Published 12/1/2012
Andrew D. Markiewitz, MD

Managing Relations with Industry

Even ethical arrangements are under scrutiny

Medicine is a business, and healthcare is a robust part of the U.S. economy. The healthcare sector employed 10.5 percent of the American workforce in 2008 and represented 17.3 percent of the U.S. gross domestic product in 2009.

Most physicians, however, entered medicine based more on their desire to help than on their craving for profit. Physicians who become involved in the business side of medicine—as inventors, educators, or consultants—must do so carefully and ethically, placing their responsibility as healthcare providers over financial gain. Physicians who are asked to advocate for or endorse a product or approach need to ask themselves whether they would use it on a member of their family or on themselves.

Physicians who study whether one product or treatment plan improves patient care or is more cost-effective than another must be free of bias. If their research is supported or sponsored by industry, they must not allow negative results to be suppressed.

The presence of a physician leader at an industry-sponsored event can be seen as an implied product endorsement. This becomes even more problematic if the physician discusses an “off-label” use of the product, one not yet approved by the Food and Drug Administration. Because companies may not promote “off-label” use, many seek out “opinion leaders,” prominent physicians who can influence treatment decisions, including “off-label” use.

The creative physician
Many physicians are self-starters, innovators, and thinkers. Because of their direct contact with patients and their desire to improve patient outcomes, physicians and surgeons may be better able to create or refine products and techniques than engineers or developers. They may also serve as troubleshooters to identify problems and suggest solutions.

As in any other field, physicians should be allowed to profit from improvements that affect their arena. Society must balance the contributions that physicians make to the advancement of medicine by serving as industry consultants with the potential abuses that could result. Requiring physician-inventors to relinquish their intellectual property rights without compensation, as some suggest, would tip the scales too far in one direction without necessarily preventing potential abuses.

Ownership of intellectual property is an important right that is recognized and protected in both case law and statutes. If a physician is employed and develops a product within the scope of his or her employment, the employer generally maintains the right to market and develop the product, unless agreements are in place that provide otherwise. Most institutions will assess their interest and determine whether they will allow an employee to develop the product at her or her personal cost. These avenues should be explored first to avoid allegations of fraud or theft.

Individual surgeon-inventors will need to form relationships with industry to realize their ideas. To avoid any appearance of impropriety, these arrangements should be clear and transparent. The surgeon’s service should be carefully documented, as well as necessary and fairly reimbursed. The surgeon must actually deliver the contracted service and, as a result, should be fairly compensated.

Consulting relationships
In 2005, more than 75,000 expert clinicians and researchers provided information to industry. To many—including members of Congress— consulting relationships may be viewed as inducements to use a company’s product. In addition, if, during the course of the relationship, the physician obtains “insider information” that is not available to the common investor or the public, this may be a potential source of liability and a violation of the Securities and Exchange Commission rules.

Between 2002 and 2006, the four largest hip and knee implant manufacturers spent $800 million on 6,500 consulting agreements. In a federal investigation exploring the companies’ relationships with orthopaedic surgeons, four device makers—Biomet Orthopedics, DePuy Orthopedics, Smith & Nephew, and Zimmer, Inc.—settled with the government in 2007 for $310 million and government supervision. A fifth manufacturer—Stryker Orthopedics, Inc.—was not fined but was subject to the same government oversite. In 2010, Wright Medical Technology settled with the government for $7.9 million and government supervision.

As a result of these investigations, orthopaedic device makers are required to list on their websites the names and certain financial information about the physicians with whom they have consulting or other relationships. The implant manufacturers are also required to disclose “any costs of additional indirect payments,” such as the estimated costs for registered or unregistered securities, meals, entertainment, travel, gifts, and in-kind services.

Before embarking on any consulting arrangement, physicians should test it against several considerations, including the following:

  • Does it violate the physician’s fiduciary duty to patients?
  • Does it require industry oversight and permission before research data is released?
  • Does it restrict use of competitors’ products that may be superior in their efficacy?
  • Does it provide reimbursement for work not done?
  • Would the public exposure of the contract change the physician’s desire to continue it?
  • Does it violate any ethical standards a physician should hold dear?

Government oversight
The government believes that consulting arrangements between physicians and industry require oversight. This has resulted in the passage of the Physician Payment Sunshine Act. Beginning next year (2013), any industry payment of more than $10 or annual cumulative payments of more than $100 must be publicly reported. Implementation may be difficult, however, because (as of this writing) the Centers for Medicare & Medicaid Services has yet to release final guidelines.

The National Institutes of Health (NIH) used the following three principles in developing its final ethics rules:

  • Research is based on scientific evidence not inappropriate influences.
  • As decision makers, senior researchers answer to a higher standard.
  • To remain at the forefront of science, interaction with industry, professional associations, and public health activities is necessary.

As government employees, researchers at NIH must meet the following requirements:

  • They are prohibited from performing outside consulting with companies that could be “substantially affected” by the results of their research.
  • They are required to divest any holdings worth more than $15,000.
  • They are restricted from receiving awards unless the awards are peer-reviewed.
  • They are required to disclose potential conflicts, receive prior approval to serve on monitoring or grant review boards, and abide by provisions for participating in academic and educational exercises.

In addition, several professional societies have issued guidelines for their members, which will be covered in the next article in this series.

Andrew D. Markiewitz, MD, is a member of the AAOS Medical Liability Committee. He can be reached at bloxiblues@aol.com

Editor’s Note: This is the first in a two-part series on potential liability issues and guidelines for managing relations with industry.


  1. http://www.laworks.net/downloads/LMI/BLSSpotLight1109.pdf
  2. http://en.wikipedia.org/wiki/Health_care_in_the_United_States