are punished with stiff fines — $5,500 to $11,000 per claim plus three times the damages incurred by the government.
The legal argument for linking the statutes is that a request for reimbursement from Medicare or Medicaid for a service or product obtained as a result of a kickback scheme constitutes a false claim for purposes of the False Claims Act. This linkage is controversial in the law, and some courts have rejected it.32,33 But prosecutors continue to try to pair the two statutes because, strategically, the combination dramatically raises the stakes and the possibilities for enforcement. The False Claims Act also offers a powerful prosecutorial tool not available in the anti-kickback statute34: since 1986, the False Claims Act has provided for whistle-blower, or "qui tam," actions — lawsuits brought by private citizens on behalf of the government against those who submit false claims for payment. These private prosecutors, usually insiders such as former employees or customers who have specific knowledge of the company's business practices, receive 15 to 30 percent of the damages awarded to the government, sums that may run into millions of dollars if many false claims are at issue.35 The emergence of this bounty system has led to explosive growth in qui tam actions as a method of enforcement of health care fraud.36
Conflicts of Interest and the Lupron Case
Prosecutors have begun to apply the anti-kickback and false-claims laws widely in cases dealing with interactions between physicians and pharmaceutical companies. One case is particularly illustrative. In 1997, government investigators began to probe relationships between TAP Pharmaceuticals, a joint venture of Takeda Chemical Industries and Abbott Laboratories, and various urologists for the marketing of Lupron, a potent gonadotropin-releasing hormone agonist used in the treatment of prostate cancer.37 Aided by qui tam actions brought by a former TAP employee and a health plan administrator, the government determined that TAP encouraged the urologists to bill Medicare at the average wholesale price for Lupron, which they received free or at discounted prices. This arbitrage netted the urologists a substantial profit.
As the sentencing memorandum in the case makes clear, the investigators also found that TAP Pharmaceuticals encouraged the sale of Lupron in a variety of other ways.37 Specifically, the company employed doctors as "consultants" without requesting any significant services in return, took physicians on free trips to attend educational seminars, and awarded educational grants with no strings attached. The physicians did not bill TAP for their time, nor did they prepare reports.
Federal prosecutors charged TAP with criminal violations of the Prescription Drug Marketing Act,38 alleged that both the arbitrage scheme and the other blandishments were intended to induce prescriptions for Lupron and therefore constituted kickbacks, and charged that the practices resulted in false claims. TAP entered into a settlement with the government in which it agreed to pay $290 million in criminal fines plus $585 million in civil penalties. The whistle-blowers received nearly $100 million of the total damages. TAP also faces a series of private class-action lawsuits brought by insurers and patients for unnecessary and costly services.39
The case against TAP went beyond the arbitrage. The government's characterization of the blandishments the physicians received as kickbacks was very significant. The government was clearly addressing, with criminal and civil penalties, practices that had heretofore been a matter of ethical oversight. Although most observers would regard the aggressiveness of these marketing practices as over-the-top, some of the practices are virtual fixtures in medical practice. The outcome of the government's case against TAP and regulatory-guidance documents issued by the Office of the Inspector General show that the propriety of trips to resorts, consulting arrangements that involve meager or no work products, and open-ended educational grants has stepped beyond the realm of academic debate regarding professional ethics and conflicts of interest.
The successful prosecution of TAP has spawned a series of other cases. In 2003, AstraZeneca settled criminal-fraud charges of $355 million in a case dealing with the drug Zoladex, a case that involved not only arbitrage issues but also marketing inducements similar to those in the Lupron litigation.40 On July 14, 2004, Schering-Plough pleaded guilty and paid a fine of $350 million, in part for providing grants to private physicians to conduct educational programs, which prosecutors characterized as kickbacks.41 Schering-Plough faces an ongoing investigation into whether it used sham consulting arrangements and clinical trials to remunerate physicians for prescribing its hepatitis drug, Intron A.42 Prosecuters' momentum is unlikely to be slowed by the unsuccessful criminal prosecution of certain TAP employees by the U.S. attorney in Massachusetts.43 Moreover, the prosecution of specific physicians in this case may add a potent dimension to enforcement.44
Clearly, a range of activities that have become ubiquitous within the triangle of pharmaceutical firms, physicians, and academic medical centers may be construed today as illegal inducements to prescribe medications. The shift has not escaped the notice of the pharmaceutical industry and professional regulators, for whom passivity is no longer a tenable strategy.
