2009: In Retrospect | Orthopedics This Week
Legal & Regulatory and Reimbursement

2009: In Retrospect

Photo source: RRY Publications

We remembered 2008 as the year of disruption in orthopedics as relationships between device makers and their consulting surgeons went through a deferred prosecution and federal monitoring period.

According to compliance officers at some of the large hip and knee makers, this disruption interrupted the flow of product development that slowed the pace of innovation in 2009. This disruption also cost consulting surgeons millions of dollars and may have contributed to Zimmer’s market share losses in the past 12-14 months. With former U.S. Attorney General John Ashcroft (or his minions) attending every meeting, reviewing every contract, Zimmer installed one of the toughest compliance programs in the industry. CEO Dave Dvorak spent a substantial amount of his time in 2009 soothing Wall Street analysts and disgruntled surgeons.

Flow of Innovation Returns

The federal monitoring period ended in 2009 for Zimmer, Stryker, Biomet, DePuy and Smith & Nephew and, as we learned from conversations with some of the firms, development projects that might have been put on hold during the compliance period are starting to move again and the innovation is flowing.

In fact, despite some of the rhetoric regarding diminished R&D budgets, our sources are telling us that the major orthopedic companies are planning to resume full implementation of their product development processes.

Disclosures and Transparency

Former federal prosecutor Christopher Christie, now New Jersey Governor, gave Congress an update in June of how the DPA (deferred prosecution agreement) had affected the orthopedic industry and how he had, in his exalted opinion, saved the U.S. orthopedic device industry from itself. He also gave his justification for not prosecuting companies and physicians.

"If [the government] had sought an indictment from a federal grand jury…it is certain that these companies would have been suspended and debarred from the Medicare programs. That exclusion would have certainly caused each of the five companies to go out of business with the resulting loss of 47, 000 American jobs and cutting edge devices which improve the lives of millions of Americans, " said Christie.

Christie took credit for saving the public purse almost half a billion dollars by fining companies over $300 million and a resulting drop in consultant payments to physicians by around $150 million in 2008. As we noted earlier in the year, physicians ended up paying almost half of the industry fines in 2008.

We also wondered how much of the 2008 industry fine affected physician payments in 2009.

So we checked the Web sites of the five company that reported physician payments.

Stryker

http://www.stryker.com/meetourconsultants/consultants/consultants.php

Smith & Nephew
DePuy

http://www.depuy.com/corporate-information/find-surgeons#/A-B

Where are Zimmer and Biomet you ask? 

Turns out both companies stopped publicly disclosing what they were paying surgeons when the federal monitors left earlier in the year. Both companies told OTW that, while they support Senator Grassley’s “Sunshine” legislation to require disclosure of payments, they were declining to continue reporting until a federal law is passed.

Only Smith & Nephew's disclosure format allows one to quickly look at the total number of consultants receiving payments in 2009. Stryker and DePuy list payments to surgeons in alphabetical order.

Smith & Nephew paid 236 surgeons in 2008. That number dropped to 122 in 2009. Industry officials tell us that even though the number of payments may be down, the orderly reintroduction of payments will contribute to increased product development flow in 2010.

Disclosure of industry/physician ties also took center stage within orthopedic medical societies.

The North American Spine Society (NASS) announced earlier this year that it was implementing tough disclosure requirements AND may ask its organizational leaders to divest certain consulting contracts and company holdings during their tenure as NASS leaders.

These new measures caused some former leaders of the society to publicly suggest that the society no longer represented the best interests of surgeons. Current NASS leaders pointed out that membership and industry participation at its annual meeting was up and, if anything, the new disclosure requirements were attracting surgeons to the society.

Surgeons in the Crosshairs

The struggle for finding the appropriate level and mechanism for physician payment disclosures brought three prominent surgeons in Senator Grassley’s crosshairs in 2009 and put them into the public spotlight.

David Polly, M.D., Jeff Wang, M.D. and Tim Kuklo, M.D. all made headlines as Senator Grassley’s office leaked information to national media following requests for information about their relationships with industry.

Dr. Polly, who had disclosed payments from Medtronic in excruciating detail, found himself debating Senator Grassley over clinical judgments (Polly won), but ended up leaving his board seat at the American Academy of Orthopaedic Surgeons (AAOS) due to the distraction caused by the news leaks.

Dr. Kuklo, a former Army surgeon and Medtronic consultant, was accused of lying about the number of patients in a study and of forging former colleagues’ names to clinical papers. Kuklo resigned his post at Washington University. A University investigation partially exonerated Kuklo.

