The PPACA 's 'Physician Payment Sunshine Provisions'

Basic Requirements of the Physician Payment Sunshine Provisions

Under the Physician Payment Sunshine provisions found in the PPACA, all U.S. drug and medical device manufacturers must report the gifts and payments they make to physicians. The provisions require disclosure of cash and in-kind payments, including food, entertainment, gifts, travel, consulting fees, and honoraria. This also includes research funding or grants, education-related or conference funding, as well as stocks, stock options, ownership or investment interest, royalties, charitable contributions, and any other transfer of value. Companies will be required to report the name, address, and national provider identifier of the physician receiving the payment or gift as well as the value, form, and nature of the payment and the payment date. If the payment is related to marketing, education, or research on a specific drug or device, the product name must also be reported. The Act exempts payments less than $10 until the aggregate annual total per company, per recipient, reaches $100, at which point all payments must be retroactively disclosed. A four-year publication delay is allowed for payments related to clinical trials or product development agreements for new products, or until the time of product approval ' whichever occurs first. Fines of up to $10,000 will be applied for each failure to report, not to exceed $150,000 annually. For each knowing failure to report, fines of up to $100,000 will be applied, not to exceed $1 million annually.

The purpose of these provisions is to allow for greater transparency in physician-industry financial relationships. All information disclosed by manufacturers is to be posted on a public, searchable website hosted by the U.S. Department of Health and Human Services (DHHS), and DHHS will submit annual reports to Congress and to each state. Support for this type of reporting is grounded in the notion that payments create an inherent conflict of interest between patients and physicians. It is also grounded in the corresponding belief that public disclosure of payments may both deter physicians from accepting payments from the industry and create a culture of transparency in which the public can evaluate payment information and identify any potential conflicts of interest.

Interestingly, although the Sunshine provisions require public disclosure of gifts and payments, they do not limit financial relationships between manufacturers and physicians.

The Controversy Surrounding Physician Payments

The common practice of pharmaceutical product and medical device manufacturers compensating physicians for participating in company-sponsored activities has faced increasing amounts of public criticism and scrutiny. There are some who believe financial relationships between pharmaceutical companies and doctors ' including even a physician's participation in industry-sponsored training and clinical research programs ' undermine a doctor's independence and objectivity and makes him or her more willing to prescribe the compensating manufacturer's products. See, e.g., Editorial, Who Else Is Paying Your Doctor?, N.Y. Times, Jan. 20, 2012, at A22 (available at www.nytimes.com/2012/01/21/opinion/who-else-is-paying-your-doctor.html). These criticisms are based in the belief that payments from industry create an inherent conflict between the commercial interests of manufacturers and physicians' obligations to act in the best interest of their patients. See generally Medicare Payment Advisory Commission, Report To The Congress, 322 (2009). (available at www.medpac.gov/documents/jun
09_entirereport.pdf).

According to a recent survey conducted by the Institute on Medicine as a Profession, 83.8% of the physician respondents reported some type of relationship with industry. Over two-thirds of physicians (70.8%) received gifts from industry, primarily food and beverages in their offices. A total of 18.3% reported receiving reimbursements for meetings or free or subsidized admission to CME events. A total of 14.1% received payments for professional services to pharmaceutical companies. Of these, payments for speaking engagements were the most frequent (8.6%), followed by payments for serving as a consultant (6.7%), payments for serving on a company's advisory board (4.6%), and payments for enrolling patients in clinical trials (1.2%). See Eric G. Campbell, et al., Physician Professionalism and Changes in Physician-Industry Relationships from 2004 to 2009 (2010) (available at http://archinte.jamanetwork.com/article.aspx?articleid=226207). A key finding of this study is that these rates of physician compensation reflect a significant decrease from 2004, which suggests that efforts in recent years aimed at reducing or eliminating physician/industry financial relationships have been successful. This includes the extensive investigative efforts of Sen. Chuck Grassley (R-IA), who first introduced the Physician Payment Sunshine Act, which was later incorporated into the PPACA.

