What’s going on? For a variety of reasons, the promotional activities of drug and device companies—and the responses of health care professionals to these promotions—are under close scrutiny from enforcement sources. In part, this stems from the expectation, premature as it turns out, that more pharmaceuticals would be eligible for Medicare reimbursement, making inflated drug costs a direct cause of federal concern. The increased prevalence of formularies and group purchasing organizations also has caused intense examination of how particular manufacturers’ products are chosen. Finally, the competition among drug companies to inform physicians’ prescribing habits may on occasion lead to a perception of undue influence, as the inducements increase from a free prescription pad to a consultant contract worth thousands of dollars.

Regardless of the cause, the attention has arrived. Physicians and hospitals should acquaint themselves with the various initiatives under way and review their own practices against the ever-stricter standards.

The TAP Settlement

TAP Pharmaceuticals, a joint venture of U.S.-based Abbott Laboratories and a Japanese company, was the subject of a four-year investigation into the marketing of Lupron, its drug used to treat prostate cancer and infertility. Two schemes used by TAP drew the most attention. TAP provided free samples of Lupron to physicians who in turn sought Medicare reimbursement for administering the free sample. (While most prescription pharmaceuticals are not reimbursed by Medicare, Lupron is administered by the physician, and so is reimbursable.) Second, according to the government, TAP inflated the "average wholesale price" (AWP) of Lupron so that the physician’s Medicare reimbursement, which was based on the AWP, not the average sales price, would be higher. The free samples and the reimbursement spread were alleged to induce physicians to prescribe Lupron over its competitor, Zoladex.

The government also charged five doctors in connection with TAP’s activities. The doctors were alleged to have conspired with the company to receive excessive Medicare reimbursements. Four of the five doctors have pleaded guilty and are awaiting sentencing.

The probe began when the medical director for pharmacy programs at Tufts Health Plan in Massachusetts alerted the U.S. Attorney in Boston that he had been offered a $65,000 "educational grant," to be used for any purpose, to switch the plan from Zoladex to Lupron, as well as the opportunity to be reimbursed by the government at a price higher than that paid to TAP. Ultimately, TAP also was charged with giving physicians trips to expensive golf and ski resorts, free consulting services, medical equipment and forgiveness of debt. The legal claims included conspiracy to defraud Medicaid, conspiracy to violate the Prescription Drug Marketing Act (by causing free samples to be illegally billed to the Medicare program) and violations of the federal anti-kickback statute.

In addition to the record-setting financial payment, TAP agreed to a sweeping seven-year Corporate Integrity Agreement. In addition to the customary provisions of a compliance program, the CIA requires annual review by an independent consultant of all of TAP’s sales and marketing-related activities, which include paying physicians for consulting, speaking and other advisory arrangements; sponsorship of speaking engagements, meetings or other events; educational or research grants; third-party advice about reimbursement or claims submissions; and gifts, payments for business courtesies, customer assistance programs, debt forgiveness or reduction and free samples. TAP’s drug price reporting and documentation also must undergo independent review.

AMA Initiative

Even before gifts to doctors raised significant anti-kickback concerns, some observers perceived ethical issues in the symbiotic relationship between physicians and the suppliers of pharmaceutical products. In 1990, the AMA’s Council on Ethical and Judicial Affairs (CEJA) created guidelines regarding gifts to physicians from industry. The guidelines were adopted by the AMA; however, by the late 1990s, they were largely ignored by physicians and industry representatives. In 1999, an AMA task force recommended raising awareness of the guidelines among physicians. To fill this need, the AMA convened the Working Group for the Communication of Ethical Guidelines on Gifts to Physicians from Industry. The group includes more than 30 members, representing physicians, corporations, medical associations, government, industry and others.

The AMA initiative has been criticized for accepting funding and staff from pharmaceutical manufacturers and other industry sources. While this situation is not without irony, the issue is of prime importance to both the provider and the industry side. Not only does each hope to avoid the appearance of impropriety that may result from expensive gifts or cash payments to physicians; they also hope to avoid running afoul of government regulations that would interpret a gift as a potential kickback.

