The Medical Industry's Practice of Giving Gifts to Doctors
How Should the Law and Professional Regulations Address It?

By GEORGE KANABE

Tuesday, Jan. 13, 2004

As part of their multi-billion dollar marketing efforts, many companies in the medical industry give gifts to doctors. They do so in order to gain a competitive edge: For the companies, doctors' choices are key. Nearly two-thirds of all patient visits in the United States end with the doctor writing a prescription. And for the medical industry, doctors' prescriptions control sales.

Gifts to doctors may have negative effects. For instance, a doctor may be swayed by a gift to prescribe a medicine that is not the one he or she would otherwise judge to be medically superior. And companies may pass on the cost of gifts to patients by charging higher prices.

Recently, the American Medical Student Association has called for an end to all gift giving, including free meals, sponsored education, and paid speaking events. That solution, in my view, is too drastic. Some gifts to doctors -- such as company sponsorship of Continuing Medical Education programs -- can legitimately contribute to medical education, and therefore, the well- being of patients. Similarly, sponsored meals at medical conferences can provide an opportunity for doctors to exchange important information relating to recent advances in medical care.

But clearly, this is an area in which serious reform is necessary. In particular, there is a need for enforceable regulations, and proper oversight to ensure compliance with them. There is also a need for better education for medical students and doctors regarding industry influences.

Gift-Giving to Doctors: The Forms It Takes

Small gifts, often referred to as "reminder items," have long been a cornerstone of medical industry marketing. For example, ballpoint pens, note pads and other similar types of items -- often with engravings of the company name or product being promoted -- have frequently been provided to doctors by company detailers. (Detailers are representatives whose job is to visit doctors' offices, and offer specific information about the company's products in the hope doctors will opt to buy, or prescribe, them.) Free drug samples have also been commonly provided to doctors as part of various companies' marketing efforts.

In addition to making office visits, companies also often provide doctors with gifts in order to convince them to meet with detailers and listen to their information. These gifts may include free lunches or dinners that also sometimes include a small -- for instance, $100 -- honorarium.

More lavish gifts have taken the form of paid vacations, airline travel miles, and even money payments tied to the number of prescriptions for a product written by the doctor. (As I will discuss below, this last type of payment, in some instances, may be an illegal kickback.)

Companies may also choose to fund continuing medical education (CME) programs directly, or to provide subsidies for doctors to attend such programs. Such conferences are often held in desirable locations, and include entertainment and other perks. If the sponsoring company can select the program's speakers, it can ensure that certain views and preferences are communicated to the doctors the company wants to influence.

Finally, industry commonly funds clinical research. And in recent years, doctors and other researchers have only become more dependent on this type of gift, because funding from the federal government has dwindled.

How Gifts Can Affect a Doctor's Ability to Provide Objective Treatment

The problem with such gift-giving is that it runs the risk of jeopardizing a doctor's objectivity in treating a patient. It does so by creating an underlying feeling of obligation, whether conscious or not, on the part of the doctor, toward the company providing the gift.

When a gift is received, the doctor may associate positive feelings about the gift with feelings about the company's product. Studies have shown, for example, that industry interactions (such as gifts, conference invitations, and the like) correlate with doctors' preferences for new products -- even when those products hold no demonstrated advantage over existing ones. In addition, such interactions have been proven to result in a decrease in doctors' opting to prescribe generic drugs, as opposed to higher-priced name brand versions.

There is also cause for concern that the practice of gift-giving can result in doctors treating patients based on misinformation. For example, studies from several countries indicate that 80-95% of doctors regularly rely on information provided by detailers while promoting certain products. Unfortunately, the studies also show that this information is generally overly positive, and that prescribing habits are less appropriate as a result.

Industry's sponsorship of CME programs raises similar concerns. For the sponsoring company, there is a potential conflict between objectively informing doctors of the latest medical advances, and providing skewed information supportive of the company's financial goals. Such conflicts are especially likely to exist when the company pays the conference's speakers, and the speakers spend a majority of their time discussing that company's products.

The risk of influencing the doctors is real: Data suggests that doctors attending such courses later prescribe the sponsoring company's products more often than they do competing drugs.

How the Practice of Gift-Giving Can Result in Increased Health Care Costs

The practice of gift-giving can also result in increased health care costs for a patient. For example, it can influence a doctor to select an expensive drug when a cheaper, equally effective alternative -- perhaps a generic version -- is available. Almost seventy-five percent of the drugs prescribed in the United States are paid for by patients out-of-pocket -- so it is likely that the patient will be the one picking up the tab.

The price of gift-giving can also be passed on to the patient because companies are likely to raise the price of their drugs to account for marketing costs -- including gift-giving. Medical product demand is more or less inelastic -- that is, a change in price does not generally affect demand for the good. If the drug's price rises, the patient has no choice but to pay, if he or she wants to get better.

Such added costs seem particularly objectionable considering that pharmaceutical price inflation was six times that of the general rate of inflation for the period of 1980-1992. The pharmaceutical industry is not exactly hurting for profits.

The AMA and PhRMA Guidelines on Drug Promotion

Plainly, gift-giving as it now stands is a problem. But how should the problem be solved? To begin, it's important to note that professional associations' standards have so far proven ineffective.

On December 3, 1990, the American Medical Association ("AMA") adopted an extensive set of general guidelines for drug promotion. Three days later, the Pharmaceutical Research and Manufacturers of America ("PhRMA") adopted identical provisions.

