Jeffrey Binder Biomet, Inc.


Published 6/1/2009
G. Jake Jaquet

Industry CEOs: Relationships with surgeons are vital

Transparency is necessary and desirable, but patient outcomes depend on interaction

Recently, AAOS Now sought comment from the chief executives of five major orthopaedic device manufacturers on various aspects of physician-industry relationships. We wondered what has changed and what remains the same since the agreements reached with the U.S. Attorney’s Office in New Jersey (Department of Justice/DOJ) expired earlier this year. (See “Final notes on the DOJ,” below.)

All five companies involved took the opportunity to respond: Jeffrey Binder, president and chief executive officer (CEO), Biomet, Inc.; Joseph DeVivo, president, Smith & Nephew, Orthopaedic Reconstruction Division; David Dvorak, president and CEO, Zimmer Holdings, Inc.; David Floyd, president, DePuy Orthopaedics, Inc.; and Michael Mogul, president, Stryker Orthopaedics.

On the relationship between surgeons and industry
AAOS Now: Has the landscape of orthopaedic implant development and marketing changed since the expiration of the DOJ agreements and the end of federal monitoring?

Mr. Binder: One thing that hasn’t changed is the need for industry to collaborate with surgeons in product development, clinical research, and training and education. We simply cannot make the kinds of improvements that benefit patients without close interaction. Having said that, Biomet and the rest of the industry have improved many of our practices in interacting with and compensating surgeons.

I look at it simply: for the relationship to be ethical, we should have a legitimate need for the services provided, we should choose consultants on the basis of their expertise, we should pay fair market value for the services, and in no way should the relationship be an inducement to gain the surgeon’s business. Our compliance processes are designed to ensure that all of our relationships have these elements.

Mr. Floyd: Collaboration with orthopaedic surgeons and other healthcare professionals to develop new products and to educate surgeons about the availability and proper use of products will continue to be a hallmark of orthopaedics. Policies and procedures about how DePuy engages surgeons as consultants, compensates them, and documents the arrangement have improved and gotten more rigorous, but the core principles of working closely with surgeons in product development, education, and training haven’t changed.

Mr. DeVivo: Smith & Nephew’s commitment to education, research, and clinical trials with our surgeon partners has not waned. What has changed and will ultimately benefit everyone is the new process in place to ensure that activities are consistent with behaviors. Our desire to develop and grow with surgeons continues, but there is a different protocol going forward.

Mr. Mogul: Stryker is actively working with our orthopaedic surgeon consultant/partners in product development, clinical research, and medical education. We have more robust systems to manage these activities after the last 18 months, but the activities remain a key part of how we develop, study, and train on our products.

Mr. Dvorak: The consideration that has guided all of our decisions during this time is the importance of preserving the best of the collaborative relationships that drive innovation in product development, clinical research, and education. These relationships between industry and the healthcare professional community have facilitated the improvement of patient outcomes, and Zimmer firmly believes they are critical for developing tomorrow’s solutions.

At the same time, we recognized the need to better manage potential conflicts of interest and have been taking significant steps to enhance our compliance program. The Deferred Prosecution Agreement (DPA) only accelerated trends that were already underway.

Zimmer recognizes and understands that we will never be able to fulfill our purpose and mission without proper collaboration with the healthcare professional community. Clearly, innovation in the research and development area is the lifeblood of our company. To achieve our objectives for creating innovative solutions, we must continue to work closely with experienced healthcare professionals around the world to develop products that match the needs of patients. Our research and development efforts are vital to our success in this important endeavor.

Zimmer is also committed to delivering value to physicians and their patients through a full array of training and education opportunities. Here, too, we collaborate with highly experienced and skilled surgeons to help us deliver effective training and education to other physicians.

On changes due to monitoring
AAOS Now: In comparing your company’s policies and practices today with those of a few years ago, has your company modified, implemented, or cancelled any as a result of the monitoring?

