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Device Makers and Doctors: Relationships Sometimes Far Too Cozy

Sep 9, 2008 | Parker Waichman LLP

Dr. Patrick Chan, a back doctor in Arkansas, was at the center of an FBI investigation that involved him receiving thousands of dollars in kickbacks such as computers, cash, and a honeymoon from medical device makers.  Chan was convicted on criminal charges for soliciting and receiving illegal kickbacks.  And although once considered rare to convict individual doctors, many experts believe doctors will be investigated more and more.  "I think we'll see more doctors facing charges going forward," said Dr. Charles Rosen, a spine surgeon at the University of California, Irvine, and founder of the Association for Ethics in Spine Surgery. "It's been coming to a head for the past 10 to 15 years. The consulting agreements are so woven into the culture of being a spine surgeon that some people think it's normal."

John Thomas, a medical device salesman, visited Chan in 2000 to transact some legitimate business.  It turned out that Chan liked a Medtronic Inc. metal plate and Thomas sold just that.  But Chan also wanted $1,500 in cash for a party he was planning at his new home; this, according to a lawsuit settled in U.S. District Court in Arkansas.  According to the complaint, Thomas said he refused to pay Chan kickbacks; however, in the following weeks and years, Thomas said he learned that his competitors provided cash and other perks to Chan under the auspices of "consulting agreements."  Also, three secret transfers of $31,000 in cash were videotaped by the FBI, which is what eventually brought Chan down, according to Karen Whatley, an assistant U.S. attorney for the Eastern District of Arkansas.  The case describes alleged payments of millions annually in consulting fees, research support, and device royalties.

Patients don’t typically ask if their doctor is compensated by a company that profits from the device they are to receive as an implant, but recently, congressional investigators started looking at agreements with doctors—especially those who perform lucrative spine surgeries—to see if such agreements are appropriate or even legal.

Medtronic spokeswoman Marybeth Thorsgaard says, "Medtronic takes great care to assure that all arrangements with physicians are fully compliant with the law and the industry's standards for such contracts."  Regardless, Congress reviewed how Medtronic transacted business with some key spine doctors:  A recently unsealed lawsuit against the nation's top spine surgeons alleges Medtronic compensated them to promote use of its devices in ways not approved by the Food and Drug Administration (FDA).  Meanwhile, Medtronic enjoys $13.5 billion in annual revenues

The Congressional investigation is also detailing how device makers approach doctors, such as in large-scale industry meetings, educational training courses, and learning facilities where doctors study new treatments and techniques.  "Surgeons tend to choose one brand of device or another," said Dr. Jeffrey Kahn, director of the University of Minnesota's Center for Bioethics. "It's not like you get to pick from all the different brands, like you're shopping for a new car.  You go to one doctor and they use one brand, and you go to a different doctor and they use a different brand. Why? Often because they have some sort of relationship" with the companies that make them.”


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