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Aging Committee Hears Surgeons Paid Millions to Promote Medical Devices

Investigator testifies that hip & knee replacement market paid $800 million to doctors over five years

Feb. 27, 2008 – Government investigators found that during the years 2002 through 2006, four manufacturers, which controlled almost 75 percent of the hip and knee replacement market, paid physician consultants over $800 million under the terms of roughly 6,500 consulting agreements, according to Greg Demske, an investigator for Health and Human Services. He testified today at a hearing of the Senate Special Committee on Aging that examined the financial interactions between medical device companies and surgeons.


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Demske, Assistant Inspector for Legal Affairs from the Office of Inspector General (OIG) for the HHS, said the Justice Department and the OIG have been examining these troubling and widespread conflicts for the past three years. 

In September of last year, the Justice Department reached settlement agreements with the top five orthopedic device makers which dominate their industry.  According to the Aging Committee staff’s calculations, the five orthopedic companies which settled agreements with the Justice Department last fall spent a combined total of at least $230 million dollars on these consultant and other payments.

Chairman Herb Kohl (D-WI) called the hearing, entitled “Surgeons for Sale: Conflicts and Consultant Payments in the Medical Device Industry,” to examine the financial interactions between medical device companies and surgeons, which often involve substantial payments in the form of consultant fees, educational grants, royalties, funding for clinical trials, travel and gifts. 

These financial relationships create conflicts of interest, can exert inappropriate influence over medical decisions and, in some documented cases, violate federal anti-kickback and self-referral statutes.  An investigation undertaken by the committee has shown some of these payments to be grossly excessive, illegitimate, and often not properly documented.

“Today’s hearing underscores the need for the Physician Payments Sunshine Act (S.2029), a measure co-sponsored by Senator Charles Grassley (R-IA) and Chairman Kohl to require manufacturers of pharmaceutical drugs, medical devices, and biologics to disclose the amount of money they give to doctors through payments, gifts, honoraria, travel and other means,” according to a news release from the committee. 

The bill was introduced last September, following another hearing, which examined the relationships between physicians and the pharmaceutical industry. 

 “These types of unethical payments are not anecdotal, but rather have been pervasive and industry-wide for far too long.  The physicians who take their money are equal participants and equally culpable,” said Chairman Kohl. 

“If these physicians are essentially putting their medical judgment up for sale, where does the patient’s well-being fit into the equation?”

 “Senator Kohl is providing important leadership in bringing attention to the issue of payments by the medical device industry to medical doctors as he and I work to build support for our legislation to shed light on these sorts of financial relationships,” said Senator Chuck Grassley, Ranking Member of the Senate Committee on Finance and former Chairman of the Special Committee on Aging. 

“Our bill doesn’t do anything to change the ability of device or drug makers to tap the expertise and insights of physicians.  Rather, the proposal works to build public confidence in the system with openness and transparency.  It’s a common sense initiative.”

Committee staff interviewed dozens of surgeons and medical device industry sales representatives over the past six months to learn more about the conditions surrounding these payments. 

Testimony offered at today’s hearing related that some physicians have felt shunned after declining to take part in financial relationships with the medical device industry.  The first panel featured Dr. Charles Rosen, president of the Association for Ethics in Spine Surgery and a clinical professor from the University of California – Irvine; and Said Hilal, president and CEO of Applied Medical Resources Corporation, a medical device company in California.

The hearing also featured representatives from two of the companies involved in the federal settlement:  Edward Lipes, Executive Vice President of Stryker Corporation, and Chad Phipps, Senior Vice President, Secretary and General Counsel of Zimmer Holdings, Inc. 

Lastly, Christopher White offered testimony pertaining to the industry’s voluntary ethical guidelines on behalf of AdvaMed, the leading industry organization.

Today’s hearing also touched on another aspect of the committee’s investigation in the area of surgeon-owned medical device companies.  In recent months, the committee has sent detailed questions and document requests to a number of surgeon-owned medical device companies.  Testimony from the HHS OIG warned that these types of corporate entities pose potential conflicts and these ventures should be closely scrutinized under the fraud and abuse laws.  Chairman Kohl announced in his opening statement that the committee would review the responses from these companies and continue with this inquiry.

Witness Testimony – Click names for printed testimony

Greg Demske, Assistant Inspector for Legal Affairs, Office of Inspector General, US Department of Health and Human Services, Washington, DC

Charles Rosen, Clinical Professor, University of California, Irvine, CA; President, Association for Ethics in Spine Surgery

Said Hilal, President/CEO, Applied Medical Resources Corporation, Rancho Santa Margarita, CA

Edward Lipes, Executive Vice President, Stryker Corporation, Mahwah, NJ

Chad Phipps, Senior Vice President, Secretary and General Counsel, Zimmer Holdings, Inc., Warsaw, IN

Christopher White, Executive Vice President, General Counsel and Assistant Secretary, AdvaMed, Washington, DC

>> A webcast of the hearing should be available later this afternoon on the committee webpage:

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