Survey: Medtech Companies Meeting Challenge of Ethics Standards

April 1, 2007

6 Min Read
Survey: Medtech Companies Meeting Challenge of Ethics Standards

Results of a recent survey indicate that while medical device companies are making progress toward compliance with industry standards for sales and marketing ethics, they are also continuing to encounter challenges along the way.

The new survey is a follow-up to a 2006 survey among medical device companies that revealed overwhelming acceptance of industry's Code of Ethics on Interactions with Health Care Professionals. Industry association AdvaMed developed the code in 2003 in order to promote a high standard of ethical conduct by companies in the medical technology industry.

The 2007 survey benchmarks the code's effect on firms' internal operations and the challenges that medical device companies face in fully complying with the code's standards. The survey was conducted by PricewaterhouseCoopers LLP (New York City) in conjunction with the law firm of King & Spalding LLP (Washington, DC) and Compliance-Alliance LLC (Arlington, VA). Results of the survey were presented at the Medical Device Regulatory, Reimbursement, and Compliance Congress, held on the campus of Harvard University at the end of March. Highlights of the survey results included the following.

  • Implementing the AdvaMed code had no negative impact on (82%) or actually improved (10%) most companies' financial results.

  • The AdvaMed Code is of high or medium relevance in shaping compliance policies at 83% of respondents' companies.

"One of the most noteworthy survey findings is that 92% of respondents said that implementing the AdvaMed code had no negative impact on their companies' financial results and, in some cases, actually created improvements," said Peter Claude, a partner in the PricewaterhouseCoopers pharmaceutical and life sciences advisory practice. "This has to be a relief for companies questioning whether a full-blown adoption would either over-burden their cost structure or hamper their competitiveness. On the other side, there appear to be some significant regulatory, market, and internal challenges for companies to overcome before they can fully implement the code."

Respondents cited several specific challenges to implementing a comprehensive compliance program, including the following.

  • The absence of clear, industry-specific guidance from regulatory and enforcement agencies regarding the legality of sales and marketing activities and other manufacturer-customer relationships.

  • Continued resistance from certain physicians and institutional customers against compliance with legal requirements and industry codes of conduct.

  • Lingering management questions regarding the business impact of tightening sales and marketing policies, particularly when the rules are unclear and competition is intense.

  • A belief that government agencies do not give sufficient credit to companies that adopt strong compliance programs that incorporate monitoring and auditing activities.

"In order for device companies to successfully meet these challenges, the key stakeholders—the medical technology manufacturers, AdvaMed, physician professional societies, and the regulatory and enforcement agencies—must form a meaningful partnership to create an environment that promotes and encourages ethical business behavior in a competitive environment," Claude said. "There is a clear cry for the government to help level the playing field by providing medical device industry-specific guidance around the activities deemed noncompliant while applying equal and visible enforcement toward those who solicit or accept noncompliant benefits."

Survey respondents offered concrete examples of a number of areas in which additional regulatory guidance would be particularly useful.

  • The appropriate circumstances for bundling of goods or services.

  • When free goods may or may not be provided.

  • The appropriate use of data from postmarket studies without violating off-label promotion rules.

  • Guidance on the payment of royalties to physicians or others who often are the inventors of medical devices.

  • Guidance on the difference between formal claims, indications, and clinical applications.

  • A better definition of what constitutes unlawful marketing activities for in vitro diagnostics.

  • A method for determining how to establish whether a gift or payment is reasonable.

In presenting the results of the survey, the authors indicated that it should not be difficult for government agencies to offer guidance in at least some of these areas. They suggested, for example, that guidance could be issued that would describe the methodologies a manufacturer could use in determining reasonable compensation for services provided by physicians where the service rendered results in the creation or improvement of a device. Manufacturers that relied on such methodologies would be presumed to have acted in good faith.

Respondents to the survey reported that they continue to implement the AdvaMed code and enhance their sales and marketing compliance functions through activities such as training, monitoring, and auditing.

  • More than two-thirds of respondents (72%) said their companies audit for compliance with the AdvaMed code. Among these, more than 75% said internal personnel handle the audits.

  • Nearly half of the respondents (47%) said their companies had hired additional staff to implement the AdvaMed code; 25% reported adding two or more full-time equivalents to support code implementation.

Bentivoglio: Parallel tracks to compliance.

"The results of this survey demonstrate that device companies should pursue a two-track compliance strategy," said John T. Bentivoglio, cochair of King & Spalding's FDA and healthcare group. "Companies should work with AdvaMed and others to secure additional guidance from key regulatory agencies, while moving ahead on their own to address emerging sales and marketing risk areas, including educational and research funding, reimbursement support, and off-label promotion."

In their report on the survey results, the authors identify specific steps that each group of stakeholders could take to improve compliance with and beyond the AdvaMed code. "More guidance from regulatory agencies, while welcome, is unlikely to be quickly forthcoming or sufficiently detailed to establish a perfect roadmap to fraud and abuse compliance by industry," the authors report. In the interim, they suggest, modest investments of time and resources by each group would go a long way toward improving sales and marketing compliance efforts within the device industry. The authors recommend that industry stakeholders take action in the following areas.

  • Expand sales and marketing compliance policies beyond activities specifically set out in the AdvaMed code.

  • Enhance controls around the highest-risk activities, including consultants, speaker programs, and educational and research funding.

  • Take steps to ensure sales compensation, performance evaluations, and accountability mechanisms strike the proper balance between sales performance and compliance requirements.

  • Increase the level and intensity of sophisticated training for personnel in key activities such as sales, marketing, pricing, and contracting.

  • Implement or expand compliance monitoring and auditing as a standard part of overall compliance programs.

  • Develop accepted methodologies for the determination of fair market value, possibly in consultation with the U.S. Department of Health and Human Services Office of Inspector General.

  • Work with leading medical centers to develop guidelines and enhance education about proper interactions between industry, physicians, and other customers.

The presentation, "2007 Medical Technology Industry Benchmarking Survey: Discussion of Survey Results," is available from the Web site of the Medical Device Regulatory, Reimbursement, and Compliance Congress at A complete copy of the report, Challenges of Complying with the AdvaMed Code: Analysis of the 2007 Medical Technology Industry Benchmarking Survey, is available via the PricewaterhouseCoopers Web site at .

© 2007 Canon Communications LLC

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