Health care industry faces greater scrutiny around payments to doctors to promote products

The health-care industry’s longstanding practice of paying doctors to explain and promote products is under review after a government watchdog last month issued a rare warning.

The special fraud alert by the Office of Inspector General for the U.S. Department of Health and Human Services—its first in six years—will at minimum prompt pharmaceutical and medical-device companies to take a hard look at the policies and controls associated with their speaker programs, compliance professionals say.

Under such programs, companies typically pay a health-care professional an honorarium to give speeches or presentations about a company’s drugs or medical devices. Those payments aren’t improper or illegal per se, but they pose a risk for companies under the Anti-Kickback Statute, which prohibits inducing or rewarding referrals or orders for items and services reimbursable under Medicare and Medicaid.

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The alert may cause the industry to move away from the promotional practice altogether in the long run—a course of action that the OIG appeared to endorse in its warning. A shift in that direction could be accelerated by the coronavirus pandemic, which has brought in-person programs to a temporary halt.

“We want [companies] to think about whether these are a necessity, and whether they are appropriate—and whether it’s appropriate to continue with business as usual in a post-pandemic time period when in-person meetings resume,” Gregory Demske, the OIG’s chief counsel, said in an interview.

Speaker programs have been a compliance concern for the health-care industry for decades. In recent years, a stream of enforcement cases have underscored regulators’ concerns about the practice, which often involves small groups of physicians meeting over dinner and drinks in private rooms in restaurants or conference spaces.

As a result, the alert surprised some corners of the industry. Companies have long been on notice to develop sophisticated rules and safeguards around the events. Since 2013, those participating in federal health-care programs also have been required to publicly disclose payments to physicians and teaching hospitals.

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And while the alert essentially advises against a long-used tactic, current and former pharmaceutical compliance executives said it doesn’t contain any substantively new information about how companies should conduct themselves.

“It’s really unusual insofar as you’ve had so much enforcement that this has been on everybody’s radar for the last two decades,” said Gary Giampetruzzi, a lawyer at Paul Hastings LLP who previously served as head of government investigations for pharmaceutical giant Pfizer Inc.

The Pharmaceutical Research and Manufacturers of America, an industry trade group, said in a statement that it adopted a voluntary code to promote ethical relationships between companies and health-care professionals in 2009.

But Mr. Demske said recent cases involving Novartis Pharmaceuticals Corp., Purdue Pharma LP and Insys Therapeutics demonstrated that speaker programs were still “a big problem.”

“We thought it was timely to get out this fraud alert to first make clear that our concerns with payments under these programs are broader than one or two or three cases,” Mr. Demske said.

The primary legal risk for companies stems from the Anti-Kickback Statute.

Purdue Pharma last week pleaded guilty to conspiring to violate the statute, including by making payments to two doctors through its speaker program to induce more prescriptions of its opioid products. Insys last year admitted to using its speaker programs as a cover to pay bribes and kickbacks to practitioners in exchange for increased prescriptions of its highly addictive sublingual fentanyl spray, Subsys.

Novartis in July agreed to pay $678 million to settle allegations of improper payments to patients and physicians in violation of the statute, including with respect to its speaker programs.

Under a parallel agreement with Novartis, the health agency OIG imposed a series of requirements on the company’s speaker program, limiting the number of events and restricting them to a virtual format.

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A spokeswoman for Novartis said the company was in the process of transforming its speaker program in the U.S., consistent with its efforts to invest in next-generation digital engagement technologies. “As we explore and activate new digital platforms in the US, over time we expect that this approach to peer-to-peer medical education will become the norm for our global business and across the industry,” she said in a statement.

Purdue Pharma did not immediately respond to a request for comment. Insys could not be reached for comment. Both companies entered bankruptcy in the aftermath of legal challenges and government investigations related to their distribution and marketing of opioid products.

Compliance professionals said the OIG’s latest warning will likely prompt companies to take a more conservative approach to their speaker programs—but that it remained to be seen whether the OIG’s pressure would end the practice altogether.

Companies should review their annual business justification for the programs, said BJ D’Avella, a partner in Paul Hastings’ life-sciences consulting group. “It always comes back to intent and how they are demonstrating the intent of the practice,” he said.

While much of the industry’s other promotional activities have shifted to a virtual environment, remote speaker programs aren’t yet common, according to practitioners.

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But from a compliance perspective, the upsides of virtual speaker programs are clear. Events held on a videoconferencing platform are much easier and less costly to monitor, said Noah Shannon, a life-sciences industry consultant.

“The downside is the social aspect has been eliminated,” Mr. Shannon said. “You have to focus on making the educational content more compelling so people actually show up.”