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Q&A |
Physicians and Device Companies: Understanding the Rules of the Road
Published: June 24, 2011By: Maria Fontanazza
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Innovation can’t happen without teamwork between manufacturers and physicians.
An interview with Thomas Hutchinson and Susan Ziel, partners at Krieg DeVault LLC
In recent years, the orthopaedics industry has been shaken by Department of Justice (DOJ) investigations into inappropriate consulting agreements between doctors and manufacturers. The resulting fallout has left many physicians wary of working with device companies. Some doctors don’t even want to entertain the idea, while others tread very lightly on the subject.
The biggest problem with this situation is that the doctor-manufacturer relationship is at the heart of product development. Thomas Hutchinson and Susan Ziel, partners on the life sciences team at Krieg DeVault LLC (Carmel, IN), offer their first-hand perspectives on how the industry has reacted to the settlements and what both parties need to do to move forward.
OrthoTec: How have the settlements between the DOJ and orthopaedics manufacturers changed the legal landscape in this industry?
Susan Ziel: We do a lot of work with physician practices and with teaching hospitals that have physicians on their medical staff doing research. In those cases, we are finding that they’re adopting policies, sometimes for the first time, that will, at a minimum, require physicians to disclose any outside activities, financial relationships, or anything else that could represent an outside activity or conflict of interest.
In addition to the DOJ settlements, there have been recent articles in the popular press on this issue that have gotten the attention of providers. For example, Stanford University School of Medicine was recently called on the carpet by a third-party database group that showed Stanford had doctors who were receiving money from drug and medical device companies that Stanford didn’t even know about.
There are physician groups around the country that, in many cases, didn’t know their physicians were involved in arrangements with pharmaceutical and medical device companies until they picked up the paper and read about some federal case or investigation involving one of their physicians. There were lists of names and dollar amounts in those articles.
I think that’s one of the big changes. There’s been caution, more emphasis on getting compliance policies in place, and also efforts to require physicians and others to report their outside activities and business relationships as part of a conflict-of-interest procedure.
I think [physicians] are going to be more hesitant, because they understand that there are going to be bigger risks than there were before. If they’re smart, they’re going to be more cautious just to make sure that they’ve had the arrangement properly reviewed by their legal counsel to ensure that it complies, at a minimum, with the federal Antikickback Statute. The safe harbor that we’re usually looking at is the Personal Services and Management Contracts Safe Harbor. In addition, the AdvaMed standards are important for medical device companies.
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| Hutchinson |
ORT: What are the common misconceptions related to the physician-manufacturer relationship?
Thomas Hutchinson: From the outside looking in, I would say that physicians who have been in these relationships in the past are comfortable with the arrangements. But with all this recent press, physicians who are considering going into arrangements are now much more nervous, and maybe more nervous than they should be. In the past, they would rely on the fact that the medical device companies knew what they’re doing and the contracts were drafted appropriately. We’re now seeing more concern and nervousness about even considering an arrangement. Even when it’s a compliant arrangement, we still see nervousness on the part of the physicians, as well as a physician group. It has had a chilling effect on these arrangements and, therefore, innovation.
Ziel: Although we have a lot of people who are nervous and cautious, we’ve also encountered some device companies that are rather flippant about some of these requirements. That is a misconception that deserves equal treatment in terms of educating the industry to ensure they’re properly advised about the rules. We’ve tried to do that education in the process of negotiating an agreement, and we’ve been told, in some cases, that compliance issues are not a big deal. It’s a misconception that needs to be addressed. Unfortunately, physicians will sometimes want to have an opportunity to contribute to the development of new innovation and technology, and they’re tempted to take the word from the contracting groups that this isn’t a big deal. If they’re a small company, they sometimes think they’re not going to be on the radar screen of the regulators and no one will care what they’re doing. That kind of misinformation and misconception can sometimes lead a physician astray.
ORT: What are the steps that the industry needs to take to change these misconceptions or better educate device companies?
Ziel: One way we as legal counsel can contribute to that is with educational programs—speaking and writing—and also being available to provide contract review. I think the industry can support efforts conducted by organizations such as AdvaMed to bring in more of the manufacturing world into the standards development groups. That said, if you go on the Web sites of both small and large medical device and pharmaceutical companies, they all have their own code of conduct. They’re starting to advance their own internal standards. I think the more we can push that out, it’s going to change those misconceptions. However, it all boils down to education and understanding.
Hutchinson: We find that some of the smaller companies have limited resources and haven’t put a great emphasis on getting their contracts up to speed and having the compliance reviews of their business relationships completed. You may find someone who was with a company and has now started their own small company, and regulatory compliance isn’t always a top priority due to the financial pressures that are present. The industry efforts in that regard have been helpful, but there’s always more that can be done to educate companies of all sizes about the do’s and don’ts of entering into those arrangements.
ORT: Should government regulators take part in more educational activities?
Hutchinson: Yes. Any multidisciplinary approach where you have physician leaders, medical device companies, and regulators working in tandem to provide that kind of insight is great. It’s always tough to orchestrate those efforts, and there’s always more that can be done. In many cases, [companies] have tended to hire in-house counsel that doesn’t have a ton of experience on a regulatory side. In some circumstances, companies will end up having a new lawyer or someone who is new to the industry interpret a difficult and high-risk area of the law for them. It’s tough for anyone to do that in isolation.
ORT: How important is the relationship between physicians and manufacturers?
Ziel: I think it’s huge. Medical device companies need physicians to assist them in R&D and to test products before they go to market as part of a clinical trial process. They can’t do it without physicians or teaching hospitals and other venues where devices can be used and refined.
