Government Spotlight Shifts To Physicians' Consulting Arrangements With Device Makers

Orthopedic surgeons who have watched from the sidelines as device manufacturers have struggled with government allegations and investigations may now find themselves directly in the field of play, according to a new initiative from the U.S. Attorney's Office in Newark, New Jersey. The investigation is moving on from the manufacturers to their physician consultants.

In November 2007, the five largest manufacturers of hip and knee surgical implants, Zimmer, Inc., DePuy Orthopaedics, Inc., Smith & Nephew Inc., Biomet, Inc. and Stryker Orthopaedics Inc., agreed to corporate reforms, five-year corporate integrity agreements and federal monitoring for 18 months to avoid criminal prosecution for allegedly improper payments made to surgeons. Four of the companies also agreed to pay a total of $311 million to settle government claims under the anti-kickback statute and the civil False Claims Act.

The companies were accused of using consulting agreements with orthopedic surgeons as inducements for the surgeons to use a particular company's knee and hip replacement and reconstruction products. Surgeons typically received tens of thousands of dollars under the consulting arrangements, which the investigation revealed to be a common practice from 2002 through 2006. Some physicians did little or no work for the compensation they received as consultants and failed to disclose their financial relationship with the manufacturers to their patients or to the hospitals where they performed surgery.

The settlements mandate specific requirements for consulting agreements with physicians going forward:

A federal monitor will review each company's compliance with its settlement agreement and all new and existing consulting relationships.

Each company will conduct an annual needs assessment to determine its reasonable needs for educational consulting services and new product-development consultants.

Physicians must disclose their financial relationship with any company to patients and the companies must disclose each consultant payment on the company website.

Consulting agreements must meet certain dollar and term limits and must meet strict reporting requirements for services rendered as a condition of payment.

Having completed its pursuit of the major orthopedic device manufacturers, the federal government has now stated that it will investigate the physicians who entered into consulting agreements and allegedly received kickbacks in return for using a particular...