Primacea Blog

Primacea's founders describe the problems and pathways for physicians to manage their industry relationships under the bright lights of the Sunshine Act in a March 2013 Endovascular Today cover story.

"From inventing a new device to providing expertise on how it might be improved or best used, physicians interact with industry in a variety of ways, often receiving paid compensation for their time and work or being provided with meals or travel expenses. While ordinarily understood to be of value by many within the field, public and political scrutiny has increased in recent years, and legislation now dictates that all financial ties be disclosed publicly, online."

The interview describes the background of the Sunshine Act, how it grew to 76,000 words of regulations, and the reporting responsibilities around financial exchanges between industry and physicians.

It emphasizes the need for physicians to take responsibility for their own compliance. Every payment that physicians receive, directly or indirectly, will be reported on a publicly searchable website. Unless a physician has the tools to accurately record and track these relationships, he or she could find that they are ill-prepared in the event that questions arise about the work they do. Industry and hospitals will spend hundreds of millions of dollars annually to comply with the Act. Unfortunately, none of these expenditures will necessarily protect a physician.

CMS finalized the rules for Sunshine reporting of payments to physicians which will be published in the Federal Register on February 8, 2013. The 287 pages detail how payments must be recorded starting August 1, 2013 and reported to CMS by March 31, 2014. 

The final rules include significant modifications based on extensive feedback received from responders. (Our comments can be downloaded at Primacea comments on CMS-5060-P.)

Subsequent posts will analyze details of the now-final Sunshine rules.

The entire document can be found at Sunshine Rules - CMS. 

It starts with a letter from the United States Congress, a call from a hospital lawyer or an email from your chief. In regards to your outside medical activities over the past year (or two or three), what did you do ... how much time did you spend ... how much were you paid? Please provide copies of all contracts, letters, emails and other records.

You think, "I've been working my tail off all this time. Where am I going to find all the paperwork?" You worry that you'll be in the newspaper and look like a doctor gone bad. You call your attorney. You say this could end your career. He asks for a significant retainer and tells you to clear your calendar for some time.

Physicians fear guilt by investigation.

How do you avoid the investigation? You can't. Once an investigation starts, nothing can undo the letter, the call or the email. Your goal is to conclude the investigation before it gains momentum and you appear guilty. A successful conclusion requires proper conduct and total transparency.

Proper conduct is more than doing good work, living up to hospital rules and abiding by medical society codes. It starts with a legal component: understanding laws, regulations, and institutional policies. Written contracts must be drafted for every engagement that clearly define your activities and the time you will spend. Compensation must be at fair market value (no more retainers or payments "for services rendered"). Non-disclosure clauses that would prohibit you from responding to an investigator or cause you to answer a reporter with "no comment" make you look guilty and are to be avoided.

Total transparency means disclosing everything in full. We believe that reporting every dollar from every source is the best policy. Omitting outside relationships or payments that don't seem to require disclosure is a recipe for expanding, not concluding, the process. Investigators will assume a crime if they sense a cover-up.

Compliance forms can pose problems, even perfectly completed ones, when compensation is reported in ranges. One physician shared this example: "the administrator said I was charging way above fair market value because I disclosed $10,000 for two hours of work." She received $900, or $450 per hour, but the box labeled "$1–$10,000" on her conflict form was interpreted as $5,000 per hour. A meeting (which included a review of all of her outside relationships) could have been avoided by sending the administrator a detailed report showing the actual compensation along with the time spent on each engagement.

Reporting relies on a well-functioning accounting system. Every engagement requires accurate time and expense tracking, invoicing for the exact work performed and recording when payments were collected.

What physician could look more above-board to a government investigator, hospital lawyer or institutional administrator than one who responds to their inquiries with a complete, accurate, up-to-date report on a moment's notice?

Need to develop appropriate infrastructure for industry collaborations

Should physicians have relationships with industry? Those who say yes believe that it is vital to advancing medicine. They point to the polio vaccine, HIV/AIDS medications, kidney dialysis, angioplasty/stents, artificial joints and numerous other historic breakthroughs. All of these advancements required the collaboration of innovative physicians and industry to improve the quality and duration of patients' lives.

