Key takeaways:
Marketing to healthcare professionals is important for pharmaceutical companies and may include free samples, physician payments or incentives, and speaking engagements.
The Physicians Payment Sunshine Act of 2010 created new transparency and reporting obligations. The act required pharmaceutical companies to submit an annual report detailing the various payments offered to healthcare providers.
This article is not legal advice. If a situation with a pharmaceutical rep seems like it could be inappropriate, reach out to your employer’s HR or legal department.
The pharmaceutical marketplace is big business. During the 2022 legislative session alone, the industry has spent over $280 million and employed over 1,600 lobbyists to protect its interests. This means that there are almost three pharma lobbyists for every member of Congress.
Along with the fact that drug development research is quite costly, it makes sense for the pharmaceutical industry to be more active in its marketing techniques than other fields. This explains the need for pharmaceutical sales representatives who help educate healthcare professionals on emerging drugs.
In this article, we’ll explore the history of pharmaceutical sales, types of physician incentives, and the possible issues that can arise with an unsupervised relationship between pharmaceutical sales reps and physicians. We’ll also offer some helpful tips for interacting with sales reps to help guide an appropriate (and legal) relationship.
History of pharmaceutical approvals
The Federal Food, Drug, and Cosmetic Act (FD&C Act) was signed into law by President Franklin Delano Roosevelt on June 25, 1938. The law spanned many industries. But, the most important section concerned the requirement for pre-market approval for all new pharmaceuticals and medical devices.
Under the new law, any new drugs and devices would need to be proven safe for commercial use by the Food and Drug Administration (FDA). This process often included data examination, analysis of the relevant condition versus available treatments, and laboratory tests by the FDA’s Center For Drug Evaluation and Research.
Plus, the law also set rigorous standards on what types of marketing language could be used when appealing to consumers. These standards included a special prohibition against false claims about the effectiveness and/or appropriate uses of a drug or device.
Current marketing trends
Once a drug or device has been approved, a two-fold promotion process begins: marketing to consumers and direct marketing to physicians. Because physicians have the authority to prescribe medications, marketing efforts tend to favor them.
According to a 2019 JAMA Network study, marketing to healthcare professionals is the highest category of pharmaceutical marketing spending. In 2016, the industry spent about $20.3 billion on it. Of that amount, an estimated $13.5 billion was used for free samples while $979 million was spent on physician payments, incentives, and speaking engagements.
Understanding the pharmaceutical law
In 2015, nearly half of all licensed physicians reported receiving some form of industry payment from a pharmaceutical company. In fact, over 60% of surgeons received a payment, with an average amount of $6,879.
In the past, “physician incentives” began as far back as medical school, with pharma sales reps interacting with students daily. Sometimes, they would visit with them up to four times per month.
What’s more, the pharmaceutical industry would sponsor Continuing Medical Education (CME) events where physicians could learn about new products, devices, and upcoming medical trends. In many cases, these were all-expense paid trips.
While it is important for healthcare professionals to remain up to date on the latest drug and device developments, many studies found that the unregulated physician-sales rep relationship affected patient care. For example, physicians were more likely to prescribe a previously-sponsored drug and less likely to prescribe generic prescriptions. This is a trend which analysts referred to as “non rational prescribing.”
The Physician Payments Sunshine Act
In response to these findings, the Physician Payments Sunshine Act (“Sunshine Act”) was included within the Affordable Care Act, a healthcare reform bill passed in 2010.
The Sunshine Act created new transparency and reporting obligations. It required pharmaceutical companies to submit:
An annual report detailing the payments or incentives offered to covered recipients along with the value of the items given
A description of the type of payment or incentive
Whether the payment was for marketing, education, or research purposes
The act originally defined a “covered recipient” as a physician, physician group practice, or physician medical practice. But the definition has since expanded to include:
Physician assistants
Nurse practitioners
Clinical nurse specialists
Certified nurse-midwives
Certified registered nurse anesthetists/anesthesiologist assistants
The reports must be submitted by March 31 of each year to the Centers for Medicare & Medicaid Services. Then, they are actively logged on the Center’s Open Payments website, making the information searchable, cataloged, and available to all.
This transparency allows anyone to see how much their healthcare team receives from pharmaceutical companies. It also allows for healthcare systems to look at their providers' pharmaceutical interactions as a whole.
Sunshine Act expansion and enforcement
While the initial enforcement and scope of the Sunshine Act were sparse, the 2018 Substance-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (“SUPPORT Act”) expanded the reportable payment categories to include student/business debt forgiveness, medical device loans, and other financial acquisitions.
That said, the SUPPORT Act was passed in response to the opioid crisis. It drew significant attention to the relationships between pharmaceutical companies and healthcare providers.
Since that expansion, enforcement of the Sunshine Act has risen greatly. Both 2020 and 2021 saw a rise in high-profile enforcement actions, including the newsworthy Medtronic settlement.
According to the Department of Justice, Medtronic allegedly violated the False Claims Act by paying out improper kickbacks to providers. The company also violated the Open Payment Program provisions of the Sunshine Act by failing to report these payments. Medtronic agreed to pay over $9.2 million to settle both allegations.
Tips for interacting with pharmaceutical sales reps
Below are four helpful tips healthcare providers can use to guide their relationships with the many pharma sales reps they may meet daily.
1. Understand if you are a covered participant
As mentioned above, the original Sunshine Act only applied to physicians and physician groups. Since then, five types of providers have been added to the list of covered participants. This means that this list is likely to continue to expand in the future.
While the reporting obligation falls on the pharmaceutical company itself, providers should always stay up to date on any developments in law. This will make sure they know if the law applies to their position.
2. Know your employer’s policy on gifts
Almost all employers have some sort of policy on accepting gifts from sales reps, patients, and more. Memorize this policy.
While the Sunshine Act only applies to gifts or incentives above $10, your employer may have a stricter policy. This policy may prevent employees from accepting anything at all — regardless of the value.
3. Do your homework
For providers with prescribing authority, when considering adding a new drug to your roster, it’s important to investigate:
The claims and research made to measure their accuracy
The drug’s efficacy
Whether there is a true difference between a name-brand and a generic drug
While pharma reps will likely present you with research and statistics on the drug, best practice shows that you should review all available information on the drug. This will help you make sure you have a holistic and accurate understanding before making changes to your own prescribing decisions.
4. When in doubt, reach out
If you ever run into an issue with a pharma sales rep that you think could lead to an inappropriate relationship or gift, reach out to your employer’s HR or legal department. These professionals can help you navigate these tough questions and make sure you stay on the right side of the law.
The bottom line
Why trust our experts?
Pharmaceutical sales reps are an integral part of the American healthcare system because they educate providers on the new drugs coming to market. The 2010 Sunshine Act attempted to regulate these relationships by requiring pharmaceutical companies to file annual reports and disclose their financial relationships with providers.
But, healthcare providers must still be mindful of their interactions with reps. They must make sure to fully investigate drug claims, understand their employer’s stance on gifts, and reach out to their legal or HR department if questions arise.
