Drug, Device Co. Payments to Docs Are Transparent, But Do They Explain the Whole Story?

Bloomberg BNA's Pharmaceutical Law & Industry Report helps you stay informed of regulatory and litigation developments affecting the pharmaceutical and biotech industries....

By James Swann and Madi Alexander

Aug. 23 — Physicians have been receiving payments from drug and device manufacturers for years, covering everything from meals to speaking fees to royalties, but with the advent of the Open Payments program in 2014, the public gained a window into this multi-billion dollar relationship.

With a few clicks on a website, patients can see exactly how much money their doctors received from drug and device companies.

But, some say the publicly available data lack context that explain why companies paid doctors sometimes large sums, making what could be legitimate payments seem questionable and casting doubt on physician-industry collaborations.

The Open Payments program was created by the Affordable Care Act and requires manufacturers of drugs, devices and other medical supplies and group purchasing organizations to report certain payments to physicians and teaching hospitals. The results are published on an HHS website available to the public at https://openpaymentsdata.cms.gov/.

A Bloomberg BNA analysis of the most recent Open Payments data (for calendar year 2015) found that two medical specialities dominate the field when it comes to large payments from drug and device companies.

MedianOpenPayments

Payments to internal medicine physicians totaled $598 million, followed by payments to orthopedic surgeons at $409 million. Combined payments to psychiatrists and neurologists were a distant third at $141 million.

Median total payments to orthopedic surgeons were the highest among all specialists at $3,275, followed by payments to internal medicine physicians at $2,752. Payments to general surgeons trailed in third at $961.

Orthopedic surgeons did especially well in terms of their overall payments, with one physician receiving $38 million and another $19 million from device companies in 2015.

The two physicians, Roger Jackson, an orthopedic surgeon in Kansas City, and Stephen Burkhart, an orthopedic surgeon in San Antonio, Texas, received $38 million and $19 million, respectively, in royalty and license payments.

Payments to orthopedic surgeons were driven by relationships with medical device manufacturers involved with developing new products, resulting in royalty payments that far outpaced other categories of device company payments to orthopedic surgeons. Manufacturers paid $291 million in royalties to orthopedic surgeons in 2015, followed by $58.7 million in consulting fees and $16.6 million for lodging.

But while the Open Payments data show how much was paid to doctors and in, general terms, why they received the payments, the data raise many questions. For example, what was the nature of the consulting that physicians provided in return for the payments, and why did companies pay physicians for lodging?

An initial data release in September 2014 covered the last five months of 2013 and included 4.4 million payments to physicians and teaching hospitals totaling about $3.5 billion (12 PLIR 1384, 10/3/14). The most recent data release was in June and included $6.49 billion in payments for all of 2015, a drop from $7.49 billion in payments in 2014

The Centers for Medicare & Medicaid Services didn't respond to a request for comment regarding the context of Open Payments data.

Helpful to Patients?

The lack of data context extends to all physician categories, including internal medicine, Elizabeth Carder-Thompson, an attorney at Reed Smith LLP in Washington, told Bloomberg BNA. Better information about drug and device company payments to physicians would go a long way to ensuring that the data can be helpful in patient decisions, she said.

“It also would help prevent consumers from forming mistaken impressions that all payments to physicians are inherently suspect,” Carder-Thompson said.

Non-educational speaking fees accounted for $241.3 million of the overall $598 million device and pharmaceutical manufacturers paid to internal medicine physicians in 2015, and Carder-Thompson said the category is akin to a catch-all payment category.

“That may explain why it's the most popular, and the numbers appear high when viewing the large internist group,” Carder-Thompson said.

The number of payment categories is limited, Carder-Thompson, and there's no “other payment” category.

While the CMS suggests that companies should use the “gift” category to report general payments that fit no specific categories, both the pharmaceutical and device industry prohibit gifts to physicians, and “we've cautioned our clients about the poor optics of using “gift” for a nature of payment,” Carder-Thompson said.

