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Controversy Over Unethical Payment Within Medical Device Industry

September 09, 2008 04:24 PM
by Emily Coakley
Government officials are watching some orthopedic and medical device companies that they suspect are handing out kickbacks to doctors.

A Unique Industry?

A three-part series in the Minneapolis Star-Tribune is examining the practice of medical device companies paying orthopedic surgeons. Some call the money kickbacks, others consulting payments.

One company’s spokeswoman said the company’s agreements with doctors help improve the devices. “The products we develop and manufacture cannot be invented by trying a new formula in a lab like the pharma industry. They must be designed and produced in close collaboration with the men and women who will use them: the world’s most highly-skilled and innovative doctors and surgeons,” Marybeth Thorsgaard of Medtronic told the Star-Tribune. 

But federal agencies and Congress are investigating these practices.

The series tells of one extreme case involving money: an Arkansas doctor pleaded guilty to a criminal charge for receiving illegal payments. Medical device distributors allegedly bought a new computer system for Patrick Chan’s office. Another distributor allegedly paid for a nurse’s honeymoon.

Chan is also accused of unnecessarily operating on patients. The Star-Tribune describes a shouting match that occurred after an anesthesiologist asked why Chan was performing spine fusion surgery on an elderly patient “who only had a few weeks to live.”

He pleaded guilty to a single count of “soliciting and receiving kickbacks,” and was sentenced to three years probation, the Star-Tribune reports. He also had to pay fines and $1.5 million for a civil whistleblower lawsuit.

Allegations of accepting kickbacks aren’t unique to American medicine. Earlier this year, Australia’s newspaper The Age reported that U.S. investigators were looking at donations and financial relationships with Australian doctors and hospitals.

Two medical device companies were among the top donors to Royal Melbourne and The Alfred hospitals, The Age said. Doctors at the hospitals allegedly have contracts with companies to use particular brands of devices.
The paper also quoted an unnamed doctor as saying: “These are contracts that are given for exclusive supply without being tendered for in public hospitals. There are instances when the sales reps will actually do the rounds of the hospital and threaten junior staff, like residents, if they see them using other companies’ implants.”
In 1994, French officials charged a dozen doctors with fraud for allegedly accepting kickbacks, according to the medical journal BMJ. The doctors were allegedly overcharging for prosthetic knees, and getting money from the distributor or maker. In that case the government hadn’t yet set a price for the devices, so it was reimbursing doctors for whatever they charged.

Reactions: Effects on the consumer

James Gaulte, a retired doctor, wrote about allegations of orthopedic kickbacks that surfaced last year. “Several years ago my brother-in-law after paying $90 for his first month supply of Zocor commented that his physician was probably getting a kick-back from the drug company. I self-righteously told him that sort of thing doesn’t happen. I am not sure what I would say now,” he wrote.

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