A Heated Forecast: Murthy v. Abbott Laboratories

It is questionable whether financial “ties” to the pharmaceutical or medical device industry truly undermine a physician's independent medical judgment. Even critics concede that “[p]atients benefit when physicians and researchers collaborate with the private sector to advance the development of effective new drugs and medical devices.” Pew Prescription Project Home Page, www.pewhealth.org/projects/pew-prescription-project-85899367092 (last visited July 2, 2012). Notwithstanding observations like these, the plaintiffs' bar has brought physician payments to the foreground with some success, and the PPACA's Sunshine provisions will only bring greater spotlight on the issue.

The learned-intermediary doctrine is the most susceptible to attack. For over 40 years, courts have held that a drug manufacturer's duty to warn runs to prescribing physicians ' not patients. Under the doctrine, once prescribers have been educated, they then have a responsibility to “effectively educate their patients” about the product. Given prescribing physicians' “education, experience, and knowledge in prescribing medications or treatment,” the doctrine recognizes that these doctors “are in the best position to evaluate the risks associated with their use.” Michael P. Pagano, Conflict of Interest, Bias, and Manipulation: Reassessing Prescriber Education and the Learned Intermediary Doctrine, 10 Commc'n L. Rev. 30 (2010).

Underlying the learned intermediary doctrine, however, is the premise that the product information was provided to the physician under ethical circumstances, which for some commentators, does not include circumstances where a company has compensated the prescriber. The federal district court for the Southern District of Texas recently articulated this position in its unprecedented decision in Murthy v. Abbott Laboratories, No. 4:11-cv-105, 2012 WL 734149 (S.D. Tex. Mar. 6, 2012).

In Murthy, the plaintiff, a rheumatoid arthritis (RA) patient, brought suit against Abbott Laboratories after participating in a clinical trial where she received infusions of Humira', an investigational drug manufactured by Abbott for the treatment of RA. Id. at *1. The plaintiff alleged that: 1) the Humira infusions caused her to develop lymphoma; and 2) the warnings contained in the materials she received before consenting to participate in the study ' a consent agreement and a video about Humira therapy ' were inadequate. Id. at *2.

Abbott raised the learned intermediary doctrine as a defense. The court declined to dismiss the plaintiff's failure-to-warn claim on learned-intermediary grounds, however, because “[plaintiff's] situation depart[ed] from the typical treatment scenario.” Id. at *7. According to the court, the treatment scenario was altered because Abbott directly marketed to plaintiff through its “promotional video,” and also because the plaintiff's prescribing physician had been compensated by Abbott for her role as a principal investigator in the Humira clinical trial. Id.

The Murthy court reasoned that “[u]nder certain circumstances, when a physician receives compensation or gifts from drug companies, his or her role as the neutral decision-maker may be diminished.” Id. at *9. While the court did not completely close the door on the defendant's ability to rely upon the learned-intermediary doctrine, it did indicate that “the Court would have to examine the factual circumstances surrounding the compensation of [the plaintiff's] physician in order to evaluate whether application of the learned intermediary doctrine is appropriate.” Id.

Although the plaintiff's failure-to-warn claim was ultimately dismissed on other grounds (see Lofton v. McNeil Consumer & Specialty Pharmaceuticals, 672 F.3d 372, 381 (5th Cir. 2012) (holding that the Texas Civil Practices and Remedies Code ' 82.007 is preempted by the Federal Food, Drug, and Cosmetic Act, absent fraud on the FDA)), the Murthy court's reasoning on how physician payments may limit the applicability of the learned-intermediary doctrine is indeed troubling. The court engaged in significant discussion regarding the way physician payments alter the typical medical treatment scenario, id. at *7, and explained its view that “when a physician is compensated by a drug company, some of the assumptions underlying the learned intermediary doctrine no longer hold.” Id. at *9. Both of these assertions are based on the court's overall position that a physician who is compensated by a drug manufacturer is no longer able to be an “objective intermediary who will draw an independent judgment about the best course of treatment for his or her patient.” Id.

The court concluded its discussion of this topic by noting that “gifts or compensation from drug companies influence medical professionals' treatment decisions,” and that “a doctor who receives gifts or compensation from a drug company may no longer, 'as the prescriber, stand[ ] between the drug and the ultimate consumer'” given the doctor's “diminished role as an evaluator or decisionmaker.” Id. (citing Restatement (Third) of Torts (1998), comment b.). The Murthy court delivered a final blow to the learned-intermediary doctrine by suggesting that in such instances, “it may be appropriate to impose on the manufacturer the duty to warn the patient directly.” Id.