Responses of the Industry and the Medical Profession
The Lupron case provoked a flurry of self-regulatory activity in 2002 and 2003, much of it targeting actions that the settlement identified as violations of anti-kickback law. The timing of this stepped-up policing strongly suggests that at least one motive was fear that the federal government's interest in punitive and costly litigation to address conflicts of interest would expand.
The pharmaceutical industry is responsible for what is arguably the strongest move. In July 2002, the Pharmaceutical Research and Manufacturers of America adopted its Code on Interactions with Healthcare Professionals.4 The detailed new code is a significant departure from the brief, loose, and outdated set of industry guidelines it supplants.
The preamble to the code states that "ethical relationships of healthcare professionals are critical to our mission of helping patients." However, effective marketing is also recognized as necessary to ensure access to and the correct use of the industry's products. Table 1 summarizes statements of permissible and impermissible conduct that follow in the code. Financial support for meetings and conferences, other than those that are run explicitly by pharmaceutical companies themselves, is addressed by interposing the meeting organizer as a neutral intermediary. Control over the content and arrangements of the meeting should reside with the organizer. The disbursement of funds to support the attendance of medical students, fellows, and residents is handled in a similar way, and the host training institution must retain control over the selection of recipients of such support.
Table 1. Selected Provisions of Recent Conflict-of-Interest Guidelines Regarding Physicians' Relationships with the Pharmaceutical Industry.
The code also addresses the nature of consultant relationships, which played so prominently in the Lupron litigation. Reasonable compensation for "bona fide" (as opposed to "token") consulting arrangements is deemed acceptable, and specific measures for establishing a bona fide arrangement are prescribed. The code condones the recruitment and training of physicians to act as part of a speakers' bureau, subject to criteria similar to those for consultants, plus compulsory education of speakers regarding requirements of the Food and Drug Administration for communications about pharmaceutical products. Finally, the code limits gifts to physicians to items that "are not of substantial value," defined as $100 or less. The gifts must also be ostensibly for the benefit of patients (e.g., pens, notepads, and stethoscopes).
The special attention that the code paid to concerns raised in the Lupron case, such as extravagant gifts and no-strings-attached consulting relationships, is noteworthy and sends a clear signal that the organization is eager to ward off future litigation of this sort. If the industry adheres to the letter of the code, it could eliminate some of the worst practices. However, such adherence does not recognize, as the literature now does, that even small gifts create a sense of indebtedness, which can lead to inappropriate prescribing.45,46
The code's authority is purely exhortative; no enforcement mechanism backs it. Perhaps none is needed if the federal government's active enforcement of the anti-kickback law provides a sufficiently menacing "stick." Because the code is one of the most detailed statements available on acceptable practices in industry–physician relations, physicians and researchers should be aware of it. Although the code does not substitute for more thorough and physician-guided standards for controlling conflicts of interest in relationships between physicians and pharmaceutical companies, it does provide a reasonable beginning.
In 2002 and 2003, the American Medical Association, the American College of Physicians, and the Accreditation Council for Continuing Medical Education all echoed the move by the Pharmaceutical Research and Manufacturers of America by overhauling their own codes of conduct (Table 1). The resulting statements share a focus on the major inducements brought to light in the Lupron litigation. Though the statements differ in scope and specificity, the harmony is striking among the recommendations that cross codes. Again, the degree of adherence to and self-enforcement of these measures among the various constituencies remains to be seen. However, the looming threat of litigation under the anti-kickback and false-claims statutes should bolster voluntary compliance.
Guidance of the Office of the Inspector General
In April 2003, the Office of the Inspector General published a guidance document for internal compliance programs at pharmaceutical companies,5 explaining which industry practices are likely to provoke government prosecution under fraud-and-abuse laws and which are not. The document sets out a series of considerations that will influence prosecutorial decisions. It is noteworthy that physicians appear to be every bit as exposed as manufacturers if the Office of the Inspector General should determine that their relationships are suspect.
