Pharmaceutical Company Gifts: From Voluntary Standards to Legal Demands

By Dresser, Rebecca | The Hastings Center Report, May-June 2006 | Go to article overview

Pharmaceutical Company Gifts: From Voluntary Standards to Legal Demands


Dresser, Rebecca, The Hastings Center Report


For a long time, medical ethicists have urged the medical profession to alter its relationship with the pharmaceutical industry. Individual physicians, medical organizations, and academic institutions have taken some steps toward reform, but problems remain. Now state and federal governments, dissatisfied with the profession's efforts at self-regulation, are pressing for further change.

Three Government Interventions

One federal and two state initiatives illustrate different ways authorities are trying to discourage certain arrangements between industry and clinicians prescribing drugs to patients. In 2003, the Department of Health and Human Services Office of Inspector General (OIG) issued provisions intended to alert pharmaceutical companies and physicians to activities that could trigger prosecution under federal laws prohibiting "kickbacks" and false reimbursement claims related to the Medicare and Medicaid programs. (1)

The OIG guidance document advised pharmaceutical companies to establish compliance programs that promote ethically and legally acceptable conduct among marketing staff and clinicians. Although presented as suggestions rather than as binding standards, the OIG guidance puts companies on notice that once-common "remunerative relationships" are now legally suspect. According to the guidance, industry "gifts, entertainment and personal services ... have a high potential for fraud and abuse and, historically, have generated a substantial number of anti-kickback convictions." The potential for violations exists whenever a manufacturer supplies goods or services with the aim of inducing health professionals to prescribe the company's drug. Legal authorities may label such arrangements bribery and related reimbursement claims fraudulent. The legal risks increase with the value of the benefit and its potential impact on clinicians' behavior.

Certain states have also intensified their oversight of drug company gifts. In 2005, California began requiring companies to adopt compliance programs consistent with the 2003 OIG guidance. The California statute also requires companies to set a specific dollar limit every year on the value of gifts and incentives provided to individual health professionals. (2) In 2001, Vermont passed a Gift Disclosure Law that requires companies to file annual reports with the state attorney general, disclosing the "value, nature, and purpose of any gift, fee, payment, subsidy, or other marketing activities [to individuals and organizations] authorized to prescribe, dispense, or purchase prescription drugs in this state." (3) Economic benefits over twenty-five dollars must be reported. Other states, including Maine and Minnesota, have similar reporting laws, and more state lawmakers are considering such legislation. (4)

Besides imposing an obligation to report corporate expenditures, the Vermont law requires drug companies to report the names of health professionals and organizations receiving marketing benefits. The attorney general releases much of this information to the public, and in 2005, he announced that in the previous year, companies had spent $3.11 million in Vermont on gifts and related marketing. Merck, Amgen, GlaxoSmithKline, Forest Pharmaceuticals, and Lilly, the top marketers, spent 72 percent of the total amount. Hospitals received the highest amounts, followed by psychiatrists and pharmacists. Not all marketing recipients were named, however, because state officials honored requests from some companies to withhold this information on grounds that it constituted a trade secret. The consumer group Public Citizen has filed a lawsuit challenging this decision. (5)

The Underlying Concerns

These legal actions were triggered by worries about the conflict of interest that exists when pharmaceutical companies offer benefits to physicians and others with control over medication purchases. The patient's interests should guide treatment decisions, and clinicians should focus on the patient's condition and personal circumstances when discussing medical options. …

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Pharmaceutical Company Gifts: From Voluntary Standards to Legal Demands
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