Senate Bill Would Monitor Medtech Payments to Doctors

Douglas C. Limbach

September 1, 2007

6 Min Read
Senate Bill Would Monitor Medtech Payments to Doctors

Earlier this month, U.S. Senators Charles Grassley (R–IA) and Herb Kohl (D–WI) introduced new legislation that would impose greater scrutiny over payments to doctors by medtech and pharmaceutical firms. Known as the Physician Payments Sunshine Act (S. 2029), the proposed bill would require drug and device manufacturers to file quarterly reports listing all payments and gifts to doctors with a value of $25 or more.

The extensive list of payment types that manufacturers would be required to report includes honoraria, research funding, consulting fees, continuing education fees, travel to conferences, and others. Full disclosure requirements would apply whether the payment was made directly or indirectly through an agent, subsidiary, or other third party.

The bill would mandate reporting of all such payments by companies with annual revenues of $100 million or more, and directs the secretary of Health and Human Services to create a Web site for posting payment information "in a clear and understandable manner." Companies would be required to file payment reports on a quarterly basis, as well as an annual summary report. Failure to comply with the reporting requirements would result in a fine of $10,000 or more for each infraction.

The proposed reporting requirements would not apply to the financing of clinical trials or the value of sample products, which are commonly distributed by drug companies.

Grassley:Much-needed transparency.

"This legislation will bring much-needed transparency to the financial relationships that exist between the drug and device industries and doctors," said Grassley, who is the ranking Republican on the Senate Finance Committee. "Drug and device companies spend billions and billions of dollars every year marketing their products. A good amount of this money goes directly to doctors in the form of these payments."

Grassley expressed outrage at the amounts that drug and device companies are believed to pay to doctors and the resulting influence over prescription patterns. "Payments to a doctor can be big or small. They can be a simple dinner after work or they can add up to tens of thousands and even hundreds of thousands of dollars each year. That's right—hundreds of thousands of dollars for one doctor. It's really pretty shocking," he said.

"Companies wouldn't be paying this money unless it had a direct effect on the prescriptions doctors write, and the medical devices they use," Grassley continued. "Patients, of course, are in the dark about whether their doctor is receiving this money."

Kohl: Disclosureas a test of truth.

Kohl currently serves as chairman of the Senate's Special Committee on Aging. Last June, he chaired a hearing to explore the financial relationships between physicians and the pharmaceutical industry. When introducing the proposed legislation, Kohl noted that drug and device manufacturers assert that their payments and gifts to physicians are appropriate. "If that is the case, full disclosure will only serve to prove them right," he said.

Senator Charles Schumer (D–NY), a co-sponsor of the proposed legislation, said, "This bill will shine a much needed ray of sunlight on a situation that contributes to the exorbitant cost of healthcare. Patients have the right to know if drug and device makers are attempting to influence physician prescribing decisions with gifts, consultations, and travel."

Other cosponsors of the proposed legislation include Senators Claire McCaskill (D–MO), Amy Klobuchar (D–MN), and Ted Kennedy (D–MA). No similar legislation has yet been introduced on the House of Representatives' docket.

Schumer: Patients' right to know.

"This bill is not all that surprising," says Alison Tanchyk Dante, an associate with the law firm of Morgan, Lewis & Bockius LLP ( Philadelphia). "We know that the Justice Department has stepped up its scrutiny of drug and device manufacturers with regard to their financial relationships with doctors, and it now appears that Congress intends to assert its oversight in this arena as well."

Even so, passage of the proposed legislation in its current form is not considered a slam-dunk. "Given the enormous scope of financial arrangements and educational and marketing activities covered by the bill, I suspect either the disclosure requirement would have to be narrowed or the number of exceptions expanded for the bill to become law," says Richard S. Liner, an associate in the healthcare practice of Arent Fox LLP (Washington), whose clients include medtech companies.

"Not only may the pharmaceutical and medical device industries react to the administrative burden created by the bill," says Liner, "the physician community may very well object to the federal government creating a Web site that lists the names and addresses of every physician or group practice that receives $25 or more in value from a covered company, without regard to the legitimacy of such remuneration."

Dante: Scrutinynot surprising.

Liner believes that some of the bill's provisions conflict with current and well-established statutes. "Given that most of these financial relationships are perfectly lawful and, in many cases, integral to the advancement of physician education and patient care, the reported information may be misleading to the public and may confuse, rather than improve, patients' ability to direct the course of their healthcare," he says. "It will be interesting to see how the medical device and pharmaceutical industries respond once they have had a chance to digest the bill and its possible ramifications."

Laws requiring life sciences companies to publicly disclose payments to doctors are already on the books in the District of Columbia and several states, including Maine, Minnesota, Vermont, and West Virginia. Most of these laws are directed at drug manufacturers rather than device manufacturers, and they typically do not provide for a Web site for easy access to the reported information. Grassley's home state of Iowa is expected to enact a physician payments disclosure law in the near future.

Leahey: Potentially burdensome reporting.

A spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA; Washington, DC), expressed the willingness of drug manufacturers to provide greater transparency, but added, "A new law is not necessary when pharmaceutical marketing is already heavily regulated by the FDA."

So far, medtech industry reaction to the proposed legislation has been limited and reserved. Industry association AdvaMed ( Washington, DC) said it is carefully reviewing the bill's provisions and potential implications. Mark Leahey, executive director of the Medical Device Manufacturers Association (MDMA; Washington, DC), said much the same, but added, "While we welcome the call for greater transparency, we are concerned about the burdensome reporting systems that this bill may require."

Addressing the expected concerns of manufacturers regarding the reporting provisions of the bill, Grassley said, "Companies already have this information available. We aren't requiring them to go out and obtain it—we're just asking them to share it with the American people. This bill is careful not to burden small businesses—it applies only to companies with annual revenues over $100 million. It is the largest companies who are driving this practice, and for whom disclosure would be least burdensome."

The complete text of the bill, which has now been referred to the Senate Finance Committee, is available via

© 2007 Canon Communications LLC

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