Pharmaceutical companies must find new ways to market products

Gifts, CME sponsorships may draw fraud and abuse investigations

For years, professional medical societies have warned their members that accepting the free meals, trips, and other gifts offered by pharmaceutical sales personnel can compromise physician-patient relationships and should be avoided.

Now the industry’s marketing efforts also have drawn the attention of federal regulators, who warn that these activities may run afoul of federal anti-kickback laws.

In a compliance guidance draft for pharmaceutical companies issued on Sept. 30, the Department of Health and Human Services’ (HHS) Inspector General Janet Rehnquist detailed several marketing practices that could draw investigations, fines, and other penalties from federal regulators.

Key among the areas of promised scrutiny are gifts and other incentives offered to health care professionals.

"Pharmaceutical manufacturers and their agents may have a variety of remunerative relationships with physicians and others who order or prescribe their products," the guidance states. "As these relationships may implicate the anti-kickback statute, they should be examined carefully."

Specifically mentioned in the guidance:

  • Switching arrangements — Although payments offered by pharmaceutical companies to pharmacies, pharmacy benefit managers (PBMs), physicians, or other prescribers each time a patient switches from a competing product to the manufacturer’s product are features of some managed care arrangements, these arrangements violate federal fraud and abuse statutes if the products are reimbursable under Medicare, the guidance explains.
  • Consulting and advisory payments — Engaging physicians and other health care professionals to act as consultants, advisors, or researchers in connection with marketing and research activities could be questioned if appropriate safeguards are not in place.

"Pharmaceutical manufacturers should ensure that they [and their sales agents] compensate health care professionals only for providing actual, reasonable, and necessary services and that the arrangements are not merely token arrangements created to disguise otherwise improper payments," the guidance states.

Payments must also be "fair-market value" for the services rendered, it continued, and manufacturers must document how they determine the amount paid for such services.

  • Other remuneration — Arrangements that, directly or indirectly, offer benefits to physicians or others in a position to make or influence referrals also may implicate the kickback statute, officials warned. Such benefits include:

    — entertainment, recreation, travel, meals, or other incentives in association with information or marketing presentations;

    — sponsorship or other financing related to third-party educational conferences and meetings attended or taught by physicians;

    — scholarships and educational funds;

    — grants for research and education;

    — gifts, gratuities, and other business courtesies.

"These practices raise a particular risk where they involve parties in a position to prescribe or order the manufacturer’s products or to influence such prescriptions or orders," the guidance states. "These parties include physicians and other health care professionals, as well as PBMs, hospital systems, and the like."

Research backs up conflict

The Chicago-based American Medical Association (AMA) has had guidelines covering ethical interaction between pharmaceutical companies and physicians since 1990, but has recently launched an aggressive educational campaign aimed at raising physician awareness of the problem, says AMA chair J. Edward Hill, MD.

"The American Medical Association has long been concerned about inappropriate pharmaceutical marketing practices that jeopardize the trust of patients and the credibility of the medical profession," he adds.

Such concerns have been heightened in recent years by studies that document how marketing incentives have influenced physician behavior.

A meta-analysis of 29 different research studies published in the Journal of the American Medical Association (JAMA) found that physician interactions with pharmaceutical representatives were generally endorsed, began in medical school, and continued at a rate of about four times per month.1

Furthermore, according to the studies examined, meetings with pharmaceutical representatives were associated with requests by physicians for adding the drugs to the hospital formulary and changes in prescribing practice.

Drug company-sponsored continuing medical education (CME) preferentially highlighted the sponsor’s drug(s) compared with other CME programs. And attending sponsored CME events and accepting funding for travel or lodging for educational symposia were associated with increased prescription rates of the sponsor’s medication. Attending presentations given by pharmaceutical representative speakers also was associated with nonrational prescribing, the JAMA author found.