The Problem with Murthy

The Murthy decision is misguided for several reasons. First, it is clear that industry relationships with physicians are vital. These relationships lead to advances in medical research and technology, which ultimately translate into improved patient care. Not only do patients benefit when physicians and researchers collaborate with industry to advance the development of effective new drugs and medical devices, but they also derive benefits from having access to doctors who are knowledgeable about cutting-edge drugs and devices.

Second, the Murthy court's suggestion that physician payments inherently undermine the doctor/patient relationship is an unfounded, sweeping generalization. Contrary to the court's analysis, physician payments generally represent drug and device manufacturers' efforts to compensate doctors for their time and talents. Companies compensate physicians under a variety of quite reasonable circumstances, including: 1) payments for overseeing clinical trials and conducting post-market research; 2) consulting fees and royalties to assist in new product development; 3) subsidizing physicians' trips to attend the training and continuing medical educational (CME) conferences they sponsor, in addition to paying physicians to conduct them; and 4) offering investment interests in return for the expert advice and technical assistance physicians provide.

A recent decision from the Texas Supreme Court that fully endorsed the applicability of the learned intermediary to pharmaceutical products is a strong indication that the Murthy order may eventually be overturned. See Centocor, Inc. v. Hamilton, No. 10-0223, slip op. (Tex. June 8, 2012). It is important to note, however, that while the Centocor decision rejects Murthy's contention that direct-to-consumer advertising could potentially preclude application of the learned intermediary doctrine, it does not specifically address the issue of physician compensation as an exception to the rule, which arguably remains an open question under Texas law, as well as the laws of other states.

While the Murthy court was not the first to consider whether physician payments preclude the learned intermediary doctrine in product liability cases, it does appear to be the first court actually to adopt this position. It remains to be seen whether this position will resurface in other cases, and whether any other courts will agree with the Murthy court's assessment that physician payments alter the doctor-patient relationship such that the learned intermediary doctrine may not apply. In this respect, Murthy may be an indicator of what is on the horizon in drug and medical device litigation as physician payments receive increased attention.

Practical Recommendations to Avoid Physician Payment Trouble

Now that it is clear the Physician Payment Sunshine provisions are here to stay, drug and device companies should be continually contemplating how they can successfully maneuver within the new legal environment that will be created as these provisions are implemented. Not only should companies ensure full compliance with the provisions, but they should also evaluate their current physician payment policies to determine whether the payments can survive the heightened public scrutiny that is sure to come. It would be advisable for companies to limit their direct involvement in education events conducted by compensated physicians. Finally, pharmaceutical and medical device companies should continue to be ever-mindful of ethical considerations when establishing guidelines for payments to physicians.

Comply Fully with the New Provisions

Despite the added administrative burden and costs the new reporting requirements may place upon drug and device manufacturers, complying with them will not only help companies avoid the civil penalties that could result from non-compliance, but it will also demonstrate that there is nothing to hide. Pharmaceutical and medical device companies can avoid any appearance of impropriety by reporting physician payments as required.

Make sure payments can be justified. Although it may be clear to a manufacturer why physician payments are being made, public perceptions must be given greater consideration. Manufacturers should seek out physicians who are experienced experts in the relevant field for speaking and consulting engagements. By choosing to compensate physicians based on their professional reputations and expertise, companies are better positioned to justify the payments, and can avoid the impression that they simply throw money at doctors indiscriminately.

Maintain a 'Hands-Off' Approach in Educational Efforts

Drug and device manufacturers should be wary of developing the speeches, presentations, and other materials used by compensated physicians at sponsored educational events. While companies may provide presenters with basic guidelines, physician presenters should have autonomy in developing the materials that will ultimately be presented about the drugs or medical devices they are educating other doctors about at company-sponsored CME presentations, advisory board meetings, lectures, or other educational events.

Be mindful of ethical considerations. Drug and device manufacturers should be confident that the physician payments they make are neither focused on inducing the physician to use the company's product, nor used to reward physicians for doing so. Many industry and professional organizations such as the American Medical Association, the American College of Physicians, and the Pharmaceutical Research and Manufacturers of America have developed voluntary codes of ethics that drug and device manufacturers should also take into consideration when determining how and why they will compensate physicians.

