Life Science Compliance Update

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August 28, 2013

Oregon Physicians Fined for Not Disclosing Relationships with Industry to Patients

A new development coming out of Oregon is likely to play a critical role as stakeholders begin tracking and reporting payments to physicians and teaching hospitals under the Sunshine Act.

Specifically, The Oregonian reported in early August that Oregon's Department of Justice had settled a civil case with two doctors for failing to disclose to patients their financial interests with a medical device manufacturer. The purpose of the payments was for training on various devices including pacemakers, defibrillators and related devices.

We have written extensively about the potential risks that will come with increased transparency because of the Sunshine Act including but not limited to: 1) increased scrutiny into kickbacks; 2) medically unnecessary treatments; 3) use of brand-name drugs; 4) off-label prescribing, promotion or misbranding; and 5) potential conflicts for hospitals or other positions for physicians.

Now, this new case out of Oregon may signal another distinct risk: actions under state consumer protection laws for failing to disclose financial interests to patients before making treatment recommendations. Such actions could lead not only to fines by state governments, but could also lead to subsequent medical malpractice litigation, exclusion by HHS-OIG, or actions by state licensure boards.

As pointed out by Arnold & Porter attorney Alan Reider, this Oregon action was likely influenced "at least in part, by the requirements of the Federal Sunshine Act." In fact, as part of the settlement agreements, "the physicians must provide on their websites a hyperlink to the database to be established under the terms of the Sunshine Act, which will include the information reported to CMS by Biotronik," Reider notes.

Reider also noted that while this case was limited to two Oregon physicians, "virtually every state has a consumer protection statute that could, in theory, be used to pursue similar action in other states."

Although physicians may want to refer patients to the Sunshine Act "Open Payments" website once it goes live on Sept. 30, 2014, "in the interim it may be prudent for physicians to consider disclosing their financial relationships with pharmaceutical and device companies to their patients in order to avoid facing a similar challenge," Reider recommended.

Case Background

The two doctors based in Salem, Matthew Fedor and Kyong Turk, received payments from Biotronik, Inc., a privately owned German device-maker with U.S. headquarters in Lake Oswego, OR. The company focuses on implantable cardiac devices to manage heart rhythms, such as pacemakers and defibrillators.

Both doctors were part of a Biotronik "program to train and certify sales representatives to assist other doctors in programming and calibrating their products," the article notes. Fedor conducted training during implant surgery for 257 patients from 2007 to 2011. Turk trained company representatives during implants for 126 patients from 2006 to 2009, after which he retired to Hawaii.

A lawyer for the two doctors said such training improved patient care and outcomes. The attorney also noted that Fedor has halted the trainings and begun informing patients of conflicts, even though he did nothing wrong.

ODOJ asserted that these payments violated Oregon's Unlawful Trade Practices Act, which requires that professionals disclose financial interest information when providing services. Fedor and Turk "had the potential to be paid each time he selected a Biotronik device for his patients rather than another manufacturer's device," said the complaints against the doctors. The amounts paid for training were not included in the ODOJ documents.

ODOJ alleged that because the doctors failed to disclose their financial payments to patients regarding these devices, "the doctors were leading the patient to believe they were free of any conflict of interest" and doing the implants "for the exclusive benefit of the patient ... when this was not the case," according to the ODOJ.

However, the article does not indicate that any patients were harmed in the process or had negative outcomes for the procedures performed. Further, there is no information as to whether these procedures were medically unnecessary.

As noted by a client alert from the law firm of Arnold & Porter, LLP, the Oregon state attorney general stated that these physicians "knew or should have known that these payments were something patients receiving Biotronik implants should know about, because they gave rise to an actual or potential conflict of interest which should have been disclosed."

Because of these payments, each doctor agreed to pay $25,000 to settle the ODOJ civil case. ODOJ continues to investigate Biotronik, Inc., which was previously under a federal investigation, for payments associated with doctors in Nevada. Additionally, a lawsuit in New Mexico accuses a doctor there who received payments from Biotronik of numerous unnecessary implants. The company has denied any improprieties.

The Oregonian maintains that "Doctors who get paid by [manufacturers] for using their product must let patients know about it," as a result of this "first-of-its-kind legal action." Oregon's Department of Justice is one of the most active states when it comes to fighting healthcare fraud, particularly with respect to pharmaceutical companies. The state is responsible for running the Consumer and Prescriber Grant Program, which funds projects such as PharmedOut to educate healthcare professionals and consumers about the "potential" conflicts of interest or bias that may come from industry payments or support.

The article explains that most hospitals in Oregon "do not require patients to be informed of such patients." However, this case could set a precedent and expand the scope of disclosures doctors must make to patients not only during the "informed consent" process, but also to comply with Oregon's Unlawful Trade Practices Act.

Michael Crew, an attorney for the two doctors agreed the case sets a precedent, but says that's not a good thing. The case is "of questionable value" to the public interest, he said, adding that device-makers "look at this (training payments to doctors) as critically important for quality of patient care."


Several aspects of this case are problematic, particularly in the context of the Sunshine Act. First, there is no indication that patients were harmed or that they received medically unnecessary procedures or operations. Moreover, there does not appear to be anything to indicate that the patients would have changed their minds had they been informed of these financial interests.

Second, enforcement based off the alleged lack of disclosure is grossly unfair, especially given that the hospitals where these physicians performed the procedures did not require such disclosures. While ignorance of the law is never an excuse, what are the chances that the average physician—who sees dozens of patients per day, and is dealing with electronic health records, health care reform implementation, and significant administrative burdens—knows that the Unlawful Trade Practices Act applies to doctors? Did the Oregon ODOJ give physicians or the state medical society information about how to comply with this law or even notice that they would be bringing such actions?

Third, it is unclear what the Oregon ODOJ would expect from physicians to comply with this consumer protection law. Would doctors need to document in every patient chart the patient was informed of the doctor's interest? Is referring a patient to the future Open Payments website sufficient? Can a doctor posts signs in their office or use other forms of disclosure? Are there clear guidelines promulgated by the Oregon ODOJ as to when and what a physician must disclose to their patients and at what point during a physician-patient relationship to avoid prosecution?


Ultimately, if this case sets trend for other states, once the Sunshine Act database goes live, plaintiff's lawyers and state attorneys general will both have a buffet of doctors to sue—and not because patients are being harmed.

Moreover, enforcement against doctors for lack of disclosure may discourage doctors from attempting new procedures or treatments for patients, which they may have learned about through an educational program or training like the two doctors in Oregon. Science and medicine changes rapidly each day, and as we have written numerous times, educational training programs and other activities offered by industry are some of the best ways for physicians to learn about new innovations.

However, physicians will be discouraged for attending or participating in such programs because if they forget to make a disclosure to their patients of the meal they received or the medical textbook or an anatomical model they use, their patient or ODOJ may sue them.

Thus, the publication of such payments coupled with potential state enforcement actions under consumer protection laws may discourage physicians altogether from receiving any kind of training or education that may help their patients out of fear of being sued. This will ultimately hurt patients as they will be unable to receive the most innovative treatments.

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This is part of an ongoing effort by the various branches of state government to cash in on the huge fines being collected under the False Claims Act. It all starts with AMA Ethics Opinion 8.032. Stark Law converted this to a federal offense, actionable under the False Claims Act. Now, Oregon appears to have established a fund to dig up a way to fine doctors, in hopes that the Oregon DOJ can fund itself with the fines. The BEST they could come up with is that the doctors didn't work for free when teaching others how to safely install the devices? Seriously? That's the best they could do? AMA Ethics were never meant to form the basis of a fines that's why they are termed "opinions" not rules.

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