Those that say no claim that such relationships inherently interfere with physicians' obligations to patients (when practicing medicine), students (whether trainees or peers) and the public (when conducting research). They cite news reports of physicians earning millions of dollars in unreported income for their industry work and social science research concluding that a gift as small as a notepad or cup of coffee may influence behavior. The end result, they believe, is the erosion of public trust.

Medical societies, academia, industry, consumer advocates and legislators universally understand and believe that physician-industry relationships are fundamental to improving medical science and patient care. They are also forming a consensus that the best way to maintain public trust is to ensure that these relationships operate under increasing transparency. I wholeheartedly support both conclusions.

The Physician Payment Sunshine provision of the new healthcare law and similar state statutes address the transparency issue in physician-industry relationships by requiring the public disclosure of all physician payments. Many recent state laws, medical society rules and hospital policies go further by banning gifts, limiting industry contact during regular business hours and influence on continuing medical education (CME) events, and by requiring detailed relationship reports. While well meaning, the end result has been a new and complicated regulatory environment.

Hospitals and industry have been able to direct their substantial legal and compliance infrastructures to help manage their obligations in today's environment. Unfortunately, these resources are often not available to us as individual physicians, and we remain ill equipped to navigate these complexities on our own. As a result, feeling that our motives are being questioned and not having a clear understanding of proper compliance procedures, many of us have reduced or even abandoned these otherwise productive and constructive relationships.

In my work, I have seen firsthand the significant impact that innovative physicians have on the advancement of medicine. I firmly believe that losing the contributions of these talented physicians will reduce our ability to improve patient care, and I worry as to the ultimate impact on the U.S. to provide appropriate care for our aging population.

For these reasons, I believe it is time for us to take action to ensure that these crucial contributions can continue. First, we must recognize that the changing environment requires a change in the way we conduct our relationships. We no longer can simply operate as "sole proprietors," but must build our own adequate regulatory compliance infrastructures to support the universal goal of transparency. We must also work together as a group to design and implement training and practical processes that will enable physicians to understand and comply with the many different requirements. With these new regulations, the ultimate goals (and our priorities) have been set. We now must step up our efforts to get there.

Laws and regulations concerning physician-industry relationships have been rapidly changing over the past four years. While not all are specifically directed at physicians, these changes, along with new hospital policies and evolving ethical rules, have created new and sometimes confusing obligations for physicians. Even the best-intentioned and most conscientious physicians have been struggling to understand and comply with today's requirements. As legal counsel for Dr. Jaff and other innovative physicians, I know that research scientists and clinicians engaged with industry need help. As one physician client bluntly asked, "You're my attorney. How do I stay out of trouble?

With nearly 20 years experience as an attorney representing high tech companies, entrepreneurs and physicians, I can certainly provide help here. I have reviewed countless legal agreements presented by potential industry partners for compliance with applicable laws and regulations. I've made sure that the agreements would not saddle individuals with unreasonable liabilities or restrict them from engaging in other activities. However, as important as these issues are, the legal answers provide only a partial solution to the question about "staying out of trouble."

One focus of the regulatory changes has been to require that compensation paid to physicians represents fair market value for services rendered. The definition of fair market value is highly subjective. It requires an understanding of the individual physician's expertise and achievements in light of market dynamics. While this analysis is not unknown to lawyers in other contexts, having the deep physician relationships and broad market understanding required to make the analysis may be difficult in traditional legal firms.

Frankly, the most critical element to avoiding trouble is to have someone monitor the ongoing relationship. In other words, compliance is not assured upon signing a contract. For most innovative physicians, industry relationships are a small (albeit important) aspect of their remarkably demanding practices. However, compliance requires proper time and expense tracking paired with accurate invoicing and, most importantly, reporting. Physicians need not only lawyers but also accountants and office managers as well.