Dr. Wang, a NASS leader, was accused of failing to disclose certain outside income from industry to his employer, UCLA. Our inquiries led to questions of duplicity by the University and no further public announcements have been made regarding his situation.

The lesson for surgeons from these public “outings” was that when political pressure becomes too hot, they will be left to defend themselves as their institutions and company employers seek to protect their reputations.   

Dr. Polly summarized it best when he told OTW that until clear, consistent and comprehensible disclosure rules are put in place, surgeons will be thinking twice about working with industry through their institutions.

FDA Dysfunction

The “freeze” in innovation in 2009 due to disrupted industry/surgeon relationships and “outing” of surgeons may have been exacerbated by a dysfunctional FDA.

First, the agency's own Science Board warned in late 2007 that the agency was no longer able to effectively fulfill its mission of protecting the public's health. Then a public fight between bureaucrats within the FDA over the 510(k) clearance program spilled over into the FDA orthopedic panel and the media as ReGen Biologics, a small device company from New Jersey got caught in the crossfire. After an orthopedic panel meeting, the panel's chair told the press that he believed the agency had stacked the panel membership deck to get the result the agency wanted.

After receiving clearance following the orthopedic panel’s conclusion that the company's device was safe and probably effective, the agency's new leaders decided that they would reconsider the ReGen decision as well as review the entire 510(k) clearance program.

The dysfunction wasn't limited to the agency's bureaucracy, as the orthopedic panel itself surprised observers when it voted twice during the year to deny a recommendation of approval of a device because panel members found clinical trial parameters worked out years ago between the agency and companies, inadequate. Stryker's OP-1 crashed at the hands of statisticians and Zimmer's Dynasys spine device fell victim to a study that some panel members believed did a disservice to the device.

Finally, to show Congress that new FDA leaders were getting tougher with device companies, the agency announced on October 5 that it was requiring manufacturers of 16 dynamic stabilization devices for spinal fusion to conduct new postmarket surveillance studies.

Moving Overseas

The FDA has evolved into a large and growing “tax’ on the medical device industry and that, probably more than any other reason, is fueling an exodus of medical technology from the U.S. to overseas markets. These frustrations found a voice at the Spine Technology Education Group’s meeting in October where entrepreneurs and surgeons stood up to explain and articulate the FDA’s chaos and unpredictability to U.S. Senate Minority Whip John Kyl of Arizona.

Comparative Effectiveness

While industry/surgeon relationships and a debate over the nation’s healthcare system was taking up all the oxygen in the media tent, a lesser publicized event may have the biggest impact on the business and practice of orthopedics in the long run.

The American Recovery and Reinvestment Act of 2009 allocated $1.1 billion for the creation of the Federal Coordinating Council for Comparative Effectiveness Research to coordinate comparative effectiveness research across the Federal government.

Steve Ubl, head of AdvaMed, the device industry’s trade association, told private investors on June 12 that proposed health care legislation would likely “be a wash” for medical technology companies due to increased coverage of the uninsured and a slowing of the increase of health care spending by the government.

However, said Ubl, proposals such as “comparative effectiveness” might even benefit the sector as he believes that industry will adapt to any changes in health care policy and reimbursements.

Comparative effectiveness is designed to give providers better data about which treatments work best, compared to other treatment options. Language in the enabling legislation specifically prohibits the data to be used to deny coverage. Former HHS Secretary Tommy Thompson told attendees at the 2009 AAOS meeting that if they believed that, he had a bridge to sell them.

The long-term consequence of implementing comparative effectiveness is that the current language used by CMS (Centers for Medicare and Medicaid Services) to determine coverage, “reasonable and necessary” could be replaced by “better and cheaper.”

When device manufacturers and inventors have to build that into their product development assumptions, their decisions about how to invest R&D dollars will likely change.

Notable 2009 Events

Other significant events of 2009 that are worthy of note include:

  • The indictment and guilty pleas of Synthes and Stryker executives and managers for off-label promotion of bone growth products
  • Dr. Arnut Gawande’s article in The New Yorker which laid bare that medical costs and patient outcomes don't match up
  • Tony Viscogliosi’s raising of $150 million in financing for small bones and ankle replacement during a worldwide financial meltdown
  • The recovery of procedure volumes and profits for device manufactures during a severe recession
  • And, for fun, the spat between Joe the Surgeon and Barack the President over scalpel happy surgeons.

But lest we let the industry’s collective anxiety over the hurdles to innovation get out of hand, we were reminded at the end of the year, with the story of Dr. Wardak’s innovation of the Afghan device under the noses of the Taliban, that innovation can and will take place in the most unexpected places and improbable times.

If a small bike shop in Kabul can do it, so can we.

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