Life Science Compliance Update

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June 04, 2012

Physician Payment Sunshine: Study Shows No Difference in Prescribing Patterns between States that Disclose Payments and Those that Don’t

Indetical Results
The Physician Payment Sunshine Act requires pharmaceutical and medical device manufacturers to report certain payments made to physicians and teaching hospitals over $10.  “This law is based on the premise that transparency in these transactions is of public importance and that disclosure acts as a deterrent against quid pro quo exchanges; physicians may be reluctant to accept large payments if these payments are publicly known and perceived as compensation for prescribing certain therapies. 

To predict deterrence effects of the federal sunshine law, a recent study looked at the experience of two states, Maine and West Virginia, which previously implemented sunshine laws.  The study, published in the Archives of Internal Medicine, examined the effect of these laws on the prescribing of HMG-CoA [(3-hydroxy-3-methylglutaryl)–Coenzyme A] reductase inhibitors (statins) and selective serotonin reuptake inhibitors (SSRIs), 2 therapeutic classes in which marketing plays an important role because the therapies within each class are pharmacologically and clinically highly substitutable.   

The authors hypothesized that, to the degree that physicians were influenced by industry payments to overprescribe branded therapies—and disclosure deterred physicians from accepting these payments—disclosure laws would lead physicians to decrease prescribing of branded statins and SSRIs. 

Overall, the study results suggested that the Physician Payments Sunshine Provision in the federal health care law may have a limited effect on prescribing and on expenditures; there were negligible to small effects of the disclosure laws in Maine and West Virginia for both statins and SSRIs.  What this study demonstrates is that Congress and the Centers for Medicare and Medicaid Services (CMS) along with hundreds of companies, will be paying hundreds of millions of dollars each year to implement a law that may not actually have its intended effect. 

While transparency is an important goal and should be implemented, the administrative burden and unintended consequences on research, education, and other scientific activities, call into question the real need for a federal sunshine law.  America is currently facing a job crisis and has still not recovered from the economic decline.  The life sciences industry provides a significant portion of new jobs, taxes, and high quality products that may help America out of these troubled times.  In light of this study, and the tremendous burdens the Sunshine Act imposes on numerous stakeholders, members of Congress and CMS should begin to reconsider cheaper alternatives. 


The study compared the experience of Maine, which enacted its disclosure law in May 2004, with that of New Hampshire and Rhode Island, demographically similar states that did not enact these laws.  The study also compared the experience of West Virginia, which enacted its disclosure law in March 2004, with that of Kentucky and Delaware.  In the analysis, the authors looked at the change in prescribing in the disclosure state, before and after the disclosure law, and compared it with the change in prescribing in comparison states over the same period.  A difference in prescribing in the disclosure state relative to comparison states would potentially reflect the impact of the disclosure law. 

The authors used information about state sunshine laws from the legal databases Westlaw and LexisNexis  and prescription drug claims from the Thomson Reuters Marketscan Claims and Encounters Database, for the period July 2003 to March 2009. 

In Maine, the effect of the disclosure law on the use of branded statins was small. Depending on the control state, the law was associated with a 0.8 percentage point reduction (New Hampshire) to a 5.3 percentage point reduction (Rhode Island) in the percentage of statin prescriptions that were for branded therapies. Thus, whereas the percentage of branded statins declined by 45.3% in the nondisclosure state of Rhode Island during this period, the decline in branded prescriptions in the disclosure state of Maine was 50.6% (45.3% + 5.3%). 

One reason for the minimal switching from brands may be that the reporting that is required does not capture much of the marketing and promotional efforts that can influence physicians.  Another reason may be that the reporting categories were too aggregated to distinguish between legitimate and questionable payments.  Finally, although these payments were disclosed to state agencies, payment information was not disseminated to the public in an accessible way. 

The analysis had several limitations.  First, there may have been other changes happening at the same time as the disclosure laws that could have led to similar net effects, although we are not aware of any such changes.  Second, the results were based on whether the comparison states are good comparisons.   Third, the use of branded therapies may be proportionately greater in the sample of individuals, who are privately insured, than in the general population.  Finally, the outcome measures may not be sufficiently sensitive to detect benefits of the disclosure laws. 


 “If the policymakers who passed these measures were hoping for a deterrent effect they may be disappointed,” said the study's lead author, Genevieve Pham-Kanter, Ph.D., an assistant professor in the Department of Health Systems, Management and Policy at the Colorado School of Public Health and a research fellow at Harvard University and Massachusetts General Hospital.

 “Our results show that the disclosure laws in the two states we examined had a negligible to small effect on physicians switching from branded therapies to generics and no effect on reducing prescription costs,” said Pham-Kanter.  “Transparency is important in its own right, but if deterring unnecessary, costly prescribing is a concern for policymakers, more direct action may be required.”

 A recent article discussed payments to doctors in Tennessee, demonstrating the potential negative effect publishing payments could have.  Using the typical ProPublica template, the article begins to criticize doctors who make money for speaking on behalf of companies.  According to the article, Tennessee doctors have been paid over $20 million by manufactures over the last few years, most of it for speaking and consulting.  The article focused on 4 Midstate doctors who earned over $200,000 working with industry.

Psychiatrist Jon Draud leads the way with an income topping $600,000. Endocrinologist Dr. Terri Jerkins is also on the list.  “I have totally clean hands in this,” says Dr. Jerkins. “What I’m doing is a very important service.”  Dr. Jenkins lectures on behalf of Insulin drugmakers about 40 times a year to supplement her income. Dr. Jerkins says the main purpose is educating other health professionals.

"This has allowed people to still get some education that is really important to them, keeping up to standards," says Dr. Jerkins.  Dr. Jerkins says all of her patients know about her speaking, which she says is often reviewed by the FDA.  Dr. Jerkins says she would never allow her work to affect her prescribing patterns.  "The day I could sacrifice what is best for the patient over some reimbursement over a drug would be the day I would need to quit," says Dr. Jerkins.

Drug companies paid U.S. doctors over $220 million in 2010, but OBGYN Dr. Omar Hamada, who serves on the Tennessee Medical Association's Judicial Council, says the vast majority of doctors are not being ethically compromised.  "We try to maintain ethical boundaries, and we try to maintain very academic intellectual decisions," says Dr. Hamada.

Vanderbilt Medical Center has taken a stand against allowing its doctors to be paid by drug companies. Doctors are still allowed to speak, but they can only be reimbursed for travel and other out of pocket expenses.  "The University takes this very seriously," says Vanderbilt Medical Center's John Howser.

Vanderbilt implemented its Conflict of Interest Policy in 2009.  Doctors are not allowed to accept gifts from drugmakers, although they still work together on research. Speaking on behalf of drug companies has been largely curtailed.  "We're doing everything we can to represent the public's best interest, and so this policy was implemented for that very reason," says Howser.


Studies like this will likely be done within a few years of the Sunshine Act being implemented.  It will be interesting to see if similar results occur on a nationwide level.  If a nationwide survey were to show limited deterrent effect of the Sunshine Act, in light of limited resources and many regulatory burdens already facing the life sciences industry, Congress should revisit the burdens the Sunshine Act imposes on stakeholders. 

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