Gifts from Pharmaceutical Companies: Nothing in Life Is Free

Physicians should make sure there is a legitimate business reason for anything they receive from a pharmaceutical company engaged in marketing activities

Steve Goldstein

For years, physicians and pharmaceutical companies have enjoyed a good relationship. Physicians have relied upon the drug companies to provide them with the latest information about new or improved drugs that can be beneficial to patients. The pharmaceutical companies, in turn, rely upon physicians to prescribe their drugs and keep them in business.

In recent years, pharmaceutical companies have significantly stepped up their marketing efforts directly to consumers in an attempt to create patient-driven demand for their drugs. Nevertheless, pharmaceutical companies’ marketing towards physicians continues unabated.

Physicians have long relied upon goods or services received from pharmaceutical companies in connection with those marketing efforts. Drug reps buy lunch for the office staff so that they can have the opportunity to introduce the staff and physicians to a new drug on the market. Pharmaceutical companies fly physicians to out-of-state conferences, on all-expense-paid trips, to learn about new procedures or treatments. Drug companies shower physicians with free samples of their products to distribute to patients and provide grants to physicians to participate in clinical studies of these products. These practices and more have become so common that no one thinks twice about them.

Well, the government is thinking twice, as it continues to scrutinize the marketing efforts of the pharmaceutical companies under the federal fraud and abuse laws. Such scrutiny is nothing new. The Department of Health and Human Services Office of Inspector General, commonly referred to as the OIG, is the federal agency that is charged with investigating and enforcing the fraud and abuse laws. As far back as 1994, the OIG issued a fraud alert addressing prescription drug marketing "schemes," listing the following activities as examples:

• Prizes offered for prescribing specific drugs.

• Cash or other benefits to individuals in exchange for performing marketing tasks, including sales-oriented "educational" or "counseling" contacts, or physician and/or patient outreach.

• Grants for clinical studies that are "of questionable scientific value and require little or no actual scientific pursuit."

This scrutiny continues to this day. Each year, the OIG publishes a work plan for the coming year, indicating the priorities for upcoming investigations. In the work plan for 2002, physician relationships with pharmaceutical companies are identified among the top priorities for investigation.

The federal government has brought a criminal indictment against the manufacturer of Lupron, a drug used for, among other things, the treatment of prostate cancer, alleging the illegal sale of drug samples, in violation of the Federal Prescription Drug Marketing Act, as well as improper cash and other payments to physicians in violation of the Medicare anti-kickback statute. The criminal indictment rendered against TAP Pharmaceutical Products, Inc., also included indictments against several physicians who allegedly received and sold free samples of Lupron, and who allegedly received educational grants and other gifts that the government characterized as improper inducements. In October, 2001, TAP pled guilty and agreed to pay a criminal penalty of $875 million, representing the largest health care criminal fine ever. More ominously for physicians, TAP made its records available to investigators and agreed to cooperate in providing information with respect to its relationships with physicians.

Already, federal investigators have begun following up the TAP settlement by investigating and seeking indictments against physicians around the country for receiving and selling free samples. These investigations have included the Phoenix area, and more may follow, as federal health care investigators may be increasing their activity in Arizona. OIG and Department of Justice investigators have been active in several cases in the state recently, and this may be a sign that Arizona may come under the same scrutiny that has existed in other markets such as Philadelphia, Boston and Florida.

At least with respect to relationships with drug companies, physicians should make sure that there is a legitimate business reason for anything that they receive from a pharmaceutical company engaged in marketing activities. The old axiom that there is no such thing as a free lunch will always continue to ring true.

These materials are designed to provide general information prepared by professionals in regard to the subject matter covered. It is provided with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. Although prepared by professionals, these materials should not be utilized as a substitute for professional service in specific situations. If legal advice or other expert assistance is required, the service of a professional should be sought.