OIG Cautions Drug Industry on Relationships with Physicians

by Susan M. Pettey, JD, MPA

New draft government voluntary compliance guidelines for pharmaceutical companies pinpoint practices that could be considered illegal under federal fraud and anti-kickback laws. Of particular concern to long-term care physicians is the focus on relationships of drug makers and their representatives to physicians, pharmacists, and pharmacy benefit managers.

The major impact could be less pharmaceutical funding for physician education and research. Pharmaceutical companies have generously supported educational programs for physicians, and stepped in to supplement research money when other funding sources have dwindled. Such relationships will have to be re-examined in light of the new OIG guidelines.

The guidelines were published in October 2002 by the Office of the Inspector General for the Department of Health and Human Services (oig.hhs.gov/fraud/complianceguidance.html). They arose largely from government concerns about the increasing costs of prescription drugs and the impact that marketing is having on price increases, and are similar to guidelines developed for other health care providers, including requirements for a compliance officer and compliance committee, written policies and procedures, effective training and education, effective lines of communication, internal monitoring and auditing, and prompt corrective action.

In addition, the OIG underscored that some pharmaceutical companies and their agents participate in suspect arrangements that offer benefits, directly or indirectly, to physicians or others who are in a position to make referrals. Cited as arrangements that potentially involve the anti-kickback statute are:

• Entertainment, recreation, travel, meals, or other benefits in association with information or marketing presentations.
• Sponsorship or other financing related to third-party educational conferences and meetings attended or taught by physicians or others in a position to generate or influence referrals.
• Scholarships and educational funds.
• Grants for research and education.
• Gifts, gratuities, and other business courtesies.

In discussing the hiring of physicians as consultants or researchers, Inspector General Janet Rehnquist acknowledged that some such arrangements may be legitimate. But she noted that they "pose a substantial risk of fraud and abuse."

PhRMA Code

The OIG guidelines cite the voluntary code of the Pharmaceutical Research and Manufacturers of America (PhRMA) as a good starting point for compliance regarding these practices (see www.phrma.org and "Docs & Drug Company Reps: Reforms Underway" in the December 2002 issue of Caring, p. 1). The OIG recommends that, at a minimum, pharmaceutical manufacturers comply with the PhRMA Code standards.

In reviewing the types of arrangements described above, the OIG recommends considering whether a particular gift or benefit:

• Was made to influence the provision of increased business for the drug maker or representative.
• Takes into account, directly or indirectly, the volume or value of business generated.
• Is more than nominal in value and/or exceeds the fair market value of any legitimate service rendered to the payer.
• Is unrelated to services other than the referral of business.

The OIG notes that in many instances, legitimate arrangements can be created under a safe-harbor provision, such as that for personal services and management contracts or employment. Such arrangements are deemed to be immune from sanction under the anti-kickback rule (see 42 CFR 1001.952).

A fundamental consideration is that payments to health professionals for services should be priced fairly and at market value for the services rendered. Pharmaceutical manufacturers are warned to document the fair market determination, as well as the actual performance of services.

While encouraging adoption of the PhRMA code, the OIG notes that "...arrangements that fail to meet the minimum standards set out in the PhRMA Code are likely to receive increased scrutiny from government authorities"; however, "compliance with...the PhRMA Code will not necessarily protect a manufacturer from prosecution or liability for illegal conduct."

Risks & Perspectives

The guidelines note that although providing drug samples is a widespread industry practice that can benefit patients, it is also an area of potential risk. The OIG is concerned that free samples are being used as kickbacks to physicians, who later bill for distributing them to patients. Therefore, officials remind drug manufacturers that the Prescription Marketing Act of 1987 (PMDA) governs the distribution of drug samples and forbids their sale.

The guidelines suggest that manufacturers minimize their risk by following PMDA guidelines and by:

• Training sales representatives to inform sample recipients that samples may not be sold or billed.
• Conspicuously labeling samples as drugs that cannot be sold, and including such notices on packaging, shipping notices or invoices.

Also suspect are "switching" arrangements, in which drug manufacturers offer pharmacies, pharmacy benefit managers, physicians, or other prescribers cash payments or other benefits for changing a prescription to the manufacturer's product. In addition, the OIG is concerned about the integrity of the data used to establish government reimbursement for drugs. Such reimbursement is based on price and sales data directly or indirectly furnished by drug companies.

Lorraine Tarnove, Executive Director of the American Medical Directors Association, commented that "on the surface these guidelines look onerous, but a careful reading reveals that the pharmaceutical industry will now be expected to comply with the same types of ethical standards that physicians are governed by through their licensing, ethical standards, and CME rules. We are already seeing a lot of misinterpretation by pharmaceutical companies in an effort to demonstrate compliance. In truth, we all know what's right and we just need to keep doing it."

Physician organizations may wish to seek further clarification of apparent conflicts between the OIG guidelines and the PhRMA code. The OIG guidelines, for example, identify as a suspect practice drug company financing related to third-party educational conferences and meetings attended or taught by physicians. By contrast, the PhRMA code allows companies to provide support to a conference sponsor.

Parties seeking further advice on their particular arrangements may apply for an OIG advisory opinion, using procedures set forth at 42 CFR 1008.

Susan Pettey, JD, MPA, is Former Director of Government Affairs for the American Medical Directors Association and a Contributing Writer to Caring.

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