A good accounting and office team informs lawyers as to physicians' income and time restrictions per applicable conflict of interest and conflict of commitment rules. They catalog every signed contract. The team provides physicians a variety of ways to easily track their time and expenses. They bill industry partners in a timely manner and make sure correct payment is received. Finally, the team produces all required compliance reports.

Physicians "get in trouble" when these steps are skipped. When they are investigated, the process drags on and become quite painful because the targeted physicians struggle with the basic tasks of documenting and disclosing the work they have done.

It is difficult to argue with the proposition that the collaborations between physicians and industry play a critical role in the advancement of patient care. One of the central purposes of these new laws (i.e., the "Sunshine Act") is to ensure the maintenance of public trust in regards to these collaborations. Many industry partners have already responded to these regulatory changes by establishing procedures to help ensure compliance. Not surprisingly, the ones with whom I have worked also recognize the importance of having sophisticated support mechanisms for physicians. It is now time for physicians to understand that is it not just about hiring a lawyer, but obtaining a comprehensive solution.

Physicians familiar with financial conflict of interest reporting are often uncomfortable with the time tracking and reporting requirements of "conflict of commitment" rules set by hospitals and other institutions that limit time spent on industry collaboration and other outside professional activities.

Primacea has analyzed the outside professional activity policies of twelve leading academic medical centers. Eleven allow faculty physicians to spend up to 20% of their time on outside professional activities. At the twelfth, Johns Hopkins, the allowance is "determined by the department director after discussion with the faculty member."

So what constitutes 20% of a physician's time? The medical center policies specify one day per week (Columbia, Pennsylvania and Yale), four days per month (Duke and Michigan State), 13 days per quarter (Stanford and Washington University) or 48-52 days per year (Baylor, Harvard, UC San Francisco and Washington University in St. Louis).

To help ensure accurate tracking, time spent on outside professional activities should be recorded in your accounting system. Track your "Outside Days" as inventory items. At the beginning of each period, set the Outside Days inventory to the number of allowed days (for example, 52 days at the beginning of each year). Each time you invoice a client, subtract the number of Outside Days spent.

Charitable and non-medical outside activities should not be deemed to consume Outside Days. The same is arguably true for consulting done after hours, on weekends and during vacations (unless your institution specifically limits total consulting days).

For a truly accurate accounting, Outside Days should be calculated as hours spent divided by hours in your actual day. How many hours are in your normal day? Of the twelve institutions we analyzed, only UC San Francisco defines a workday (eight hours); the rest leave it to their physicians. If it's up to you, be conservative. A physician who works from about 7:15 am to 8:30 pm could comfortably define a 12-hour workday. Why is this definition needed? Because spending 4 hours consulting and 8 hours at the hospital should be recorded as one-third of an Outside Day.

Physicians are responsible not only for reporting their time spent on outside professional activities but also for keeping future time commitments within their institutions' allowances. The same accounting system should be used for both of these functions. Whenever you enter into a consulting contract, you should consider entering the time commitment as a sales order for Outside Days into your accounting system. For example, say you agree to participate in a three-day scientific advisory board meeting plus another 12 hours of consulting throughout the year. Record a sales order for four Outside Days.

Whenever you are asked for a "conflict of commitment" report, run an inventory analysis that shows how many Outside Days you have spent, have committed and have remaining.

Following these steps will allow you to both provide required periodic reports and show that you are proactively meeting your institution's time disclosure requirements. In this age of increasing transparency, such disclosures of time spent on outside professional activities will be required of more and more physicians.

According to a study published in the Archives of Internal Medicine, only 14% of physicians provided consulting services to industry in 2009, down from 28% in 2004. The study speculates as to potential causes of the decline: press coverage of physician-industry relationships, changing medical school and hospital policies, increased public reporting of consulting relationships, and/or reduced spending by pharmaceutical and medical device companies.

Two years ago, The New York Times told the stories of leading academic scientists, including a cardiologist, a psychologist and an oncologist, who decided to no longer accept paid engagements with industry. One physician explained his decision as "responding to societal pressure." He noted that he is less willing to collaborate on treatments now that receives no pay for spending weekends on advisory boards, and he concluded "I resent the fact that I had to make this decision."