Conclusion

Following implementation of the Physician Payment Sunshine provisions, pharmaceutical and medical device manufacturers will undoubtedly continue to face accusations that they use money inappropriately to influence physicians' treatment decisions. Drug and device manufacturers must continue to rebut the implication that all physician-industry financial ties work to undermine the physician-patient relationship.

While the obvious penalties of this new mandate are fines for failure to meet the disclosure requirements, public perceptions of physician compensation may be the larger threat to defendant manufacturers. Physicians undoubtedly play a critical role in advancing health care through the expertise they provide to drug and device manufacturers. Physicians are also key players in pharmaceutical and medical device litigation, given their authority to diagnose conditions, prescribe pharmaceutical products, and select the medical devices used in patient procedures. Going forward, it will be important for manufacturers to maintain physician payment policies that not only protect their own reputations, but also the reputations of the doctors they compensate.

Although the Murthy decision may not stand, the court's discussion of physician payments should serve as a warning to the pharmaceutical industry. As physician payments become more visible under the Sunshine provisions, the Murthy court's opinion may well be adopted by other courts. There are steps, however, that pharmaceutical defendants can take to avoid detrimental outcomes in courts of law, as well as the court of public opinion.

Kendra Perkins Norwood is an associate at Hollingsworth LLP in Washington, DC. She practices in the firm's Pharmaceutical Products and Toxic Torts & Products Liability groups, where she currently assists in the defense of mass tort pharmaceutical products liability litigation.

The U.S. Supreme Court's recent decision in Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. ____ (2012), upholding the Patient Protection and Affordable Care Act (PPACA) (42 U.S.C. ' 18001) signed into law by President Obama in 2010, will likely be one of the most controversial and talked-about legal decisions of this century. While the media attention surrounding both the legislation and the Supreme Court's decision has focused on the individual mandate ' one of the most contested provisions of the Act ' a lesser-known mandate known as the “Physician Payment Sunshine provisions” may have larger implications for pharmaceutical companies and others.

Located in ' 6002 of the PPACA and formally titled “Transparency Reports and Reporting of Physician Ownership or Investment Interests,” the Physician Payment Sunshine provisions require pharmaceutical and medical device companies to publicly disclose the payments they make to physicians. Although a small number of manufacturers already report this information publicly, there has never been a widespread federal requirement to do so until the PPACA was enacted.

Public access to pharmaceutical companies' physician payment data could change the landscape of product liability litigation in many ways. Most troubling is the possibility that the heightened attention and access to this data could lead some courts to use physician compensation as a basis for carving out yet another exception to the learned intermediary doctrine. A federal district court has recently come close to doing so in Murthy v. Abbott Laboratories, No. 4:11-cv-105, 2012 WL 734149 (S.D. Tex. Mar. 6, 2012), reasoning that compensated physicians may not be capable of making unbiased medical treatment decisions. Id. at *9. Although several other courts have previously rejected this position, its acceptance by the Murthy court may provide greater traction for this position as visibility into physician payments increases.

Basic Requirements of the Physician Payment Sunshine Provisions

Under the Physician Payment Sunshine provisions found in the PPACA, all U.S. drug and medical device manufacturers must report the gifts and payments they make to physicians. The provisions require disclosure of cash and in-kind payments, including food, entertainment, gifts, travel, consulting fees, and honoraria. This also includes research funding or grants, education-related or conference funding, as well as stocks, stock options, ownership or investment interest, royalties, charitable contributions, and any other transfer of value. Companies will be required to report the name, address, and national provider identifier of the physician receiving the payment or gift as well as the value, form, and nature of the payment and the payment date. If the payment is related to marketing, education, or research on a specific drug or device, the product name must also be reported. The Act exempts payments less than $10 until the aggregate annual total per company, per recipient, reaches $100, at which point all payments must be retroactively disclosed. A four-year publication delay is allowed for payments related to clinical trials or product development agreements for new products, or until the time of product approval ' whichever occurs first. Fines of up to $10,000 will be applied for each failure to report, not to exceed $150,000 annually. For each knowing failure to report, fines of up to $100,000 will be applied, not to exceed $1 million annually.

