Medical Device Link.

Originally Published MX November/December 2003

INDUSTRY ASSOCIATIONS

AdvaMed's revised code updates medtech business practices to meet modern demands for ethical conduct and social responsibility.

Kristine Rapp

As exposés by the media and investigations by federal and state authorities into pharmaceutical industry sales and marketing practices multiplied, and as ominous indictments, convictions, and multimillion-dollar fines were publicized, U.S. medical technology industry leaders decided that it was time to review industry ethical guidelines. A representative trade association asked itself whether a code of ethics adopted in the early 1990s still provided adequate guidance for member companies operating in a changing enforcement environment. The answer was no: a change was needed.

Individuals from a diverse range of medtech companies worked for more than a year to produce the Code of Ethics on Interactions with Health Care Professionals that was overwhelmingly approved this September by the Advanced Medical Technology Association (AdvaMed; see sidebar, page 20).¹ The procedure for arriving at the revised code reflected the diligence and thoroughness of an industry committed to maintaining relevant high ethical guidelines.

Kristine Rapp is associate general counsel at Baxter International Inc. (Deerfield, IL) and chair of the AdvaMed working group that developed the organization's revised code of ethics .

The January 1, 2004, implementation date for the voluntary code of ethics rapidly approaches. Thus, it is important that medtech company executives, including key figures in the sales, marketing, finance, medical affairs, and legal departments, thoroughly understand the impetus behind the change in ethical guidelines. They, as well as physicians, hospital administrators, group purchasing organizations, dealers, and distributors, should become familiar with how organizations and individuals alike are expected to conform.

A Wake-Up Call for Change

Companies supplying pharmaceutical and medical technology products have paid more than $2.5 billion in healthcare fraud settlements in the past two years. This is a wake-up call for every firm in the industry.

Fraud and abuse units in many state and federal law enforcement agencies are seeking and gaining indictments—and in some cases convictions—of corporations and individuals, along with extracting significant monetary settlements and long-term corporate integrity agreements (CIAs). The most publicized of recent cases was that of two years ago, involving TAP Pharmaceuticals Inc., which resulted in $875 million in fines and penalties, significant compliance commitments itemized in a 58-page corporate integrity agreement, indictments of numerous company officers and sales and marketing employees, and even convictions of physician-customers who participated in fraudulent activities.²

Rewards for whistleblowers—individuals who bring possible fraud and abuse situations to the government's attention and then aid in the investigation of such cases—have also been staggering. Whistleblowers have been awarded millions of dollars. The most dramatic example is that of the single whistleblower involved in both the TAP and the AstraZeneca cases, whose awards totaled more than $125 million.^3–5

The spike in investigations can be attributed to several things. In cases which, until quite recently, involved primarily the pharmaceutical industry, obvious abuses in federal- or state-funded healthcare that had to be corrected were brought to light. In other cases, sales and marketing practices that had been acceptable for many years assumed an aura of impropriety in the post-Enron era of heightened suspicion about corporate integrity. Additionally, pharmaceutical and medical device companies are perceived as deep pockets by the government, the press, and the public.

Medtech Not the Same as Pharmaceuticals

One challenge for the medical device industry is to stave off the application by government and the media of a one-size-fits-all approach to the various and distinct segments of the healthcare industry. Outside of the industry there is considerable lack of awareness of how medical technology is developed, used in the clinical setting, and improved upon. Nor are outsiders necessarily aware of how integrally involved industry is in the training of healthcare professionals in the safe and effective use of often- complex medical technology.

The natural partnership between manufacturing firms and healthcare professionals distinguishes the medtech industry from the pharmaceutical industry. Unfortunately, the government, press, and public often fail to recognize the significance of this difference when judging ethical behavior.

Typical of such confusion is the Compliance Program Guidance for Pharmaceutical Manufacturers, which was issued earlier this year by the U.S. Department of Health and Human Services' Office of the Inspector General (OIG). In a note on the application of that guidance, the OIG states that "the compliance program elements and potential risk areas addressed in this compliance program guidance may also have application to manufacturers of other products that may be reimbursed by healthcare programs, such as medical devices and infant nutritional products."⁶

Notwithstanding the OIG's statements, the differences between the pharmaceutical and medtech healthcare segments are profound. Unlike the pharmaceutical companies that are the primary focus of the OIG guidance, 90% of medical technology firms are small, having fewer than 100 employees.

Most drugs are discovered in laboratories, and drug formulae typically remain unchanged and on the market for decades. Changes in dosages can be readily communicated to physicians on a product's label. Drug firms often produce and market the same products year after year, and their marketing and sales forces are not required to train healthcare professionals on the use of their products.

