Medtronic payments questioned

  • Article by: CHEN MAY YEE , Star Tribune
  • Updated: September 27, 2007 - 8:53 PM

Medical device companies pay doctors for various services and trips. But it is the practice legitimate? A senator is asking.

A problem over payments to doctors that Medtronic Inc. thought it had put to rest last year with a $40 million settlement with the Justice Department has resurfaced.

An influential senator who helps oversee Medicare payments has written to Medtronic asking the company to explain its continued payments to doctors.

The request shines a spotlight on the longstanding practice of device companies paying doctors to help design, build and market implantable devices, something the companies say is perfectly legitimate.

"The fact is, medical device businesses have to do market research and clinical research and have to work with doctors to do this," said Tim Nelson, an analyst who covers Medtronic for Piper Jaffray. "Which ones are appropriate and which ones aren't? The gray area is a mile wide and a mile deep."

Fridley-based Medtronic is the largest medical device company in the country.

Sen. Charles Grassley, R-Iowa, in a Sept. 20 letter to Medtronic's chief executive Bill Hawkins, requested information on Medtronic's "practices regarding payments and other transfers of value to physicians."

He also requested the company respond to allegations from the original whistleblower in the federal case that "Medtronic's practices of providing physicians with inordinately high consulting fees, free travel and other perks distort decision-making among physicians and obscure the best interest of the patients."

Grassley's request was for information since 2003. Last year's settlement covered payments made between 1998 and 2003. In that case, the Justice Department accused Medtronic's Memphis, Tenn.-based subsidiary Sofamor Danek, which makes spinal devices, of paying kickbacks to doctors through "sham consulting agreements, sham royalty agreements and lavish trips to desirable locations." In the settlement, Medtronic denied wrongdoing.

Collaboration or kickback

The letter to Medtronic is part of a broader investigation by Grassley into the medical industry. The Senate finance committee, of which Grassley is a member, said in an April report that some educational courses for doctors funded by the drug industry were in fact "veiled forms of advertising."I am concerned that similar practices are now occurring in the device world," he wrote.

Medtronic spokesman Rob Clark said the company sent an "initial response" to Grassley. He declined to say what was in it.

Clark said physician-device company collaborations go back about 50 years, to the time Medtronic founder Earl Bakken partnered with University of Minnesota heart surgery pioneer C. Walton Lillehei to create the first wearable pacemaker.

While drug companies can hire chemists to develop a drug with minimal input from practising physicians, device companies need to consult physicians during the design and engineering of a device and ultimately, on how best to implant them.

"These relationships do exist. They are at the foundation of our ability to create new ideas for patients," Clark said. Once the devices are on the market, Medtronic also hires physicians on contract to train other physicians to use them. He said compensation is based on fair market value for their time.

Deciding what's reasonable

The American Medical Association and the Advanced Medical Technology Association, or Advamed, a trade group based in Washington, D.C., have extensive codes of conduct for doctors and companies. Advamed says it's appropriate for medical companies to sponsor training for physicians and to pay physicians "reasonable compensation" for training, research and other product collaboration.

The concept of what's fair value for physicians' time may become an area of focus for Grassley.

"If there's a big disparity between services performed and fees collected, then you have cause for suspicion," said Nelson of Piper Jaffray.

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