Mr. Mogul: Stryker has developed sustainable processes that let us partner with surgeon consultants on product development, research, and education to advance medical technology and help improve patient care. Our professional affairs group, which is responsible for the management and oversight of all consultant relationships, now has increased resources and greater visibility across all functional areas.

Mr. DeVivo: Smith & Nephew has a new compliance process with checks, balances, and redundant controls to ensure that no one can perform a noncompliant activity. The spirit of how to design products, educate, and clinically validate them is the same. But checks and balances are in place to ensure compliance.

Mr. Floyd: DePuy has always felt that our interactions with surgeons as consultants have to be appropriate, above-board, and legitimate. Now we have to be able to demonstrate the validity of those interactions to interested outside parties such as the government and the public. We need to make clear that the surgeon and patient determine medical treatment and that the surgeon’s medical judgment is not clouded.

It is not just a matter of ensuring that we comply with the law but also that we can demonstrate that these important relationships are legitimate. Working in partnership with surgeons is an essential part of advancing orthopaedic medicine.

A good example of how we have made the processes more rigorous and improved the documentation is in our needs assessments to identify what our business is doing, our strategic objectives, our need for consultant services to achieve those objectives, the specific services needed, the kind of consultant needed and their qualifications. When a surgeon is finally engaged—whether to work on designing a new product or to teach a single course—you can demonstrate that you needed the surgeon, that the activity was necessary and essential, that the surgeon was qualified, that he or she was recruited for only appropriate reasons, and that the surgeon was compensated at no more than fair market value.

Having done several needs assessments—twice under the guidance of a monitor—I would tell you that our process is incredibly rigorous and robust.

Mr. Dvorak: Many of the processes we now follow were put in place in 2005, but today there is even more rigor in following the terms of the policies and implementing checks and balances. For example, we have separated sales and marketing activities from consulting and other appropriate financial arrangements with healthcare professionals. These arrangements are now handled by nonsales personnel specifically focused on these matters to ensure that we are managing our relationships properly and to facilitate communications with our consultants.

Another example is our support for the OMeGA Medical Grants Association, the third-party administrator created by the American Orthopaedic Association to receive and distribute industry funds for postgraduate orthopaedic education. We believe that this arrangement enables us to fulfill a legitimate role while removing any perceived inappropriate influence.

Mr. Binder: Biomet now has a more structured process for identifying and approving projects that require consultant input and for nominating consultants for those projects. Also, we have a more rigorous process for ensuring that we receive the services for which we pay.

We have completely isolated our sales force from any involvement in our consulting relationships. We do not want even the appearance of a link between our consultants and their current or potential business with the company as customers.

On fair market value
AAOS Now: The DOJ compliance requirements state that payments for consulting arrangements with orthopaedic surgeons must be based on “fair market value.” How are you determining fair market value, and has your need for consultant surgeons changed?

Mr. Floyd: DePuy works with outside consultants and healthcare compliance lawyers who specialize in this area. They, in turn, typically rely on published salary surveys and other methods of gaining compensation information, then apply proprietary processes to establish fair market value rates.

Mr. Dvorak: Zimmer has obtained independent third-party analysis on fair market value ranges for hourly consulting services as well as for intellectual property contributions resulting in royalties paid. In addition, we plan to review the hourly and royalty rates in the future. We fully anticipate that consultants will continue to play a vital role in developing and training on products and techniques to improve patient outcomes as well as in areas such as research and clinical studies.

Mr. Binder: The DPA set fair market value at a maximum of $500 per hour for consulting services. We will continue to use that figure as a ceiling for the time being. For royalty payments and other services, Biomet used an outside consulting firm to help determine fair market value. For example, in determining the fair market value for a surgeon who hosts visiting surgeons at his or her hospital to observe and learn a new surgical technique, expert third-party evaluation was very helpful.

Jeffrey Binder Biomet, Inc.
Joseph DeVivo Smith & Nephew
David Dvorak Zimmer Holdings, Inc.
David Floyd DePuy Orthopaedics, Inc.
Michael Mogul Stryker Orthopaedics

Mr. Mogul: Stryker remains committed to working with orthopaedic surgeons to research and design new medical technologies and provide education and training so all healthcare professionals can use technology safely and effectively to improve patient outcomes.