By contrast, the medtech industry could not exist apart from physicians and other healthcare professionals who work in research and clinical settings. Medical technology is designed and engineered with significant involvement by healthcare professionals in order to meet specific clinical and professional needs. Product designs are continually assessed against clinical use and outcomes data, an iterative process that often results in a new generation being released every few years. Many innovative technologies are complex; thus, new applications require extensive education and retraining of both physicians and patients.

A cardiovascular medicine example points up the distinction. The technique of implanting heart valves in cardiac patients involves significant use training and requires considerable interaction between manufacturers and cardiac surgeons. On the other hand, the administration of a cardiovascular drug is a straightforward procedure requiring little direct interaction between the pharmaceutical manufacturer and the physicians using its product.

The medtech company sales and marketing staff who provide diagrams, demonstrations, and training seminars necessary to ensure safe and effective use of products are often healthcare professionals themselves. Medtech sales representatives must also be in continual contact with physicians and patients in order to retrieve and investigate a device when it does not function as intended. The expertise at work here—on the part of the healthcare professional and the marketing and sales staff—is usually technology specific and not necessarily transferable to similar products.

Clearly, healthcare professionals are valuable and necessary partners with the technology industry. Their interactions with medtech manufacturers must be viewed in a different light from those with companies in other healthcare segments.

The challenge of making this distinction was foremost in the minds of AdvaMed's board of directors when it decided that the 1993 code of ethics should be revised to reflect current compliance expectations.

First Attempt at Revision

In 2002, the AdvaMed board discussed the changes occurring in the legal and ethical environment since 1993, including recent revisions in the ethical codes of other healthcare industry groups such as the American Medical Association (AMA) and the Pharmaceutical Research and Manufacturers of America (PhRMA). It decided in June that its own code should be reviewed and revised appropriately.

Under the direction of the board, a working group of 17 AdvaMed member companies convened frequently between August 2002 and March 2003 to evaluate the 1993 code, the PhRMA Code on Interactions with Healthcare Professionals, the AMA Code of Medical Ethics, and applicable provisions of the federal antikickback statute.^7–9 The association reviewed, at various times, the progress being made on the code and ultimately submitted a draft to the membership for consideration via teleconferences in early March. Recommendations received as a result of those calls were incorporated into the document. Finally, the AdvaMed board of directors voted unanimously to adopt the revised code of ethics in March 2003.

Then, throughout the spring and summer, the working group reconvened to develop a frequently asked questions (FAQs) document to educate the membership about the code revision, and also to review the OIG's final Compliance Program Guidance for Pharmaceutical Manufacturers, which was released a month after AdvaMed approved its code. The OIG's endnote stating that its guidance "may also have application to manufacturers of other products . . . such as medical devices" created concern among a number of AdvaMed members that the government did not understand the distinct nature of interactions between the medical technology industry and healthcare professionals. This concern provided the impetus for an informal meeting in June 2003 between AdvaMed and OIG representatives.

AdvaMed had several reasons for wanting the meeting. First, it wished to convey its interest in establishing a collaborative and cooperative dialogue with the inspector general's office. Second, it intended to educate the OIG about key distinctions between the medtech and pharmaceutical industries regarding the nature of their interactions with healthcare professionals. And, finally, it wanted to gain insight into how the OIG representatives perceived the association's new code of ethics.

Although the OIG took no formal position on AdvaMed's code and offered no legal opinion on either it or the FAQs document, the representatives made several personal and informal observations:

• Some of the language in the code was ambiguous and could be construed—particularly by "those predisposed or motivated to circumvent the law"—as allowing (or not prohibiting) interactions with healthcare professionals that might be unethical or potentially illegal.
• The code's provisions for arrangements with consultants were not sufficiently limiting—that is, the code did not specify a prohibition against selecting consultants on the basis of the volume or value of business generated by a consultant, nor did it establish a standard for a legitimate need, as distinguished from a legitimate purpose, for a consultant's services.
• The scope of the code should not exclude certain interactions between healthcare professionals and AdvaMed members, as the OIG believed this approach suggested that "ethics are situational."

The OIG representatives stressed that AdvaMed should refer to the OIG pharmaceutical compliance program guidance. This advice, coupled with the personal observations, led the association to undertake further revisions that would significantly enhance the code.

Second Revision and Approval

Throughout this past summer, the AdvaMed working group revised parts of the ethics code and conferred with board members regarding the revisions. Final revisions to the code and FAQs were overwhelmingly approved by the board at the beginning of September.

