Over the past few years, the US medical device industry has taken proactive steps towards implementing codes of conduct that govern the manufacturer/physician relationship. With continued interest in this relationship, two US senators recently introduced legislation that would provide further scrutiny and oversight of this relationship.

The Physician Payments Sunshine Act (PPSA) of 2007 was introduced by Senator Herb Kohl, chairman of the US Senate Special Committee on Aging, and Senator Charles Grassley, ranking member of the US Senate Committee on Finance. The proposal will mandate nearly full disclosure of all payments, gifts and honoraria to doctors by pharmaceutical and device manufacturers.

“94% of physicians have received gifts from drug manufacturers in the forms of medication samples, food and beverages and miscellaneous gifts and payments.”


Given the nature of advancements in medical technology, the interaction between companies and physicians is essential to the development of novel therapies. However, it is also critical that these interactions are proper and that compensation is based on services rendered and not on trying to increase market share or sell products. It is an accepted and widespread practice that physicians are often remunerated by manufacturers.

The goal is to educate physicians or provide meaningful research to study and/or improve the technologies and medicines. While this practice is not illegal, it is facing growing scrutiny in light of some studies indicating a correlation between gift-giving and prescribing rates or pharmaceuticals. Moreover, the practice is highly pervasive throughout the physician community dealing with drugs. The New England Journal of Medicine cites that 94% of physicians have received gifts from drug
manufacturers in the forms of medication samples, food and beverages and miscellaneous gifts and payments.


In 2007, five leading medical device manufacturers agreed toa multi-million dollar legal settlement following a US Justice Department investigation into relationships between them and some medical professionals. Four of the five manufacturers accepted fines totalling $311m; they were Zimmer Holdings Inc, Johnson & Johnson’s DuPuy Orthopedics, Smith & Nephew and Biomet Inc. The fifth, Stryker Corp, acknowledged its role but escaped a fine after committing to alter its code of practice.

It was revealed that, in total during 2007, at least $222m worth of payments were made by the five to surgeons. The committee’s investigation revealed that Zimmer paid $86m directly, Stryker at least $40m, and DuPuy in the region of $50m. However, an official report highlighted the fact that such payments were not made exclusively by these manufacturers but rather were something that was occurring industry-wide.

Addressing the committee, Chad Phipps, Zimmer’s senior vice president and general counsel said: “There were abuses in the past… not unique to Zimmer, but across the industry. People who say that there weren’t (abuses) have their heads in the sand.” All have now accepted that non-disclosure of such payments is not acceptable and they aim to work to ensure transparency in the future.


The Kohl-Grassley proposal would not prohibit this practice, but create a new obligation for device and drug manufacturers to report the level of gifts they provide to physicians. Specifically, the PPSA will require drug and device companies to disclose anything of value given to physicians, whether given directly by the manufacturer or through a through a third party.

The items to be disclosed include: compensation; food, entertainment or gifts; trips or travel; a product or other item provided at less than market value; participation in conferences, continuing medical education, or other educational programmes; products or rebates; and consulting fees or honorary for speaking engagements. The proposal would also give the secretary of the Department of Health and Human Services (HHS) discretion to determine what could be defined as an ‘economic benefit’.

Manufacturers would be required to, on a quarterly basis, provide updates to the secretary on all gifts provided to physicians which exceed $25 of value. These disclosures would then have to be submitted electronically to include the name of the physician and their employer, all entities the physician is affiliated with, the gift value and a short description of what exactly the gift entails.

In addition, each manufacturer would be required to submit an annual report to the secretary which summarises all submissions. Failure of companies to submit both quarterly and annual reports would result in civil monetary penalties beginning at $10,000 per infraction and not exceeding $100,000. The Kohl-Grassley legislation requires that drug and device manufacturers with annual gross revenues exceeding $100m comply. This threshold was set to dampen the administrative burden on smaller


An important consideration for foreign manufacturers with direct business interests within the US market will be how to adapt to these new requirements. Many foreign medical device corporations maintain a significant presence in the US health marketplace with varying degrees of direct marketing interactions with physicians or providers. If implemented, the proposed legislation will likely create a substantial administrative burden to companies.

The PPSA concept is one that some states have already begun implementing. The proposed legislation is based partially on programmes already existing in several states. In 1993, the state of Minnesota required, for the first time, the public disclosure of gifts and payments to physicians from drug distributors. Now, the states of Vermont, Maine, West Virginia, as well as the District of Columbia, require manufacturers to disclose such information. However, not all of these disclosures are
available to the public.

“Manufacturers would be required to, on a quarterly basis, provide updates to the secretary on all gifts provided to physicians which exceed $25 of value. “

The Kohl-Grassley legislation would go further than the state programmes by including both drug and device manufacturers. Moreover, the bill would require all gifts and disclosure reports to be accessible to the public through an HHS-supported internet database. Both senators stressed the need of having the public know if their doctors are receiving any form of reimbursement from the manufacturers of the drugs and devices they prescribe.

Kohl and Grassley have both examined this issue in the past. Most recently, as chairman of the Senate Special Committee on Aging, Senator Kohl convened a hearing to examine the relationship between physician prescribing rates and the drug industry.

In early 2007, Senators Grassley and Max Baucus released a Committee on Finance report regarding the use of drug company grants for medical education. The Committee examined the practice of manufacturers providing education grants to medical societies and organisations in efforts to promote the off-label use of drugs.


Reaction to the new proposal has been mixed. While several prominent public interest groups have praised the legislation as providing much-needed transparency to the marketing practice, many industry representatives are reviewing the proposal to determine the impact and the ability for companies to properly implement such programmes.

A recurring criticism of the measure is the failure to recognise the benefits of informing doctors of new, innovative and groundbreaking medicines and technologies to ensure that patients receive the best possible care. Given the time constraints of many physicians, it is often difficult to introduce them to these medicines and technologies. Many in the industry also contend that the proposal would add an unnecessary level of bureaucracy in an already heavily regulated environment. They believe that the rules currently in place by the relevant accreditation organisations are sufficient to protect against potential conflicts of interest.

The outlook for passage of the Kohl/Grassley bill is still unclear. It will likely depend in part on the response received by stake-holders. Congress is expected to address the issue again in 2008.