Medical Device Daily Washington Editor

ARLINGTON, Virginia — The increasing scrutiny of the relationship between device makers and physicians has industry's rapt attention, and yesterday's session hosted by the Center for Business Intelligence (CBI; Woburn, Massachusetts) engaged an audience with a lot of savvy on such issues.

However, one of the speakers opined that the situation is unlikely to let up anytime soon, and urged regulatory affairs staffers to coax their CEOs and presidents along in order to ensure that the importance of compliance with marketing regulations is driven home in the executive suite.

David Vicinanzo, a partner in the government investigations and corporate defense practice at Nixon Peabody (Albany, New York), said the interest of regulators, state and federal, is simple. "What they see, what drives them, is all this money" and "that's what they say, that they have to protect the government's money."

Vicinanzo also said that therapeutic devices and their impact on health "is not their primary interest.

"The tools Congress has given prosecutors are ... sometimes a blunt instrument," and "when you put a company under a microscope, you're going to find something" that is not necessarily criminal in intent but which nonetheless violates a letter of the law, Vicinanzo said. These blunt instruments "are not necessarily the best way to approach" the situation, especially given the "unique relationship between the device industry and doctors."

Vicinanzo also urged those in the audience to get their bosses to such meetings. "Compliance is not going to work without commitment from the top," he said, adding that "the bosses should be coming to these conferences" despite the fact that CEOs and presidents have a huge number of distractions.

"My take-away is ... there is an opportunity to avoid having the government going back into the kind of piecemeal investigations" that characterized the first couple of years of this decade, Vicinanzo said, and foster the realization that "there ought to be something other than the blunt instrument."

However, a little more leadership would help. "Let's see if we can get some CEOs and presidents here next time," Vicinanzo said.

Mark Bonaguro, chief compliance counsel for Covidien (Mansfield, Massachusetts), pointed out that of all the federal agencies, the Department of Health and Human Services is by a good distance the largest in fiscal terms, with a budget "upwards of $800 billion."

Bonaguro reminded the audience that some of the impetus behind anti-kickback laws is the rather large figure attached to the overall HHS budget, and that violation of said laws can result in banning companies from doing business with Medicare and Medicaid. Fines of as much as half a million dollars and jail terms of as long as five years also are available to prosecutors.

"We're going to see more and more individuals prosecuted" in the years to come for questionable transactions with physicians acting in a consulting role, he warned.

The code of ethics written by the Advanced Medical Technology Association (AdvaMed; Washington) has a fair amount of credibility with prosecutors and Congress, Bonaguro said, and firms looking for a compliance strategy could do a lot worse than the AdvaMed code, which the association published in 2004.

"Paying their travel expenses is probably not appropriate," in reference to docs getting general training, he said, but educational grants can be made to the conference sponsor or training institution rather than the attendees' employers to indemnify the device maker. "Companies may provide them with modest meals, receptions and hospitality," as long as any such gatherings "are subordinate in time and focus to the purpose of the conference."

The added perk of a round of golf or a baseball game, on the other hand, is probably not such a good idea. "When the [AdvaMed] code came out in 2004, some people looked at the word 'hospitality' and concluded that sporting events are in," Bonaguro observed, but this is a risky proposition.

Another hang-up to avoid is payment for expense incurred by guests and spouses of the healthcare professional who attends your training session, unless that second party can be demonstrated to hold "a bona fide interest," he said.

The same rules apply should a doctor approach a device maker. Bonaguro used the example of a physician approaching the firm about sponsoring registration fees and travel and lodging costs of the surgeon and three medical students. Bonaguro recommended that the firm put the money into the organization that is hosting or sponsoring the event rather than pay for such expenses directly.

As for sales and promotional meetings with docs on the subject of future products, "it is appropriate to meet with doctors," he said, but "meetings should take place near their place of employment." In much the same vein as for training sessions for existing products, a firm can pay for occasional modest meals and receptions and for "reasonable travel costs ... when necessary," but not for their guests and spouses "without a bona fide interest."

Bonaguro posed the hypothetical situation of whether a representative of a device company can take a doctor who is a personal acquaintance or friend to a baseball game and pay for it out of his/her own pocket. This would be a bad move, he said.

What about firms who are looking for key opinion leader feedback to gauge the market potential of a device that is still on the drawing board or early in development?

Agreements with consultants under those circumstances have to be buttoned down and should specify the services to be provided and reflect "a fair market value for those services." Bonaguro recommended that the valuation should be connected to that physician's expertise "and not on the basis of the volume or value" of referrals that physician might generate, should the device make it to market.

The agreement has to be signed "prior to the start of the services," he said, and firms can still "pay reasonable travel and actual expenses, including modest meals and lodging costs, for performing the service."