Mr. DeVivo: Like the other companies, Smith & Nephew worked with outside vendors. We identified a basic range for hourly rates and royalty compensation. We will depend on periodic—most likely annual—revalidation to ensure that we stay in step with what is deemed fair market value.

On participation in physician education
AAOS Now: Industry involvement in physician education, particularly graduate medical education (GME) and continuing medical education (CME) program funding, has been significant. Have your company’s activities or funding in this arena changed? How are you distributing CME and GME funding?

Mr. Dvorak: First, we absolutely believe that industry has an appropriate role in advancing the practice of orthopaedics, and funding for education is one of the ways that we can fulfill that role. Zimmer was the founding supporter of OMeGA for resident and fellowship program funding, and we are proud of our commitment to postgraduate medical education. We looked for a similar mechanism to fund CME, but we are currently addressing such requests through a new, internal Grants Review Committee that is separate from our sales functions. Our goal is to maintain our funding support, not reduce it, and make our dollars go as far as they can. Over time, we expect our support to grow.

Mr. Binder: Biomet has changed the way it contributes to teaching institutions. We have partnered with the Orthopaedic Research and Education Foundation (OREF) to create an “arms-length” process that allows us to contribute funds for GME, without any possibility of bias, using OREF’s expertise in grants and donations. We continue to support accredited CME courses, under a more stringent review and approval process.

We expect our financial support for these activities to increase, and we remain committed to supporting excellent educational programs. We are very concerned about the impending shortage of orthopaedic surgeons—we note, for instance, how many fellowship programs are going unfilled—and believe that we must do what we can to support orthopaedic GME.

Mr. Mogul: Stryker’s mission with regard to physician education remains unchanged. We will continue to be a major contributor through organizations like OREF and we will provide a significant number of educational opportunities in surgeon-led global educational programs and initiatives through the Homer Stryker Center and other venues.

Mr. DeVivo: Smith & Nephew signed an agreement with OREF as a third-party administrator to provide fellowship grants and some CME funding. It allows us to maintain our commitment to the industry and removes the potential of a quid pro quo from grants and fellowships. Our funding levels and our desire to continue to fund CME have not changed.

Mr. Floyd: DePuy is also providing GME support, residency program support, and fellowship support exclusively through a grant to the OREF, which would, through its own independent process, determine grant recipients.

We have not changed how we support CME. Requests for sponsorship are evaluated with our own processes and committees to make those decisions.

On disclosure legislation
AAOS Now: What is your company’s stance on the Physician Payment Sunshine Act?

Mr. Dvorak: Zimmer believes that a properly structured mechanism for disclosing industry-physician relationships can be a positive in building trust among patients, regulators, and policy makers. The Physician Payments Sunshine Act introduced by Sens. Kohl and Grassley is, in many ways, consistent with our own internal compliance and ethics initiatives. One concern we have expressed is that we believe that any federal law should deter states from enacting their own versions; physicians and companies should expect consistent disclosure requirements across all states.

Mr. Binder: Biomet supports transparency and disclosure of meaningful information to stakeholders. Reasonable and uniform disclosure requirements, created at the federal level, represent the most efficient way to do this. If every state has its own set of disclosure laws, manufacturers will face unmanageable and expensive disclosure requirements that simply create costs while providing information of dubious value.

Mr. Mogul: Stryker fully supports appropriate disclosure. Appropriate and ethical relationships between physicians and medical device companies are critical for medical progress and quality care.

Mr. Floyd: Johnson & Johnson has shared our support for the revised bill with the Act’s sponsors.

Mr. DeVivo: Smith & Nephew supports the AdvaMed position on this issue.

Final thoughts
AAOS Now: Would you like to share any additional thoughts on this new business climate with our readers?