Among other things, these guidelines indicated that gifts to doctors from industry should primarily entail a benefit to patients, and should not be of substantial value (including the value of meals and entertainment). They also recommended that cash reimbursements should not be accepted directly by doctors to underwrite the costs of attending a CME program. In addition, they stated that gifts directly or indirectly connected to prescribing patterns are not to be accepted by doctors under any circumstances.

More specific AMA advice followed. For example, in December 1993, the AMA's Council on Ethical and Judicial Affairs (CEJA) issued an opinion indicating that the education value of a CME program alone must be the main reason a doctor chooses to attend, and that presenting faculty should not be influenced in their presentations by the event's financial supporters. In addition, the opinion stated that all conflicts of interest are to be disclosed fully to the audience of the CME program, and that promotional activities are to be clearly identified as such to everyone involved.

Initially, the response to the AMA guidelines was relatively positive. Many companies ceased providing remuneration for prescription writing, and also canceled CME conferences that were not strong enough to attract doctors willing to pay their own travel expenses. Extravagant promotional dinners were also abandoned.

Nevertheless, many questionable gift-giving practices have recently returned -- probably because the guidelines, in the end, are mostly unenforceable; compliance, in the end, is voluntary. (Indeed, even AMA membership itself is not required for doctors to practice medicine.)

The Current Law on Kickbacks In the Medical Profession

There is one federal criminal law relevant to medical industry gift-giving: The Medicare Fraud Statute. It specifically prohibits the solicitation and payment of kickbacks -- for instance, payments by a company of a portion of a drug's purchase price to the prescribing doctor, in order to influence the doctor's current or future prescribing habits.

But the law only covers goods and services paid for by Medicare or Medicaid -- not those funded by other federal programs, or by private insurers. And even when the statute does apply, it may be hard to enforce, for kickbacks can be disguised as part of "drug validation studies" and similar ostensibly legitimate programs.

In April 2003, the U.S. Office of the Inspector General of the Department of Health and Human Services (HHS) -- which has jurisdiction over violations of the Medicare Fraud Statute -- issued a new Compliance Program Guidance for Pharmaceutical Manufacturers. The Guidance warned that some industry practices, including gifts and paid consulting arrangements, might violate federal anti-kickback laws. In addition, the Guidance required that drug companies fund CME programs from the company's grant providing, not marketing, divisions.

Nevertheless, once again, as is true with respect to the AMA guidelines, adherence to the HHS Guidance is voluntary. Granted, those who violate the Guidance may be more likely to be investigated and prosecuted for breaking federal fraud and kickback statutes. But at the same time, a violation of the Guidance does not automatically establish a violation of the law.

Enforceable Regulations and Proper Oversight Are Necessary

What else should be done, then, to curb gift-giving abuses?

To begin, new solutions must be mandatory and enforceable -- not voluntary and optional. In addition, oversight must be provided to ensure that compliance actually occurs. Thus, Congress should pass legislation explicitly empowering the FDA, FTC and/or other agencies to regulate industry detailing and gift-giving practices.

In addition, state-level solutions should be considered. For instance, many states already have, or are considering, laws that would require pharmaceutical companies to declare all gifts in excess of $25 to doctors, pharmacists, hospital administrators or anyone else authorized to write prescriptions.

Vermont has such a law in place, while California proposed such a bill in March, 2003. Connecticut, Maryland and Washington are also each considering similar laws.

Such disclosure laws are a good idea, for they may provide a way to flush out improper gifts that amount to kickbacks or represent other abuses. But they are not enough: Conflicts of interest, too, should be fully disclosed.

And some such conflicts should simply be prohibited. Currently, companies that fund CME programs often also help prepare the curriculum, recommend and pay the speakers; indirectly pay medical students and doctors to attend; and then promote the company's products at the program. That is inappropriate. So are lavish perks that shift the programs' focus from providing information for doctors to providing incentives for doctors to prescribe certain products over others.

State medical licensing boards should also do their part. They should make clear that accepting kickbacks, or other improper gifts, can and will be sanctioned -- as "character unbecoming of a physician," or a similar, separate offense.

Educating Doctors About the Dangers of Receiving Gifts

Finally, doctors should be educated about the risks of receiving gifts. Recent studies indicate that they continue to hold "fairly lenient views" on the ethics of accepting gifts from industry. (Indeed, detailers sometimes find it difficult to gain access to doctors without providing something in return!) Interestingly, one study found that while 85% of medical students believe it is improper for politicians to accept gifts, only about 46% feel that it is improper for doctors to accept gifts of similar value from industry.

Doctors may fervently believe that they, personally, would never be influenced by such a gift. But the fact is that studies show doctors as a group are influenced -- and that means some individual doctors must be.

This point must be made clear -- and medical students, medical residents, and other doctors must be properly educated about how effective industry marketing can be, even when that effect is not directly perceptible.

Doctors can also be trained to more critically appraise detailers' presentations. One form of such training is "counter-detailing" -- in which a clinical pharmacist or other qualified individual critiques a detailer's presentation for inaccuracies and biases.

It's time to impose real, mandatory regulation of the medical industry's practices of giving gifts to doctors. Without such regulation, these practices will continue to jeopardize the integrity of the medical health care system, and even put patients at risk.


George Kanabe is a second-year student at Fordham Law School.

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