[Ip-health] Re: US Medical Device Companies, Kick Backs and Regulation

[Tom Faunce]

Hip bones and hip pockets

Thomas Faunce
March 13, 2008
The Age Newspaper, Australia

Australia's medical device industry needs stricter regulation.

REVELATIONS that US investigations into kickbacks paid to senior surgeons b=
y giant US medical device companies Stryker and Zimmer may extend to Austra=
lia should be deeply troubling for patients, health institution managers an=
d policy makers in this country.

It is undoubtedly true that many genuine evidence-based health innovations =
in medical device technology arise from research undertaken by clinicians w=
ho receive appropriate remuneration, including royalties. Yet the US Senate=
 Special Committee on Ageing has received evidence that last year Zimmer pa=
id $US86 million and Stryker $US40 million directly to surgeons to encourag=
e loyal use of their artificial hip and knee devices. Indeed, last year Zim=
mer and three other large medical device companies paid $US311 million to s=
ettle an investigation by the US Justice Department into no-work consultanc=
y deals with surgeons in return for exclusive use of the paying company's p=
roducts.

Comments by a spokeswoman, reported in The Age, that the Stryker company wa=
s "unaware if its links to Australian doctors would be examined by US inves=
tigators" seem either disingenuous or unduly optimistic given that Stryker =
recently informed investors in a US Securities and Exchange Commission fili=
ng that the US Justice Department's criminal division was investigating the=
 company for possible violations of the Foreign Corrupt Practices Act, whic=
h prohibits US companies from paying bribes overseas.

The Australian Orthopedic Association's Guidelines for Interactions with Me=
dical Device Suppliers 2006 prohibits such surgeons from direct benefits fo=
r implanting prostheses. Such prohibited benefits include shares, options, =
research support and support for travel. The guidelines state that "under n=
o circumstance" should a member "enter into an agreement which links the nu=
mber of implants used clinically with personal or institutional remuneratio=
n or material benefit".

The guidelines require members to disclose to patients such potential confl=
icts of interest and to prohibit product endorsements. Consultancies are pe=
rmitted only if "covered by a legally binding contract which explicitly def=
ines the expectations of the commercial organisation" and is "subject to an=
 annual report". These guidelines confirm that patient safety and wellbeing=
 must not only be, but appear as, the chief priority.

One problem, however, is that multinational device corporations are adept a=
t framing kickbacks as legitimate donations or invitations to bona fide sci=
entific meetings. Another is that despite increasing interest in "full fina=
ncial informed consent", few surgeons have the time or inclination to adequ=
ately disclose any financial involvement in the device they are about to im=
plant.

Furthermore, a decade of systematic underfunding of Australian public hospi=
tals by the pro-privatisation former federal government has forced hospital=
s to seek funds from industry sources. So, too, has the government's push f=
or patents and research grants involving "linkage" between medical academia=
 and industry.

With the Rudd Government having established a Health and Hospitals Reform C=
ommission, and with health-care reform being one of the main points of inte=
rest for the imminent 2020 Summit, it is time for an urgent review of our n=
ational regulatory system in this area.

Why, in Australia, do we never see medical device or pharmaceutical compani=
es paying millions of dollars to government regulators after actions have p=
roven a prima facie case for collusion, kickbacks and other forms of pro-mo=
nopolistic or corrupt practices? Is it that such companies, routinely invol=
ved in such nefarious payments in the US and Europe, are somehow more trans=
parent and honest in this nation?

A more likely answer is the reluctance and/or inability of the Australian C=
ompetition and Consumer Commission to investigate corruption and anti-compe=
titive practices in these industries. Reform of such a watchdog organisatio=
n should be a priority for an Australian government seeking value for healt=
h-care expenditure. This could include so-called qui tam payments under whi=
ch whistleblowers get a percentage of the amount recovered from a successfu=
l large-scale anti-corruption action by a government regulator. Similarly, =
we have a world-class Pharmaceutical Benefits Advisory Committee that evalu=
ates scientific evidence for the objectively demonstrated therapeutic signi=
ficance of new products and passes on recommendations for a price negotiati=
on.

This system is not as finely tuned for cost-effectiveness evaluations of ne=
w medical devices, with the Medical Services Advisory Committee having less=
 evidence to work with and fewer opportunities for hard bargaining over the=
 price offered by industry. Yet the advantages of each state pooling the bu=
ying power of the equivalent of Health Purchasing Victoria are manifest: th=
ere would be much greater leverage over industry to justify price.

Meanwhile, nanotechnology will soon revolutionise both the ubiquity and cos=
t of medical devices in the health-care sector. Regulatory reforms should a=
lso include encouragement for multidisciplinary, collaborative and integrat=
ed projects that not only acquire and publish crucial data about the risks =
of such next-generation medical devices, but channel that data into regulat=
ory structures where experts make objective assessments of the comparative =
"health innovation" value of such products to the community.

The alternative, characteristic of the US health-care system, sees huge man=
aged care corporations controlling pools of doctors required by employment =
contracts, or enticed by kickbacks, to exclusively use products chiefly as =
a service to corporate shareholders.

Dr Thomas Faunce is associate professor at the Medical School and College o=
f Law at the ANU.

This story was found at: http://www.theage.com.au/articles/2008/03/12/12051=
26007207.html


Dr Thomas Alured Faunce
BA LLB (Hons) B Med. PhD.
Assoc. Professor, College of Law
Assoc. Professor, Medical School, College of Medicine and Health Sciences
Director, Globalization and Health Project
Board Member National Biosecurity Centre
Australian National University
Ph: 61 2 61253563
Fax:  61 2 61253971