The guidelines do not attempt to ban all exchanges of value between industry representatives and physicians. Manufacturers have a right to responsibly advertise and promote their products, most of which are of significant benefits to patients. The guidelines do, however, recognize that gift-giving can go too far, and seek to prohibit gifts that are unrelated to improving the physicians’ understanding of their patients’ conditions and cures. And while the guidelines are not binding, providers could find the guidelines cited in the enforcement or litigation areas as industry standards to be followed.

Office of Inspector General’s Anti-Kickback Standards

In 1994, the OIG issued a Special Fraud Alert regarding the anti-kickback law’s application to prescription drug marketing programs. The alert stated that "patients may now be using prescription drug items, unaware that their physician or pharmacist is being compensated for promoting the selection of a specific product." OIG cited such conduct as payments by drug companies to pharmacies that converted a prescription from one brand to another, frequent flier miles provided to physicians for completing a form showing that a new patient was placed on the company’s drug, and a research grant program that rewarded physicians with substantial payments for minimal recordkeeping tasks.

The OIG described as potentially improper gifts or payments (1) made to a person in a position to generate business for the paying party; (2) related to the volume of business generated; and (3) more than nominal in value or unrelated to any service other than the referral of a patient. The OIG threatened investigations of gifts of any kind in exchange for prescribing a particular product, and grants to physicians and clinicians for studies of prescription products when the studies are of questionable scientific value and require little effort.

Under some circumstances, remuneration to physicians can fall within one of the "safe harbors" published by HHS to protect permissible conduct that would technically violate the anti-kickback statute. Safe harbors for personal services and management contracts are sometimes appropriate if the manufacturer pays the physician for legitimate services that can be described in a written agreement, and the compensation is unrelated to the volume or value of the manufacturer’s product used by the physician. For a safe harbor to apply, all criteria for inclusion must be met.

Prescription drug marketing is once again near the top of OIG’s agenda. In its 2002 Work Plan, the OIG specifies: "We will evaluate the extent of gifts and payments to physicians from pharmaceutical companies. The pharmaceutical industry currently spends about $12 billion a year on marketing to physicians, and some of these gifts may present an inherent conflict of interest between the legitimate business goals of manufacturers and the ethical obligations of providers to prescribe drugs in the most rational way."

In particular, the OIG will be examining any type of arrangement between a seller and a buyer or prescriber of pharmaceutical products to determine whether it contains overt or disguised incentive payments to prescribe a particular manufacturer’s product.

AMA Ethical Opinion on Gifts to Physicians From Industry

The AMA’s Ethical Opinion E-8.061 is endorsed by the Working Group for the Communication of Ethical Guidelines on Gifts to Physicians from Industry and forms the basis for the AMA initiative. The basic principles of the initiative are:

• Gifts accepted by physicians should primarily benefit patients and be of minimal value (such as textbooks, modest meals and other gifts serving an educational function). No cash payments. No free drug samples for personal use.

• Individual gifts of minimal value related to the physician’s work, such as pens and notepads, are acceptable.

• Conferences or meetings must be primarily dedicated to scientific and educational activities. Industry support should be disclosed.

• Industry subsidies to underwrite the cost of conferences and meetings are permissible, but should not be given directly to physicians; instead, any subsidy should be accepted by the conference sponsor who can use the money to reduce the registration fee.

• No industry payments for the cost of travel, lodging or other personal expenses or time of physicians attending conferences should be accepted. Faculty may receive reasonable honoraria and reimbursement for expenses. Token consulting or advisory arrangements should not be used to justify paying physicians for travel, lodging or other out-of-pocket expenses.

• Industry may provide funds to support students’, residents’ or fellows’ attendance at major conferences.

• No gifts should be accepted if there are strings attached.