The purpose of these provisions is to allow for greater transparency in physician-industry financial relationships. All information disclosed by manufacturers is to be posted on a public, searchable website hosted by the U.S. Department of Health and Human Services (DHHS), and DHHS will submit annual reports to Congress and to each state. Support for this type of reporting is grounded in the notion that payments create an inherent conflict of interest between patients and physicians. It is also grounded in the corresponding belief that public disclosure of payments may both deter physicians from accepting payments from the industry and create a culture of transparency in which the public can evaluate payment information and identify any potential conflicts of interest.

Interestingly, although the Sunshine provisions require public disclosure of gifts and payments, they do not limit financial relationships between manufacturers and physicians.

The Controversy Surrounding Physician Payments

The common practice of pharmaceutical product and medical device manufacturers compensating physicians for participating in company-sponsored activities has faced increasing amounts of public criticism and scrutiny. There are some who believe financial relationships between pharmaceutical companies and doctors ' including even a physician's participation in industry-sponsored training and clinical research programs ' undermine a doctor's independence and objectivity and makes him or her more willing to prescribe the compensating manufacturer's products. See, e.g., Editorial, Who Else Is Paying Your Doctor?, N.Y. Times, Jan. 20, 2012, at A22 (available at www.nytimes.com/2012/01/21/opinion/who-else-is-paying-your-doctor.html). These criticisms are based in the belief that payments from industry create an inherent conflict between the commercial interests of manufacturers and physicians' obligations to act in the best interest of their patients. See generally Medicare Payment Advisory Commission, Report To The Congress, 322 (2009). (available at www.medpac.gov/documents/jun
09_entirereport.pdf).

According to a recent survey conducted by the Institute on Medicine as a Profession, 83.8% of the physician respondents reported some type of relationship with industry. Over two-thirds of physicians (70.8%) received gifts from industry, primarily food and beverages in their offices. A total of 18.3% reported receiving reimbursements for meetings or free or subsidized admission to CME events. A total of 14.1% received payments for professional services to pharmaceutical companies. Of these, payments for speaking engagements were the most frequent (8.6%), followed by payments for serving as a consultant (6.7%), payments for serving on a company's advisory board (4.6%), and payments for enrolling patients in clinical trials (1.2%). See Eric G. Campbell, et al., Physician Professionalism and Changes in Physician-Industry Relationships from 2004 to 2009 (2010) (available at http://archinte.jamanetwork.com/article.aspx?articleid=226207). A key finding of this study is that these rates of physician compensation reflect a significant decrease from 2004, which suggests that efforts in recent years aimed at reducing or eliminating physician/industry financial relationships have been successful. This includes the extensive investigative efforts of Sen. Chuck Grassley (R-IA), who first introduced the Physician Payment Sunshine Act, which was later incorporated into the PPACA.

A Heated Forecast: Murthy v. Abbott Laboratories

It is questionable whether financial “ties” to the pharmaceutical or medical device industry truly undermine a physician's independent medical judgment. Even critics concede that “[p]atients benefit when physicians and researchers collaborate with the private sector to advance the development of effective new drugs and medical devices.” Pew Prescription Project Home Page, www.pewhealth.org/projects/pew-prescription-project-85899367092 (last visited July 2, 2012). Notwithstanding observations like these, the plaintiffs' bar has brought physician payments to the foreground with some success, and the PPACA's Sunshine provisions will only bring greater spotlight on the issue.

The learned-intermediary doctrine is the most susceptible to attack. For over 40 years, courts have held that a drug manufacturer's duty to warn runs to prescribing physicians ' not patients. Under the doctrine, once prescribers have been educated, they then have a responsibility to “effectively educate their patients” about the product. Given prescribing physicians' “education, experience, and knowledge in prescribing medications or treatment,” the doctrine recognizes that these doctors “are in the best position to evaluate the risks associated with their use.” Michael P. Pagano, Conflict of Interest, Bias, and Manipulation: Reassessing Prescriber Education and the Learned Intermediary Doctrine, 10 Commc'n L. Rev. 30 (2010).

Underlying the learned intermediary doctrine, however, is the premise that the product information was provided to the physician under ethical circumstances, which for some commentators, does not include circumstances where a company has compensated the prescriber. The federal district court for the Southern District of Texas recently articulated this position in its unprecedented decision in Murthy v. Abbott Laboratories, No. 4:11-cv-105, 2012 WL 734149 (S.D. Tex. Mar. 6, 2012).

