Several weeks ago I posted an entry on this blog about a major federal anti-kickback settlement agreement entered into by the five largest orthopedic device companies: Zimmer Inc., Depuy Orthopaedics, Inc., Smith & Nephew Inc., Biomet Orthopedics, Inc., and Stryker Orthopedics, Inc. At the heart of the government’s allegations in the case were consulting fees paid to physicians which the government alleged were kickbacks intended to induce the physicians to use the companies’ products. One of the key components of that settlement was that the companies are required to disclose the name of each consultant and what they have been paid on each company’s website. The companies have now begun posting this information and it is, to the say the least, quite interesting.
According to an article published today by the Center for Science in the Public Interest, almost 50 orthopedic surgeons each earned over $1 million a year in consulting fees and royalties from the five companies subject to the settlement, and many of the surgeons are affiliated with top institutions.
Physician consulting arrangements with pharmaceutical and device manufacturers are nothing new and are not necessarily illegal. In fact, many of these arrangements are quite necessary to the development of new and innovative drugs and devices. However, payments for "phantom" consulting services or which are in excess of fair market value for the consulting services may, if intended to induce the consultant to recommend and/or use the particular company’s products, violate the federal anti-kickback statute.
Fortunately, there is a safe harbor under the anti-kickback statute which, if met, can protect these arrangements from prosecution. The recent device settlement should not discourage physicians from entering into legitimate consulting arrangements but does serve as fair warning to physicians that they should proceed with caution when it comes to these arrangements and, if at all possible, structure them to fit within the applicable safe harbor.