The ethics of the surgical implant business

Companies routinely pay outside experts to help them improve their products. Louisville Slugger pays baseball players, Porsche pays race car drivers, medical bill review companies pay consultants – it’s just common practice.
Companies that make surgical implants – Zimmer, Biomet, Stryker et al – also pay experts. But there’s a bit of a difference; these companies are directly benefiting when their ‘experts’ implant a device in a patient. Nissan pays a driver to test a car, not to sit down with potential customers and, as part of a much larger transaction, include a car.
That’s what surgeons are doing with and for the implant firms. Patients have just about zero say in which manufacturer’s device is implanted in their body – that’s up to the doctor. But the physicians often are the source of innovation; as they use the devices and tools to implant the devices, they make improvements, tweak the devices and enhance the product. Docs who perform this service contribute to the success of the device manufacturer by making their product better. While this is certainly a valuable service, it is difficult to discern how this is materially different from TRG hiring Patrick Long to drive its cars and provide feedback to improve the company’s products.
The Feds got involved in the industry, and after a lengthy investigation busted the five leading makers of artificial joints last year. That’s a bit of an exaggeration; the Feds and device makers reached a settlement that required public disclosure of the company-physician financial relationship and a total fine of over $300 million. As part of the settlement, device manufacturers were required to post lists of physicians and payments to those physicians.
These lists are revealing. Past disclosures from manufacturers indicate 48 docs were paid more than a million dollars each for their services. In total, Zimmer et al paid 6500 docs over $800 million over a four year period. Zimmer decided to get in front of the problem, and has started publishing names of physicians it has worked with and the amounts paid to those docs during 2007. A few of the payments are rather stunning; Dr Jorge Galante of Clinton WI was paid $1,951,810; Kenneth Gustke MD of Tampa received $582,648; and Aaron Hoffman MD of Salt Lake City was paid $4.3 million.
I don’t have a problem with Dr Hoffman being paid by Zimmer; he has fourteen patents and likely is paid royalties by Zimmer for sales of devices incorporating these patents. The ethical issue is rather more complex than a payment for royalties. Orthopedic implants are outrageously expensive; my sense is this is in large part because they are difficult for health plans to accurately and fairly price. Physicians who own patents on devices with little price elasticity can make relatively minor changes and earn huge rewards from the manufacturers – who can charge more for the ‘enhancement’.
In my post yesterday, I noted consumers attribute much more of the blame for rising health care costs to health plans than to other players. I’ll bet their opinions will change if and when they find out the doc operating on their hip got paid over $4 million by the company that makes the device he’s bolting onto their pelvis.

What does this mean for you?
Health costs are out of control, and these outrageous payments are one more example of the corrupting nature of the American health care system.