Eric Fader, an attorney with Day Pitney LLP in New York, told Bloomberg BNA that internists received the most device and pharma company payments primarily because there many more physicians who are internists than there are in any particular specialty. Open Payments data for 2015 covered 158,451 internists compared to 22,121 orthopedic surgeons, for example.

Kirk Ogrosky, an attorney with Arnold & Porter LLP in Washington, told Bloomberg BNA that without appropriate context, the public can't begin to understand the numbers included in the Open Payments database.

“This current data release does not, nor has it ever, provided enough information for the public to make intelligent judgments about physicians,” Ogrosky said.

Ogrosky likened releasing Open Payments data with no context to viewing claims data with no context.

“For example, a highly specialized cardiac surgeon in a densely populated area who is known by other cardiologists to be the best at a certain procedure may look off the charts until someone actually looks at the claims and her patient base,” Ogrosky said. The cardiologists could be saving taxpayers millions of dollars, yet the public would only know her as a high biller, he said.

SpecialistsOpenPayments
Technical Field

Orthopedic surgery is one of the more technical medical specialties, and as such, has a close relationship with medical device companies that supply everything from hip replacements to spinal implants.

Alexe Page, an orthopedic surgeon in La Jolla, Calif., and chair of the American Academy of Orthopaedic Surgeons' (AAOS) health care systems committee, told Bloomberg BNA that while the payments can be large, they cover a very technical field in which not every physician has the ability to operate. Surgeons with the expertise to operate on patients are more likely to collaborate with the device industry, Page said.

Page said context is needed to distinguish what the individual payments mean.

For example, a majority of the payments to orthopedic surgeons are royalties to physicians who have a role in creating devices, and the CMS should present the Open Payments data in a more meaningful way to highlight this fact, Page said.

“Some doctors are inventors, and they end up monetizing their inventions,” Page said.

Page said relationships between industry and physicians were important for learning about new techniques and treatments, and keeping those relationships going requires money.

Orthopedic spinal surgeons had the highest average total payment per physician ($56,000) in the 2015 Open Payment data, and Page said that was due to the unique nature of the sub-specialty.

Out of the $409 million in payments orthopedists received in 2015, $290.9 million were royalties or licensing fees.

“It's a tough area to treat, and it's heavily driven by implants,” Page said.

Chronic back pain is a fairly common condition, Page said, which drives demand for the surgeries. As a result, physicians who helped invent or develop back-related medical devices have seen larger payments from manufacturers in the form of royalties and licensing fees.

A spokesperson from Stryker Corp., a device manufacturer in Kalamazoo, Mich., told Bloomberg BNA the goals of the Sunshine Act (Section 6002 of the ACA) which created the Open Payments program) are in line with Stryker's “commitment to providing quality products and services to supporting the health and well-being of patients.”

Orthopedic products make up 43 percent of Stryker's total sales, including replacements for hips, knees, feet and ankles.

“By collaborating with physicians, Stryker is able to make health-care better through developing innovative products and technologies and by training and educating health-care professionals on the safe and effective use of our products,” the spokesperson said.

Hands-On Interactions

As device manufacturers work on new procedures and services, collaboration with physicians is critical.

Carder-Thompson said the medical device space is very different from the pharmaceutical arena in terms of level of hands-on physician-industry interaction, especially in regard to orthopedists.

“Patients are the beneficiaries of these high-level professional interactions, but I'm concerned there isn't enough context provided in the Open Payments data to enable a full understanding what's behind the numbers,” Carder-Thompson said.

While the aggregate dollar value of payments may appear significant when viewed in isolation, the individual interactions between physicians and manufacturers are critical to advancing innovations within the orthopedic surgical space, she said.

New Products and Procedures

Carder-Thompson said as new procedures and devices have emerged, many surgeons have contributed significant intellectual property to product development, based on their hands-on surgical experience.

“Compensation for their contributions may involve the payment of a royalty for the creation of a new product, and royalties are generally based on product sales for a pre-determined period of time,” Carder-Thompson said.