Despite such evidence, many health care professionals have become accustomed to the perks that drug companies offer and find it hard to turn away such offers, says Catherine Marco, MD, chair of the ethics committee of the American College of Emergency Physicians (ACEP), based in Irving, TX, which developed its own guidelines on physician acceptance of gifts from industry.

"Organizations are becoming more proactive in helping their members make decisions about these kinds of things, and that was the basic goal of the ACEP policy, to give them guidelines about how to make decisions, what might be OK to take and what other things are probably not," she explains.

A few years ago, it was common for pharmaceutical companies to pay for physicians to go on trips, she says. That practice has now become much less common, but has not disappeared.

"I still know some people locally who routinely go on golf outings, to dinners, with pharmaceutical reps," she says. "Clearly, that kind of thing, to me, is unethical, because it is basically bribery. There are lots of ways to sugarcoat it. Everybody says it doesn’t influence their [clinical decision making], but research clearly shows that that is not the case and it does influence prescribing practices."

CME sponsorship

CME sponsorships continue to be a complicated ethical area for physicians and the drug industry, says Marco.

"CME is very common, and a lot of people feel that is acceptable. But there are different types of educational support that drug companies give," she notes.

Unrestricted educational grants, in which the company gives financial support for an educational offering without the inclusion of advertising associated with their products, is not problematic, Marco says.

But many companies sponsor conferences at which they promote a speaker who also has a financial arrangement with the company.

"For example, the company supports the speaker with large honorariums and pays all the expenses and that kind of thing," she says. "That speaker is clearly going to be motivated to promote the product in his or her talk. That’s when it becomes more questionable."

Trade organization guidelines lauded

Shortly before HHS issued its document, the Pharmaceutical Research and Manufacturers Association of America (PhRMA), a trade organization based in Washington, DC, representing the nation’s pharmaceutical research and biotechnology companies, issued its own guidelines on appropriate marketing practices, the Code on Interactions with Health Care Professionals.

Their voluntary code took effect on July 1.

"The new code makes it crystal clear that the interactions of company sales representatives and health care professionals are to benefit patients and enhance the practice of medicine," says PhRMA president Alan F. Holmer. "It explicitly spells out that that all interactions should be focused on informing health care professionals about products, providing scientific and educational information, and providing supporting medical research and education."

The code specifies the circumstances in which company officials can offer physicians and other health care professionals a meal (in connection with sales or promotional presentations, but no entertainment or recreational events); provide token compensation for advisory or consulting services (the stipend should not be used to justify compensation for travel, lodging and other expenses); and offer gifts (value not to exceed $100 and must be primarily used to benefit patients).

The HHS document advises that these guidelines should help companies determine whether their practices are appropriate, although compliance with the code does not ensure that questionable marketing practices won’t be investigated.

The draft guidance is open for public comment for 60 days, at which time the HHS might make revisions before issuing the final guidance.

The AMA in cooperation with other medical societies is carefully reviewing the guidance and will submit its own comments to the inspector general, says Hill.

The goal is to eliminate undue influences and conflict of interest while still allowing pharmaceutical companies to offer needed support for medical education and scientific research.

"We will have to wait and see what kind of impact it will have," Marco adds. "The problem is the pharmaceutical industry is such a huge economic industry and finances are such a huge part of that industry that I think the drug companies are motivated to do whatever marketing it takes to sell their product."


1. Wazana A. Physicians and the pharmaceutical industry: Is a gift ever just a gift? JAMA 2000; 283(3):373-380.

For more information

  • A copy of the draft compliance guidance for pharmaceutical companies is available on the web site of the Department of Health and Human Services’ Office of the Inspector General at:


  • Catherine A. Marco, MD, Associate Professor Emergency Medicine, St. Vincent Mercy Medical Center, 2213 Cherry St., Toledo, OH 43608-2691.
  • J. Edward Hill, MD, American Medical Association, 515 N. State St., Chicago, IL 60610.
  • Pharmaceutical Research and Marketing Association, 1100 Fifteenth St., Washington, DC 20005.