Several physicians told Primacea of similar feelings: all missed contributing their ideas and experiences to the process of advancing medicine. So why did they reduce or stop consulting? Overwhelmed by changing laws and rules, many concluded that continuing industry engagement wasn't worth the risk to their careers and reputations. Others feared being the next subject of an investigation or newspaper article. One even declined to accept royalties legitimately earned on a breakthrough invention.

Concerned physicians acknowledge that a number of physicians were improperly retained and compensated at times in the past. To the extent that the reduction in physician consulting is due to industry eliminating such inappropriate hiring, these recent changes are positive. However, to the extent that these changes primarily reduce productive physician-industry interactions, more appropriate regulations need to be developed.

Conversations with leading physicians lead me to conclude that the vast majority of the decline in physician-industry interaction can be traced to two concerns: public suspicion about physician motives in working with industry and personal fear about conforming to complex and changing legal, regulatory and institutional requirements. More research is required to better understand this issue from the perspective of physicians.

We must reverse the decline in collaborations between physicians and medical companies. Three things must happen so that physicians may continue their critical role in advancing patient care (as has been acknowledged by physician and industry leaders and is nearly universally accepted). First, the value of such collaborations must be more broadly appreciated. Second, a consensus must be formed as to what constitutes appropriate interactions. Third, processes for certifying ethical collaborations must be instituted.

French hepatologist Yves Benhamou presented research on several drugs being developed by Boehringer Ingelheim and Tibotec at the 2010 American Association for the Study of Liver Diseases meeting in Boston. Shortly afterward, he was arrested by FBI agents and charged with engaging in an insider trading scheme.

Dr. Benhamou, a liver disease expert whose research has been widely published in medical journals, was a country lead investigator and was on the steering committee that supervised a trial for Albumin Interferon Alfa 2-a (Albuferon), a hepatitis C drug being developed by Human Genome Sciences (NASDAQ:HGSI). He also consulted for Abbott, Bristol-Myers Squibb, Gilead, GlaxoSmithKline, Idenix Pharmaceuticals, Roche, Valeant and Vertex according to public filings. At the same time, he provided consulting services through expert networks, companies that charge substantial fees to provide hedge funds and other investors access to healthcare experts.

Dr. Benhamou’s role on the steering committee provided access to confidential information about serious adverse events during Albuferon’s clinical trial, including information about a patient fatality and the occurrence of lung disease in another patient. According to the charges, Dr. Benhamou used his dual roles as an adviser on the clinical drug trial and as a consultant to the hedge funds to provide material, nonpublic information about the drug trial's progress to hedge funds. By selling more than 6 million shares of HGSI before the public disclosure of the adverse events, the hedge funds avoided losses totaling approximately $30 million.

Charged with one count of conspiracy to commit securities fraud and one count of securities fraud, Dr. Benhamou faces a maximum sentence of five years in prison on the conspiracy charge and 20 years in prison on the securities fraud charge. Additionally, in a civil complaint, the Securities and Exchange Commission is seeking a permanent injunction, disgorgement of any ill-gotten gains with prejudgment interest, and a financial penalty against Dr. Benhamou.

In a Department of Justice press release, FBI Assistant Director-in-Charge Janice K. Fedarcyk said: "Dr. Benhamou was the quintessential insider, providing non-public information about the company for which he worked to a hedge fund holding millions of shares in the company. Insider information about the clinical trials of Albuferon was invaluable to the hedge fund, but passing it along wasn't fair, and it wasn't legal."

Manhattan U.S. Attorney Preet Bharara said: "Benhamou is alleged to have abused his position as a medical doctor by illegally tipping off a hedge fund so it could reap a $30 million windfall. As charged, by profiting from his sensitive position and providing the hedge fund an unfair advantage, Benhamou undermined the integrity of the securities market and sold out his employer. This office, along with the FBI and the Securities and Exchange Commission, will continue to pursue professionals of all stripes whose greed motivates them to corrupt the market and betray the companies they advise."