AdvaMed's revised code of ethics becomes effective at the beginning of 2004. Delaying implementation until January 1 allows medtech industry companies to learn about the revisions, initiate internal changes, and educate their customers, physicians, dealers, and distributors about the new code. AdvaMed has been disseminating informational materials to its members and other constituents, and has conducted several educational conference calls with members.

The code of ethics is voluntary and has been adopted by the board of directors to foster appropriate ethical behavior. Its overriding theme is that "members shall encourage ethical business practices and socially responsible industry conduct and shall not use any unlawful inducement in order to sell, lease, recommend, or arrange for the sale, lease, or prescription of their products."

The association is careful to note that the code "is not intended to be, nor should it be, construed as legal advice . . . or to define or create legal rights, standards, or obligations." That is, individual companies have the responsibility to interpret the code and ascertain their own compliance with all applicable laws and regulations.

The AdvaMed code of ethics differs from other healthcare sector ethical guidelines in the following important ways:

• It defines healthcare professionals as "those individuals or entities that purchase, lease, recommend, use, arrange for the purchase or lease of, or prescribe members' medical technology products in the United States."
• It stresses the importance of medical technology firms providing education and training about their products—something that is often a regulatory requirement.
• It describes what constitutes the appropriate hospitality to be provided in clearly identified venues, including member-sponsored product training and education, third-party educational conferences, and sales and promotional meetings.
• It allows firms to provide occasional modest gifts to healthcare professionals, provided the gifts benefit patients or serve a legitimate educational function and have a fair market value of less than $100 (textbooks and anatomical models excepted).
• It states that AdvaMed members will communicate the principles of the code to their employees, agents, dealers, and distributors with the expectation that these individuals and entities will adhere to the code.

Conclusion

With its new code of ethics AdvaMed has created a living document that provides medtech companies with an ethical roadmap for a landscape that will undoubtedly continue to evolve. Medtech firms will continue to be closely involved with healthcare professionals, providing them necessary training and education and monitoring performance results of their use of a wide array of innovative, complex products. Companies will continue to partner with these professionals to design new devices and improve upon existing technologies.

The need for greater understanding of the unique relationship between medtech manufacturers and the healthcare providers who make technological innovation possible is clear. Yet, the OIG has unequivocally stated its intention to demand ethical business practices and socially responsible industry conduct. This, too, is clear. The revision of AdvaMed's code of ethics is a signal to all stakeholders that the medical technology industry is committed to those objectives as well.

References

1. Code of Ethics on Interactions with Health Care Professionals (Washington, DC: AdvaMed, 2003 [cited 22 September 2003]); available from Internet: www.advamed.org/publicdocs/code_of_ethics.pdf.

2. "Corporate Integrity Agreement between the Office of the Inspector General of the Department of Health and Human Services and TAP Pharmaceutical Products Inc." [on-line] (Washington, DC: Office of the Inspector General, U.S. Department of Health and Human Services, 2001 [cited 21 September 2003]); available from Internet: http://oig.hhs.gov/fraud/cia/agreements/tap_pharmaceutical_products_2801.pdf.

3. "Corporate Integrity Agreements (CIAs) and Settlement Agreements with Integrity Provisions" [on-line index]; available from Internet: http://oig.hhs.gov/fraud/cia/index.html.

4. United States v. TAP Pharmaceutical Products Inc., D. Mass., 01CR10354 settlement (October 3, 2001).

5. United States ex rel. Durand v. AstraZeneca Pharmaceuticals LP, D. Del., no. 03-122-JJF, settlement (June 20, 2003).

6. Compliance Program Guidance for Pharmaceutical Manufacturers (Washington, DC: Office of the Inspector General, U.S. Department of Health and Human Services, 2003 [cited 22 September 2003]); available from Internet: http://oig.hhs.gov/fraud/docs/complianceguidance/042803pharmacymfgnonfr.pdf.

7. PhRMA Code on Interactions with Healthcare Professionals [on-line] (Washington, DC: Pharmaceutical Research and Manufacturers of America, 2002 [cited 22 September 2003]); available from Internet: www.phrma.org/publications/policy/2002-04-19.391.pdf.

8. Code of Medical Ethics [on-line] (Chicago: American Medical Association, 2001 [cited 22 September 2003]; available from Internet: www.ama-assn.org/ama/pub/category/8288.html.

9. "Criminal Penalties for Acts Involving Federal Healthcare Programs" [the antikickback statute], 42 U.S.C. Sec. 1320A-7b(b).

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