ACPE Survey Sounds Alarm over Medtech Business Practices

In an era when corporate behavior is widely suspect, it isn’t surprising that companies in the healthcare sector have been subjected to scrutiny on many fronts. So far, federal prosecutors have not considered it necessary to investigate the business practices of the medical device industry on a broad scale. But if the attitudes of physician executives are any indication, that could change—and soon.

In a recent survey by the American College of Physician Executives (ACPE; Tampa, FL), 79% of respondents said that they were very or moderately concerned about physicians being influenced by medical device companies to perform a certain procedure. That level of alarm was second only to concern over physicians who refuse patients without insurance (80%), and was even greater than respondents’ concern over the influence of pharmaceutical companies (76%).

Among respondents to the ACPE survey, 63% also said that they were very or moderately concerned about physicians being paid to make promotional pitches for vendors. And 66% said that they were very or moderately concerned about nonphysician executives accepting gifts from vendors.

ACPE’s Kolb: Teaching leaders.

Nearly 1500 U.S. physician executives participated in the survey, which was published as part of a special report in the March/April issue of The Physician Executive: Journal of Medical Management. “The survey results show us a serious problem facing U.S. healthcare,” said ACPE president Marvin O. Kolb, MD. “Our challenge at ACPE and other professional organizations is to teach healthcare leaders how to identify and eliminate unethical business practices and behaviors.”

Release of ACPE’s survey results came hard on the heels of a session at the annual meeting of industry association AdvaMed (Washington, DC), in which speakers cautioned that federal prosecutors have already begun to take a closer look at business practices in the medical device industry. Companies are being investigated for practices that violate federal fraud and abuse statutes, with emphasis on activities that bring sales and marketing personnel in direct contact with healthcare professionals.

McAnaney: Warning industry.

Speaking at the AdvaMed meeting, Washington, DC, attorney Kevin G. McAnaney said that investigators’ interest in medical device companies follows years of similar investigations targeting hospitals, clinical laboratories, and pharmaceutical manufacturers. Now, he warned attendees, device companies have become targets because “they’re the only people left who’ve got any money.” McAnaney is a nationally recognized expert on healthcare fraud and abuse who served as chief of the industry guidance branch in the office of counsel to the inspector general from 1997 to 2003. His private practice focuses on healthcare fraud and abuse matters, including compliance reviews, transactional work, and civil and administrative litigation.

According to McAnaney, the number of fraud and abuse cases involving medical device companies is increasing largely because whistleblowers have begun to identify suspect company practices. Once prosecutors have identified a particular violation at one company, it is typical for them to investigate other companies for the same violation. “If prosecutors find evidence that a suspect practice is widespread in the industry, they will quickly expand their investigations to other companies,” McAnaney said. “They’ll try to run the table.”

AdvaMed has been actively seeking to avoid giving prosecutors such an excuse. The AdvaMed session presented the preliminary results of a “Compliance Benchmarking Survey” undertaken to measure the extent to which medical device companies are implementing the code of ethics put into effect by AdvaMed in January 2004. Intended for industrywide adoption, the code establishes policies to guide interactions among medical device companies and healthcare providers, especially with regard to sales and promotional activities.

Presenting the results was Brian Salsberg, associate principal in the business-consulting firm of McKinsey & Co. (Washington, DC), which conducted the confidential survey among AdvaMed member companies. The law firm of King & Spalding (Washington, DC) also contributed to the design and analysis of the survey.

Although only 48 companies responded to the survey, they included both large and small companies with a variety of corporate structures; 23% of the responding companies were based outside the United States. Key findings of the survey included the following.

• Among responding companies, 92% were aware of the AdvaMed code of ethics.
• Most of the responding companies are modifying corporate policies in response to the requirements of the code.
• Training about the code is being provided to employees, including sales reps (88% of responding companies), marketing personnel (85%), and senior executives (83%).

Not surprisingly, companies with greater annual revenues tend to have more formal ethics compliance functions than their small-company counterparts. Among the survey respondents, companies with a formal compliance function or officer had average revenues of more than $1.7 billion, while those without such a function had average annual revenues of $40 million. Staffing of the function also differs according to company size: large companies maintain an average compliance staff of 7.2 permanent and 5.5 part-time employees, while small companies have an average of 2.2 permanent and 0.2 part-time employees. Both large and small companies supplement their in-house compliance staffing through the use of temporary contractors.

According to Salsberg, tracking compliance with the AdvaMed code is a major challenge for medical device companies. The majority of companies responding to the survey (55%) said that they currently have few or no formal key performance indicators with which to measure their compliance. Salsberg recommended that companies develop in-house surveys that can be used to measure compliance over time.

Apparently, considering the results of ACPE’s recent survey, not everyone agrees that industry’s implementation of the AdvaMed code of ethics has been effective. But perhaps the perception of wrongdoing exceeds reality. Despite the strong concern expressed by 79% of the respondents to ACPE’s survey, only 7.8% of the respondents identified device company influence as the most-frequent ethical challenge in their own institutions—less than half the percentage reporting undue influence from pharmaceutical companies (19.7%).

A summary of the ACPE survey results is available from the organization’s Web site at www.acpe.org/ethicalsurvey. A summary of the AdvaMed “Compliance Benchmarking Survey” is available via the AdvaMed Web site at www.advamed.org/publicdocs/compliancepresentation.pdf.

© 2005 Canon Communications LLC

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