This case illustrates how it has never been more critical for physicians to manage their relationships with industry and the financial world very carefully.

A landmark study of medical journal disclosures found that authors failed to report half of their financial relationships with industry. Conducted at Columbia University's Center on Medicine as a Profession and published in the Archives of Internal Medicine, the study compared disclosures in journal articles with physician payment data from five orthopedic device companies:

Our findings indicate that current journal disclosure policies do not yield complete or consistent information regarding industry payments. More than half of the articles in our sample failed to acknowledge an authors' relationship to a company. In no article could readers know how substantial the company payment to an author was. More stringent journal policies were not associated with greater transparency. Although prominent authorship position and article-payment relatedness were associated with increased disclosure, nondisclosure rates remained high: even when the recipient of company funds was the first, sole, or senior author, only 54% of the articles mentioned the company tie. Similarly, even among articles directly or indirectly related to payments, the disclosure rate was only 50%.

Omissions, misinterpretations and errors in compliance reporting by a number of physicians have led to protracted investigations and a negative impact on public trust. Now that an increasing number of drug and device companies are disclosing payments to physicians—and with the Physician Payment Sunshine reporting provisions of the new healthcare law taking effect March 31, 2013—comparing physician disclosures and industry disclosures will be much easier.

It is easy to predict many more such comparisons.

The availability of industry disclosures of physician payments leads the study authors to conclude that there is "an unprecedented opportunity for the medical profession to move to a system of full, verifiable transparency."

It occurred to us that other medical organizations might also take advantage of company disclosure data. Academic medical centers might use company-supplied data to supplement faculty's conflict of interest statements. Pharmacy and therapeutics committees, as well as other purchasing bodies, might use these data in reviewing members' disclosures. So too, professional medical associations might also refer to company data to examine disclosures by officers, directors, and members who help develop educational activities or formulate clinical guidelines. Finally, governmental bodies might compare these data with the disclosure statements of advisory committee members, study group members, and intramural and extramural researchers.

Physicians are required to provide conflict of interest disclosures to universities, hospitals, journals and medical associations; many of these disclosures have unique formats and requirements.

Get ready for audits to accompany physician disclosures. Physicians now have two choices: (i) Proactively work to develop a disclosure system that more accurately describes their relationships with industry or (ii) do nothing and live with the very negative consequences that arise from flunking.

Discussions with legislators, regulators and thought leaders often brings up the question, "When physicians consult for industry, do they actually help make better products or are they just being paid for marketing?" Medtronic Chairman and CEO Bill Hawkins answers from deep experience, explaining to the press, academia, the public and shareholders that the medical device field depends on physician-industry collaboration.

"I'm hard-pressed to think of any innovation we've had that didn't come from Medtronic working with physicians," he tells The Wall Street Journal. Medtronic innovates at a rapid pace, renewing product lines in its $15 billion business about every three years.

In a Darden Health Care Conference keynote speech, Hawkins noted that the medical technology industry is unique because ideas originate at a patient’s bedside, move to the development bench, then return to the bedside. These ideas have generated more than 14,000 patents for Medtronic.

In an editorial this summer, Hawkins wrote:

Collaboration between physicians and industry remains absolutely critical to the delivery of state-of-the-art health care in this country. The medical-device industry simply cannot develop life-changing products without collaborating closely with some of the world's most highly skilled and innovative doctors and surgeons.

Physicians are the best source of ideas about how to make medical devices like artificial joints, neurostimulators, stents and pacemakers work in the human body after implant. In turn, a skilled medical-device company is the best at building the new designs. Both sides of this innovation team are indispensable in bringing new products and therapies to market to benefit patients.

Hawkins reports to shareholders that "collaboration with physicians and surgeons is vital for innovation and for the health of our industry." He adds that innovation "both starts and ends with the physician, in an ongoing and iterative cycle that fuels rapid and essential product and procedure innovation."

Do physicians actually help make medical products better? According to the head a 60-year-old global healthcare leader that helps more than seven million patients manage their chronic diseases, yes.