COMMENTARY:

Hip to Profits: The Sleazy Business of Medical Device Manufacturing

The latest issue of Mother Jones includes an article by Peter Stone on the shady dealings and inflated profits of the medical device industry. These companies make things like artificial joints and heart valves, which are often needed by older people—and paid for by Medicare.

In recent months, these companies have launched a huge lobbying blitz in response to provisions in the health care reform bills that would levy fees on their high-profit enterprise. The efforts apparently have not been wasted: In the latest versions of the legislation, the level of fees has dropped considerably (though that hasn’t stopped the manufacturers’ whining).

Compared with Big Pharma, the medical device industry has received relatively little media coverage or public attention, which makes this article worth reading in full. A few highlights:

We’ve been left jaded, after all, by the endless reports of drugmakers’ seducing physicians with golf and spa weekends, expensive gifts, and lucrative consulting contracts. Well, now that federal investigators have quietly turned their sights on the makers of medical devices—a $200 billion industry whose marketing practices have seen relatively little scrutiny—it’s becoming clear that implant companies are just as solicitous of doctors as Big Pharma has been.

Consider Minneapolis-based Medtronic, the country’s leading device maker, which hauled in nearly $15 billion in 2009 sales despite having become a repeat target for state and federal prosecutors. In 2006, Medtronic agreed to pay the feds $40 million to settle allegations that from 1998 through 2003 it had set up sham consulting and royalty agreements, trips to strip clubs in Tennessee, and other incentives to entice surgeons to use its spinal products....

Stone runs through cases that have led to hundreds of million in federal fines against medical device manufacturers in the last three years, including a $311 million settlement with the top five manufacturs of artificial hips and knees accused of giving doctors millions in kickbacks, often disguised as consulting fees.

Some effort to combat these practices has emerged from the Senate Special Committee on Aging, chaired by Wisconsin Democrat Herb Kohl, which held a “Surgeons for Sale” hearing last year, and in January introduced the Physician Payments Sunshine Act of 2009. This legislation, Stone writes, “would compel makers of medical devices, drugs, vaccines, and the like to publicly disclose any payment of more than $100 to a doctor; failure to report could result in fines of up to $1 million.”

Kohl is hoping the provision will become part of the final final draft of health care reform legislation. But the medical device manufacturers, in league with Big Pharma, will do everything they can to keep that from happening.