In Murthy, the plaintiff, a rheumatoid arthritis (RA) patient, brought suit against Abbott Laboratories after participating in a clinical trial where she received infusions of Humira', an investigational drug manufactured by Abbott for the treatment of RA. Id. at *1. The plaintiff alleged that: 1) the Humira infusions caused her to develop lymphoma; and 2) the warnings contained in the materials she received before consenting to participate in the study ' a consent agreement and a video about Humira therapy ' were inadequate. Id. at *2.

Abbott raised the learned intermediary doctrine as a defense. The court declined to dismiss the plaintiff's failure-to-warn claim on learned-intermediary grounds, however, because “[plaintiff's] situation depart[ed] from the typical treatment scenario.” Id. at *7. According to the court, the treatment scenario was altered because Abbott directly marketed to plaintiff through its “promotional video,” and also because the plaintiff's prescribing physician had been compensated by Abbott for her role as a principal investigator in the Humira clinical trial. Id.

The Murthy court reasoned that “[u]nder certain circumstances, when a physician receives compensation or gifts from drug companies, his or her role as the neutral decision-maker may be diminished.” Id. at *9. While the court did not completely close the door on the defendant's ability to rely upon the learned-intermediary doctrine, it did indicate that “the Court would have to examine the factual circumstances surrounding the compensation of [the plaintiff's] physician in order to evaluate whether application of the learned intermediary doctrine is appropriate.” Id.

Although the plaintiff's failure-to-warn claim was ultimately dismissed on other grounds ( see Lofton v. McNeil Consumer & Specialty Pharmaceuticals , 672 F.3d 372, 381 (5th Cir. 2012) (holding that the Texas Civil Practices and Remedies Code ' 82.007 is preempted by the Federal Food, Drug, and Cosmetic Act, absent fraud on the FDA)), the Murthy court's reasoning on how physician payments may limit the applicability of the learned-intermediary doctrine is indeed troubling. The court engaged in significant discussion regarding the way physician payments alter the typical medical treatment scenario, id. at *7, and explained its view that “when a physician is compensated by a drug company, some of the assumptions underlying the learned intermediary doctrine no longer hold.” Id. at *9. Both of these assertions are based on the court's overall position that a physician who is compensated by a drug manufacturer is no longer able to be an “objective intermediary who will draw an independent judgment about the best course of treatment for his or her patient.” Id.

The court concluded its discussion of this topic by noting that “gifts or compensation from drug companies influence medical professionals' treatment decisions,” and that “a doctor who receives gifts or compensation from a drug company may no longer, 'as the prescriber, stand[ ] between the drug and the ultimate consumer'” given the doctor's “diminished role as an evaluator or decisionmaker.” Id. (citing Restatement (Third) of Torts (1998), comment b.). The Murthy court delivered a final blow to the learned-intermediary doctrine by suggesting that in such instances, “it may be appropriate to impose on the manufacturer the duty to warn the patient directly.” Id.

The Problem with Murthy

The Murthy decision is misguided for several reasons. First, it is clear that industry relationships with physicians are vital. These relationships lead to advances in medical research and technology, which ultimately translate into improved patient care. Not only do patients benefit when physicians and researchers collaborate with industry to advance the development of effective new drugs and medical devices, but they also derive benefits from having access to doctors who are knowledgeable about cutting-edge drugs and devices.

Second, the Murthy court's suggestion that physician payments inherently undermine the doctor/patient relationship is an unfounded, sweeping generalization. Contrary to the court's analysis, physician payments generally represent drug and device manufacturers' efforts to compensate doctors for their time and talents. Companies compensate physicians under a variety of quite reasonable circumstances, including: 1) payments for overseeing clinical trials and conducting post-market research; 2) consulting fees and royalties to assist in new product development; 3) subsidizing physicians' trips to attend the training and continuing medical educational (CME) conferences they sponsor, in addition to paying physicians to conduct them; and 4) offering investment interests in return for the expert advice and technical assistance physicians provide.

A recent decision from the Texas Supreme Court that fully endorsed the applicability of the learned intermediary to pharmaceutical products is a strong indication that the Murthy order may eventually be overturned. See Centocor, Inc. v. Hamilton, No. 10-0223, slip op. (Tex. June 8, 2012). It is important to note, however, that while the Centocor decision rejects Murthy's contention that direct-to-consumer advertising could potentially preclude application of the learned intermediary doctrine, it does not specifically address the issue of physician compensation as an exception to the rule, which arguably remains an open question under Texas law, as well as the laws of other states.

