Medical Device Daily Washington Editor

WASHINGTON — The relationship between doctors and makers of drugs and devices has undergone scrutiny in many quarters, including in the meetings of the Medicare Payment Advisory Commission (MedPAC), which has staked out a position that all financially meaningful relationships should be reported.

On the other hand, commission members quickly shot down a proposal that any transaction with a value of $25 constitutes a meaningful relationship, with one member describing such a threshold as the price of a trip to the local hamburger joint.

MedPAC staff analyst Ariel Winter led off Friday's MedPAC meeting with the remark that "we expect today's session to lead to draft recommendations" to be forwarded to Congress. Winter described relations between drug/device makers and doctors as "pervasive," adding that drug companies spent $7 billion on physician detailing in 2005 and gave free drug samples worth $18 billion the same year.

There are "both benefits and risks" to such relations, Winter said, including that drug and device makers get much-needed expertise, but these relations "may undermine physician objectivity."

He also noted that there is "no mechanism to enforce or report on [the Office of Inspector General] guidelines" that deal with such relations, although five states and the District of Columbia require drug makers to report such relations. Only the Massachusetts law covers device makers as well as drug companies.

One option MedPAC could consider is a national database on such relations, which "could discourage appropriate relationships," Winter said. Some concerns on this would be compliance costs for makers and administrative costs for government, but he also acknowledged that any such laws "might discourage beneficial arrangements" and "would not [entirely] eliminate conflicts of interest."

On the question of how comprehensive such a data system should be, he said one possible low-end threshold for reporting would be for gifts and other perks valued at $25. Large and small makers of drugs, devices and supplies would be included, as would any entities making payments to companies that host continuing medical education sessions, but Winter said monies paid to patient advocacy groups might also be included in reporting requirements.

As for whether a company should be able to withhold data it deems proprietary, he said one policy approach might be to delay reporting "related to development of new products," which could be tied to the date of registration of related clinical trials at the National Institutes of Health web site. Another date might be the date of an FDA approval of the product, but the absolute latest date should be "no later than a set number of years after a payment is made."

As to whether federal law should pre-empt state law on reports of financial ties between doctors and drug and device makers, Winter said one argument "in favor is it would reduce compliance costs for makers." A proposal to allow states to collect data in parallel to federal data collection, even if those states are disinclined to act on those data, would impose the same elevated compliance costs as would be imposed by state-based reporting.

Publication of the data offers a new set of questions to be answered. An Internet-based database that clearly defines payment categories seems an obvious solution, Winter said, but he pointed out a few implementation issues, such as which agency at the Department of Health and Human Services would handle the task. Among the obvious candidates are FDA and CMS, but he reminded the commissioners that "both agencies have funding and resource constraints," and data collection and sorting costs are unknown.

Commissioner William Scanlon, a private health policy analyst, said, "I worry about a threshold that's too low" in reference to the $25 threshold, which he hypothesized would turn out a volume of data that might obscure more important information. As for pre-emption, he said one option would be to make it an administrative move rather than a legal one, possibly alluding to a willingness on the parts of the five states and DC to forgo reporting requirements, even if they left the relevant laws on the books.

Panelist Richard Butler of Rush University Medical Center (Chicago), said, "It gives me a headache to think of reporting everything under the sun" in reference to the $25 threshold, to which Robert Reischauer, PhD, of the Urban Institute (Washington) assented. Reischauer suggested a threshold of at least $100, adding that he would "make sure it's indexed [to inflation] because these things have a way of becoming irrelevant." He also said the threshold of $25 argued that doctors can be influenced "for the price of a hamburger."

As for pre-emption, Reischauer said "my guess is the states will get out of this business if there is an adequate federal law."

Disclosure sought for doctor owners

Winter gave a thumbnail on the potential for conflicts of interest embodied in physician ownership in ambulatory surgical centers (ASCs) and specialty hospitals, noting that the number of specialty hospitals owned at least in part by doctors rose threefold between 2002 and this year. The number of ASCs with a similar ownership was said to have risen by 60% between 2000 and 2006.

The obvious concern is "physician ownership can affect the volume of services," Winter said, but the fact that such arrangements are not made public makes it "difficult for payers and researchers to obtain information on financial relationships."

At present, CMS requires hospitals to report any ownership stake of 5% or more, but the law in question does not provide for public disclosure. Medicare beneficiaries are entitled to know of any ownership stake their doctor has in a hospital regardless of percentage, but such data is not available to CMS or to the general public under the 5% set-point. The rules for ASCs are essentially identical.

Winter said that one option is to force all hospitals and ASCs to report at all ownership thresholds for both CMS and for web publication, and since 5% is already reported, "the additional reporting burden . . . should be minimal."

Commissioner Ronald Castellanos of Southwest Florida Urological Associates (Ft. Myers, Florida) said, "I'm fully in favor of public disclosure," adding that he is "all for transparency. I don't see how it can be any other way." This sentiment was echoed by George Miller of Community Mercy Health Partners (Springfield, Ohio), who said he also saw mandatory disclosure as necessary "across the board."

He alluded to the motive for forming specialty hospitals and quipped, "you never see physicians coming together to open an emergency room."

As for the burden of collecting relevant information, Nancy Kane of the Harvard School of Public Health (Boston) remarked that given the multiple levels of financial participation in the modern American corporate organization, "its going to be really hard to figure out who owns what," and asked what kind of audit capacities will be needed and at what cost. Decoding such organizational structures "adds an enormous cost," so the penalty for running afoul of regulations will have to be substantial to provide a deterrent if the audit capacity is not up to the job.

Offering an alternate vector for information, Michael Chernew, PhD, of Harvard Medical School (also Boston), said the issue might be "which activities should be disclosed by whom," making the case that perhaps doctors ought to do the reporting because the effect of such arrangements is really derived from how large a percentage of the doctor's income is derived from that interest.

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