Mr. DeVivo: Smith & Nephew believes the integrity of the relationship between the company, consulting surgeons, and surgeon partners has not and will not change. Our commitment to education, clinical trials, and research and development has not changed. We have weathered a very difficult storm and have emerged at a place where we believe we can continue that relationship in a much more protected and transparent environment. Going forward, we will actively work to develop and benefit the orthopaedic industry together and maintain that partnership.

Mr. Dvorak: We are excited to now be in a business climate where we can focus our efforts on helping surgeons provide the best possible treatments and outcomes for their patients. I recognize and regret that there were many disruptions during the past 18 months, but thanks to some outstanding work by great people and the patience and understanding of many surgeons, we are in a much better place today to lead in providing innovative solutions and in surgeon training on our products and techniques.

Zimmer believes we have preserved and strengthened our ability to collaborate with the profession to help advance orthopaedics, and we are delighted to be able to turn our full attention to our foremost concern—providing best-in-class products and services for surgeons and their patients.

Mr. Mogul: Stryker will continue to work together with surgeons to research, develop advanced technologies, and educate. We believe this strong collaborative exchange will deliver the right products and solutions to help improve patient outcomes around the world and may improve healthcare efficiency. At the same time, we will continue to manage the company in an ethical manner and engage healthcare professionals in an appropriate manner, consistent with our business practices.

Mr. Floyd: The contributions of surgeon consultants have been essential to advancing orthopaedic surgery. Because those same surgeons treat patients, however, together we have a responsibility to assure the public, the government, and other interested stakeholders that our interactions are appropriate and do not interfere with medical decisions in the best interest of patients.

With enhanced policies in place, DePuy can continue to collaborate with orthopaedic experts as surgeon consultants to develop and provide the best-in-class products to patients and to offer the medical education necessary to ensure those products provide the intended benefit to the patients.

Mr. Binder: I believe that it is crucial to preserve the surgeon’s role as patient advocate. Biomet believes that, as we debate changes in the delivery and payment of healthcare, our system must preserve the right of one surgeon to provide the best possible treatment to one patient. To the extent that evidence-based guidelines and comparative effectiveness can help surgeons make better decisions, we are supportive. We also support collaboration among stakeholders to improve the efficiency and reduce the cost of healthcare delivery. We are wary, however, of increasing government involvement in clinical decision-making and using financial penalties as enforcement.

We respect the right of the government to be a value-based purchaser of health care. We do not believe, however, that quality in orthopaedics can be defined by adherence to government-mandated processes. Quality is defined by how well each treatment addresses the unique needs and expectations of each patient. Any attempt to subordinate clinical decision-making to short-term financial concerns—whether under a government-mandated program or a restrictive, limited-vendor supply contract—undermines the true value of our healthcare system.

G. Jake Jaquet is executive editor of AAOS Now. He can be reached at

Final notes on the DOJ
In September 2007, after more than 2 years of ongoing federal investigation, the U.S. Attorney of New Jersey (Department of Justice or DOJ) reached settlement agreements with five major orthopaedic device manufacturers—Biomet, Inc., DePuy Orthopaedics, Inc., Smith & Nephew, Inc., Stryker Orthopaedics, Inc., and Zimmer, Inc.—over allegations that the companies paid financial inducements to surgeons to use their products. Under the agreements, the companies acquiesced to new corporate compliance procedures and accepted federal monitoring for an 18-month period; the monitoring period expired at the end of March 2009.

Biomet, DePuy, Smith & Nephew, and Zimmer executed Deferred Prosecution Agreements (DPAs), paid a total of $311 million to settle government claims, and are now operating under 5-year Corporate Integrity Agreements with the Department of Health and Human Services Office of the Inspector General. Under a Non-Prosecution Agreement, Stryker Orthopaedics, Inc., made no financial settlement, but was subject to the same federal oversight and required reforms.

It is unlikely, however, that the story ends here. Investigations into the relationships between orthopaedic surgeons and industry are continuing on a number of levels. Watch AAOS Now for ongoing coverage of this important issue.