Medical Device Company Payments to Cardiologists

Today’s Managing Health Care Costs Indicator is 95%

That’s the portion of patients at University Medical Center in Las Vegas who received pacemakers made by Biotronik, a small German firm that has only 5% of the market nationally.   The New York Times reported yesterday that a Biotronik salesman who had left Boston Scientific began hiring physicians from UMC as consultants, and pretty soon a leading cardiologist was pushing the CEO to junk an existing group purchasing contract and to purchase cardiac implantable devices independently.

The price?  One cardiologist who was paid “up to $5000 per month” implanted a quarter million dollars of Biotronik devices in patients each month.  Some of the cardiologists were paid $2000 per month – which couldn’t have had much impact on their income.  Still, the UMC cardiologists moved in lockstep from the top brands of pacemakers to Biotronik’s offerings.

This isn’t the first we’ve heard of this problem with high-margin medical devices.  Every major orthopedic medical device manufacturer entered into a consent decree with the FDA prohibiting future inappropriate marketing to orthopedists. New York Times       Academic Reference 

The factors that make this kind of inappropriate ‘consulting’ payment likely include
-        High margin devices
-        Nontransparency about industry payment
-        Physicians who make choices on behalf of their patients
-        Lack of incentive for anyone in the supply chain to try to lower overall resource cost

What can we do about this going forward?

Making industry payment to physicians public is a first step.  In general, these payments drop dramatically when they are made public. There are some legitimate payments from the medical device industry to practicing physicians who help the industry innovate – but patients should know if their physician has taken such payments.  Making payments public in fully-identifiable searchable databases is the best approach.  The Wall Street Journal has been doing a great job using data mining to identify likely fraud in Medicare, but has needed to sue using the Freedom of Information Act, and is only able to mention physicians by name if they are foolish enough to consent to being interviewed.  

Payment reform can make hospitals responsible for overall cost of a procedure. This means that there would be an agent who cared about overall resource cost use, which would push down the price (and margin) of these implantable devices.

Increased Medicare scrutiny and pursuit of kickback allegations against participating physicians and pharmaceutical and medical device companies can help – but don’t address the underlying problem.  These payments and the resultant changes in device purchase are result in higher cost to Medicare and to other purchasers.  They are not an exception – they are an expectable result of the current payment system.