The guidance document suggests that, when possible, pharmaceutical companies should structure their relationships with physicians to fit within one of several statutory "safe harbors." The anti-kickback statute describes a number of common business arrangements that will not give rise to prosecutions, provided that the company strictly follows the prescribed conditions. In cases in which such arrangements are not applicable, the document indicates that the government will weigh four factors in deciding whether a payment to a physician constitutes a kickback. First, how likely is the arrangement to interfere with clinical decision making by diminishing the objectivity of professional judgment? Relevant considerations include the value of the remuneration and the manner in which payment is determined — in particular, whether it is conditioned on referrals. Second, how likely is the arrangement to increase the use of a company's products? A key factor here is the degree of influence the physician has on the generation of sales for the company. Third, how likely is the arrangement to increase costs to federal health care programs? Such an increase could occur if the arrangement boosted either sales or prices. Finally, does the arrangement raise concern about patient safety or the quality of care?
With respect to educational programs, the guidance document clarifies that physicians and researchers face potential exposure to liability whenever a manufacturer has influence over the substance of a program, a risk that can best be managed by separating grant-making functions from sales and marketing functions within pharmaceutical companies. The guidance also cautions manufacturers to ensure that organizers of conferences for continuing medical education are not improperly channeling funds to physicians. The code of conduct of the Accreditation Council for Continuing Medical Education is referred to as a "useful starting point" for manufacturers.
With respect to commercially funded research, the guidance notes that research must be valid and originate from the manufacturer's scientific division, not its sales or marketing division. In addressing consulting and business courtesies, it clarifies that consulting or advisory services that result in fair-market-value payments for small numbers of physicians are unlikely to raise concern, but paying physicians as consultants to attend meetings and engaging physicians to work in manufacturers' marketing and sales activities are more suspect. Entertainment, recreation, travel, meals, gifts, and gratuities are all potentially subject to anti-kickback prohibitions.
It is important to emphasize that the guidance document and the statutes discussed above represent legal constraints; ethical values set by the profession could be more stringent. To illustrate the distinction, consider the stipulation that ghostwritten papers could attract scrutiny under anti-kickback law, a risk that is not eliminated by disclosure alone. From an ethical perspective, most physicians would regard ghostwriting practices as unacceptable, no matter what the legal implications.
Conclusions
The amount of regulatory, self-regulatory, and prosecutorial activity that is currently focused on conflicts of interest in the interactions between physicians and pharmaceutical companies is remarkable. Four years ago, this area was chiefly of interest to medical ethicists and others concerned about the threat posed to clinical decision making by the growing influence of drug companies. Today, professional organizations, the pharmaceutical industry, the Department of Health and Human Services, and a cadre of federal prosecutors are all actively engaged in defining the boundaries of acceptable behavior. The federal authorities in particular are using the powers granted them under the anti-kickback and false-claims statutes to step up their policing efforts.
We believe that such oversight will grow more intense, for the same reasons it has swelled to its present dimensions. With the continuing publication of studies showing that even minor gratuities can influence the behavior of physicians, the government will grow more aggressive in anti-kickback enforcement. Moreover, as the cost of drugs continues to rise and Medicare becomes an increasingly prominent payer (owing to the prescription-drug benefit and the aging of the population), the government will seek any means available to reduce the overuse and cost of drugs. The Medicare program has a stake in the game as never before and will act accordingly to address any practices that are perceived to increase costs unnecessarily.
The pharmaceutical industry may be facing the same kind of sea change in business practices and industry oversight that other segments of corporate America faced in the wake of Enron and other corporate scandals. In these cases, high-stakes, widely publicized government investigations exposed practices that passed neither ethical nor legal muster, provoking an intense regulatory response. The pharmaceutical and health care industries have the opportunity to maximize the extent to which they are leaders, rather than targets, of regulatory initiatives by continuing to develop and enforce stronger ethical standards regarding relationships between physicians and pharmaceutical companies. The increasingly long arm of anti-kickback law should remove any doubt that such proactivism is overdue.
We are indebted to Timothy Jost for his helpful comments on this article.
Source Information
From the Harvard School of Public Health (D.M.S., M.M.M., T.A.B.) and Harvard Medical School (T.A.B.) — both in Boston.
Address reprint requests to Dr. Brennan at Brigham and Women's Hospital, 75 Francis St., PBB4, Boston, MA 02115, or at tabrennan@partners.org.
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