While the Murthy court was not the first to consider whether physician payments preclude the learned intermediary doctrine in product liability cases, it does appear to be the first court actually to adopt this position. It remains to be seen whether this position will resurface in other cases, and whether any other courts will agree with the Murthy court's assessment that physician payments alter the doctor-patient relationship such that the learned intermediary doctrine may not apply. In this respect, Murthy may be an indicator of what is on the horizon in drug and medical device litigation as physician payments receive increased attention.

Practical Recommendations to Avoid Physician Payment Trouble

Now that it is clear the Physician Payment Sunshine provisions are here to stay, drug and device companies should be continually contemplating how they can successfully maneuver within the new legal environment that will be created as these provisions are implemented. Not only should companies ensure full compliance with the provisions, but they should also evaluate their current physician payment policies to determine whether the payments can survive the heightened public scrutiny that is sure to come. It would be advisable for companies to limit their direct involvement in education events conducted by compensated physicians. Finally, pharmaceutical and medical device companies should continue to be ever-mindful of ethical considerations when establishing guidelines for payments to physicians.

Comply Fully with the New Provisions

Despite the added administrative burden and costs the new reporting requirements may place upon drug and device manufacturers, complying with them will not only help companies avoid the civil penalties that could result from non-compliance, but it will also demonstrate that there is nothing to hide. Pharmaceutical and medical device companies can avoid any appearance of impropriety by reporting physician payments as required.

Make sure payments can be justified. Although it may be clear to a manufacturer why physician payments are being made, public perceptions must be given greater consideration. Manufacturers should seek out physicians who are experienced experts in the relevant field for speaking and consulting engagements. By choosing to compensate physicians based on their professional reputations and expertise, companies are better positioned to justify the payments, and can avoid the impression that they simply throw money at doctors indiscriminately.

Maintain a 'Hands-Off' Approach in Educational Efforts

Drug and device manufacturers should be wary of developing the speeches, presentations, and other materials used by compensated physicians at sponsored educational events. While companies may provide presenters with basic guidelines, physician presenters should have autonomy in developing the materials that will ultimately be presented about the drugs or medical devices they are educating other doctors about at company-sponsored CME presentations, advisory board meetings, lectures, or other educational events.

Be mindful of ethical considerations. Drug and device manufacturers should be confident that the physician payments they make are neither focused on inducing the physician to use the company's product, nor used to reward physicians for doing so. Many industry and professional organizations such as the American Medical Association, the American College of Physicians, and the Pharmaceutical Research and Manufacturers of America have developed voluntary codes of ethics that drug and device manufacturers should also take into consideration when determining how and why they will compensate physicians.

Conclusion

Following implementation of the Physician Payment Sunshine provisions, pharmaceutical and medical device manufacturers will undoubtedly continue to face accusations that they use money inappropriately to influence physicians' treatment decisions. Drug and device manufacturers must continue to rebut the implication that all physician-industry financial ties work to undermine the physician-patient relationship.

While the obvious penalties of this new mandate are fines for failure to meet the disclosure requirements, public perceptions of physician compensation may be the larger threat to defendant manufacturers. Physicians undoubtedly play a critical role in advancing health care through the expertise they provide to drug and device manufacturers. Physicians are also key players in pharmaceutical and medical device litigation, given their authority to diagnose conditions, prescribe pharmaceutical products, and select the medical devices used in patient procedures. Going forward, it will be important for manufacturers to maintain physician payment policies that not only protect their own reputations, but also the reputations of the doctors they compensate.

Although the Murthy decision may not stand, the court's discussion of physician payments should serve as a warning to the pharmaceutical industry. As physician payments become more visible under the Sunshine provisions, the Murthy court's opinion may well be adopted by other courts. There are steps, however, that pharmaceutical defendants can take to avoid detrimental outcomes in courts of law, as well as the court of public opinion.

Kendra Perkins Norwood is an associate at Hollingsworth LLP in Washington, DC. She practices in the firm's Pharmaceutical Products and Toxic Torts & Products Liability groups, where she currently assists in the defense of mass tort pharmaceutical products liability litigation.