For example, royalty payments may have been negotiated years ago and may continue for another 10 years.

In fact, when it comes to royalty payments, manufacturers may have no current interactions with the orthopedic surgeon beyond sending a modest royalty payment and reporting to the Open Payments database, Carder-Thompson said.

Some of the payments to orthopedic surgeons are also attributable to clinical research for which the surgeons serve as principal investigators, while others reflect payments to physicians who launched start-up companies that are later acquired by larger companies, she said.

Additionally, Carder-Thompson said quite a few orthopedic surgeons have direct consulting relationships with device industry, helping to develop product enhancement, formulate surgical protocols and train new surgeons on emerging techniques.

“So there are many different types of interactions with the industry, all geared toward improving products and techniques and enhancing patient care,” Carder-Thompson said.

Context Challenges

Matt Wetzel, vice president and assistant general counsel at the Advanced Medical Technology Association (AdvaMed), likewise told Bloomberg BNA that greater context is an absolute necessity.

While AdvaMed hasn't seen evidence that physicians are pulling back from relationships with manufacturers, some physicians have been wary of having their names listed in the Open Payments database, Wetzel said.

“These payments represent deep clinical insight from physicians concerning complex and nuanced devices,” Wetzel said, a fact that isn't clearly indicated in the existing database.

One problem with the Open Payments program is the small number of categories in which a manufacturer can report a payment, Wetzel said. Manufacturers have a set number of categories to fit payments into, covering:

  •  consulting fees;
  •  compensation for services other than consulting, including serving as faculty or as a speaker at an event other than a continuing education program;
  •  honoraria;
  •  gifts;
  •  entertainment;
  •  food and beverage;
  •  travel and lodging;
  •  education;
  •  research;
  •  charitable contributions;
  •  royalties or licenses;
  •  current or prospective ownership or investment interest;
  •  compensation for serving as faculty or as a speaker for an unaccredited and non-certified continuing education program;
  •  compensation for serving as faculty or as a speaker for an accredited or certified continuing education program;
  •  grants; and
  •  space rental or facility fees.

The current set of categories doesn't cover all the types of payments manufacturers make, Wetzel said, making it hard to provide any context around a payment.

For example, a standard industry practice is to loan equipment to physicians for up to 90 days, but there's no category where such payments can be disclosed and made sense of, Wetzel said, forcing those payments into an unrelated category.

While large payments can appear questionable and even inappropriate, Wetzel said the AdvaMed code of ethic encourages companies to exclude from royalty payments any personal use by a physician of a device for which they receive royalties.

Device manufacturers enter into individual royalties contracts with physicians during which they can set the terms of the royalty payments, such as ensuring a physician doesn't receive royalties for any products they use in their own practice. Excluding a physician's use of a particular device from their royalty payments defuses any question of overutilization, Wetzel said.

“Transparency's here to stay, so the more context, the better,” Wetzel said.

Administrative Burdens

Wetzel said the CMS also should fix some technical issues with the actual reporting system, such as improving the inputting of data and speeding up the dispute resolution process.

The dispute process allows physicians to view any data reported about them and file a dispute if there's inaccurate information. Physicians who register with the Open Payments program have 45 days to review and dispute data before the June publication each year. Once the data are released, physicians can file a dispute through Dec. 31. The annual Open Payments data publication also includes updated data from previous years.

The AAOS' Page also said the dispute process could be improved. The current process can be frustrating and time consuming, she said, requiring physicians to go through the data themselves.

Page also said Open Payments has had an ongoing problem verifying the accuracy of reported payment data.

“The industry really has to keep good track of how the money's spent,” Page said.

Page said she was hopeful that future iterations of the Open Payments program would fix some of the problems.

Moving forward, Wetzel encouraged stakeholders to take advantage of the CMS's request for comments on improving the Open Payment system, which was contained in the proposed 2017 physician fee schedule. Comments are due Sept. 6.

To contact the reporters on this story: James Swann in Washington at jswann1@bna.com; Madi Alexander in Washington at malexander@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.