After products go to market, and manufacturers continue to refine the devices, the postmarket quality improvement process continues to make a product the best that it can be. From premarket to postmarket, medical device companies can’t do it without physicians because they need to have access to patients to innovate and to continue to test product quality and improve it. I think it’s an important relationship. It’s a doable relationship—it’s just a matter of making sure everyone understands the rules of the road.
The product development process can’t occur without the relationship between the manufacturer and the physician—both in terms of product R&D, approval, and postmarket. A device company can’t get to the patient unless it does so through a treating physician. This is not only due to informed consent rules and ties to clinical trials, but also from a HIPPA [compliance] standpoint. The benefit is to get a product that has been well tested and continues to get tested after it goes to market.
ORT: What challenges do physicians experience while working or considering an arrangement with a medical device company?
Hutchinson: It depends on the company. The opportunity often gets oversold to the physician. So, by the time they bring in legal counsel or an administrator to look at the agreement, whoever has been communicating with the physician hasn’t fully explained the parameters that they need to work in and how the arrangement will work going forward.
As a medical device company, having the facts and educating the physician up front is critical. The frustration comes in when counsel looks at the agreement and finds that it needs to be revised late in the discussions. Then they have to go back to ground zero and start with the relationship from the beginning. Physicians then get upset that the company didn’t have its act in gear or that they went down a path with a company that doesn’t do things the right way, and as a result start fresh with someone else. Again, it can be simply a lack of organization and a lack of education.
It can be something as simple as the consistency of the approach of the same company. We have instances where from one year to the next, a company will approach physicians in a much different way. A physician may talk to his colleague who has one type of arrangement at the practice, and two years later, he thinks that’s what he’s going to have the same opportunity, yet the method of interaction has totally changed with no explanation. Physicians then perceive that they’re not being treated fairly.
ORT: What frustrations do you see from device manufacturers?
Hutchinson: I think they’re frustrated by the bad press that these arrangements have been getting. They’re trying to legitimately improve their products, and everywhere they turn, there’s an article or a lawyer raising concerns. This makes physicians nervous, which makes some of the more conservative and most ethical physicians reluctant to enter into these arrangements. As a result, it’s challenging for them to find the quality physicians that they want to evaluate the products.
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| Ziel |
Ziel: The acquisition of physician practices by hospitals is also creating other frustrations. In the past, physicians could pretty much use any device that they wanted in surgery. Today, with a lot of changes in reimbursement and the emphasis on the bottom line, hospitals and physicians are doing a lot of work to develop a preapproved list of devices, equipment, and drugs that they’re going to use so they can use a higher volume of those devices and get them for a better price. I think that’s a new frustration for device companies. In the past, if they could befriend and educate physicians, they were confident that the physician would use that piece of equipment or device in surgery. Now, those decisions aren’t always in hands of individual physicians. As a result, manufacturers must get in line and may not always get all of the business that they had before because of the changes and incentives under reimbursement.
ORT: What are the key points of advice for device manufacturers as they approach a consulting arrangement with a physician?
Ziel: I think the foremost thing that manufacturers should do is implement a compliance program that would set certain standards for establishing business relationships with physicians and a have a competent and high-level compliance officer who is going to monitor and police that program. From there, they should have a competent outside counsel that would help them craft arrangements or agreements—that can be with anything from a consulting arrangement to speaking bureaus. They need competent counsel to advise them on how to put those standards together. When they enter arrangements, the agreements should be vetted so they are approved by someone on the manufacturer’s side. These same rules would apply on the physician side.
They should continue to stay abreast of the rules. The driver is the Safe Harbor under the Antikickback Statute and the AdvaMed standards—they have great resources. There are also a lot of advisory opinions under the Antikickback Statute that continue to provide guidance. There’s also the OIG [Office of Inspector General] compliance guidance that would be used by the compliance officer; they have guidance out for pharmaceutical manufacturers. It’s not guidance specifically for device companies, but the principles are the similar. Those are the key points that need to be done even before you begin to seek out physicians to establish a partnership. In seeking a partnership, the goal is that it has to be done correctly and needs to be memorialized in writing. Then you need to comply with your terms and conditions.
ORT: Despite recent regulatory scrutiny, do you think the relationships between device companies and physicians will improve and grow stronger?
Hutchinson: I think they must because the end product is so critical. There can’t be innovations without the participation of the physicians. The future is bright, but there will need to be a more consistent and sustained effort on education. All the manufacturers have to realize is that although rules are frustrating, they’re there for a reason. There have been some mistakes in the past, but this is the world we have to live in. The manufacturers have to take the time and resources to do it right.
Ziel: For purposes of the future, I think that unless physicians and manufacturers self monitor and self regulate themselves, they’re going to be subject to more scrutiny and more regulation.For example, there are companies that are subject to a Corporate Integrity Agreement or a Deferred Prosecution Agreement, when a company has been subject to a settlement with the federal government for a period of usually five years. The government sends in a monitor that will review everything these companies do that could implicate these various issues that we’re discussing here. The future could easily look like that for all manufacturers if these companies and physicians don’t self police and self regulate their practices.
Lastly, one [element] that is going to be very different is the requirement of transparency. A lot of states had sunshine laws that required physicians, hospitals, and drug and medical device companies to file a report under state law of any financial arrangements that they might have had. Under the reform legislation, there’s a new provision that will apply across the board for physicians and teaching hospitals that receive anything of value from medical device or drug companies. They’re going to have to start logging and tracking all these benefits—whether it’s money under a contract, attending a seminar, or anything they receive of value—and that will eventually be posted on a federal Web site. That’s going to have a chilling effect, even more so when device companies and physicians understand that these contracts are going to be up there in lights on a Web site for all to see. Transparency is a big deal.
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