FCPA whistleblowers who report healthcare companies bribing doctors and government officials may be eligible for a reward under the Dodd-Frank reward program. This is part one in a series that will examine international pharma corruption and how to identify potential reward eligible information. To best understand how pharma corruption schemes work, one should follow the money going from pharma to key opinion leaders and doctors – both paid directly by pharma and indirectly via third parties – in order to get their products placed on hospital formularies and obtain more prescriptions. Part two of the series examines pharma bribing regulatory officials, and part three of the series examines pharma bribing doctors by hiring them and their relatives.
Whether you are a pharma employee, a former pharma employee, or someone who is affiliated with the pharma sector, almost anyone can be a pharma FCPA whistleblower. But to do so, it is helpful to understand where the bodies are buried and what information would be most helpful to regulators. This post will examine how pharma makes payments to doctors.
Paying Doctors Directly
Pharmaceutical companies have been using the following schemes to pay doctors directly: (1) providing cash advances to sales and medical representatives who then use those funds to pay doctors; (2) paying doctors under the guise of speaker fees; and (3) paying doctors under the guise of serving on advisory committees and participating in “roundtable” discussions.
- Cash Advance Scheme: The cash advance scheme involves pharma providing cash advances to medical representatives who then take the cash and give it to doctors for prescriptions and to ensure their companies’ products are placed on the hospitals’ formularies. After paying the doctors, the medical representatives will fabricate their expense reports with phony restaurant, hotel, and travel receipts in an attempt to make it appear that their cash advances were used for legitimate purposes.
- Speaker Fee / Honorarium Scheme: The speaker fee and honorarium scheme involves pharma marketing and sales personnel selecting doctors for “speaking” opportunities where they can pay the doctors for prescribing their companies’ products. Often in an attempt to make the speaker fee payments appear legitimate, pharma will have the doctors enter into a “consulting” contract where the doctors agree to create a presentation and deliver a speech. In the consulting contract, both sides will agree that the amount of the payment is commensurate with the amount of time needed to create and deliver the presentation. What typically happens, however, is that the pharmaceutical company will prepare the presentation and give it to the doctor prior to the event. In many cases, the company will use the same form presentation, or a very similar presentation, repeatedly. In a large number of cases, pharma is selecting the doctors for the speaker fee and honorarium payments in order to reward them for prescribing the company’s products. It has nothing to do with the time the doctor spent on preparing a speech because most doctors spend virtually no time preparing.
- Advisory Committees & Roundtable Meetings: This is similar to the speaker fee scheme discussed above. Except in these cases, the doctors are being paid under the guise that they are providing strategic advice for the pharmaceutical company or that they are participating in a “roundtable” discussion. In many cases, pharma is only selecting these doctors for the paid advisory committees and roundtables because they want to reward their top prescribers. The payments often have nothing to do with the doctors providing advice or showing up for a “roundtable” discussion. In some cases, it is a complete sham, and the doctors are paid for advisory committee meetings and “roundtables” that did not even take place.
Paying Doctors Directly – Outsourcing the Bribery to Third Parties
Pharma also frequently uses third parties to pay doctors, which allows pharma to outsource the bribery. Below I will discuss some of the most commonly used third-party schemes.
- Travel Agencies: Local travel agencies are often used by pharma to bribe doctors. Pharma sales representatives will tell the travel agencies how much to pay each of the doctors. The travel agencies will sometimes give the doctors cash or refundable airline tickets, which the doctors can then cancel and obtain the cash value. Pharma will then reimburse the travel agencies for the bribes they paid on pharma’s behalf when they invoice pharma.
- Event & Media Companies: Pharma also uses event and media companies to bribe doctors. I have seen multiple cases where pharma used event and media companies to pay doctors for prescribing their products and placing them on their hospitals’ formularies. Pharma engages these companies to put on events and conferences for certain doctors. In some of these cases, the doctors directed pharma to sponsor and fund certain events the doctors were involved with and were further directed to use certain event companies to put on these conferences. These event and media entities are almost always affiliated with the doctors who requested them and in one case was owned by the doctor’s immediate family.
- Doctor-Created Associations: Pharma often bribes doctors by making payments to certain doctor-created associations. The way this scheme works is that a doctor or KOL will either create or become the head an “association” for a medical speciality, such as the local association for cardiologists or neurologists, and then seek payments from pharma. The typical reason given for the requested payment is that the “association” needs sponsors for some event it is organizing. Pharma will bribe these high-prescribing and important KOLs by sponsoring their associations’ events; sometimes funding these events with payments of thousands of dollars. These doctors have complete control over the funds, as they were the ones who founded and/or manage the associations and control their bank accounts. This bribery scheme is very common and is being used worldwide.
- Doctor-Created Foundations (Both Charitable & Private): Pharma often bribes doctors by making donations to their foundations, including both charitable and private. Similar to the association-bribery scheme referenced above, doctors will sometimes create foundations and seek donations and sponsorships from pharma. Pharma will only make the donations if the doctor is either a high prescriber or important to the company’s business. In return for the specified donation to their foundations, the doctors will prescribe pharma’s products or ensure they are placed on their hospitals’ formularies. Like with the association scheme described above, the doctors who created and/or manage the foundations are the ones who control the foundations’ bank accounts and have complete control of all funds being paid into those accounts by pharma.
- Clinical Trials / Observational Studies / Patient Follow-Up Programs: Pharma will engage and fund clinical consulting entities that will run clinical trials, observational studies, and patient follow-up programs involving their products. These clinical consultants pay the doctors for each patient. Pharma and their clinical consulting agents make it appear that they are not paying doctors to prescribe their products but rather are paying the doctors to complete some important “scientific” research and to record the results of the treatment for the patients participating in the study. But typically marketing and sales are heavily involved in selecting the clinical study consultants and the doctors. Oftentimes the clinical consultants will be the ones who complete the paperwork for the doctors, and the doctors’ assistants will be the ones who meet with the patients. The doctors, themselves, are truly being paid to prescribe pharma’s products to the patients.
- Distributors: Pharmaceutical companies will often use their local distributors to pay bribes to doctors and then reimburse the distributors through their contracts and discounting process. Some pharma companies will have their distributors pay kickbacks to doctors based upon the percentage of sales to the doctors’ institutions. Some distributors will provide government doctors with a large amount of samples so that those doctors can then use and profit from those samples in their private practices.
- Doctor-Affiliated Vendors: In some cases, pharma will bribe a doctor by engaging a vendor, supplier, or consultant at the direction of a high-prescribing doctor. In return, the doctor will continue prescribing pharma’s products.
- Engaging Doctors as Consultants & Hiring Their Family Members: Pharma often bribes doctors by engaging them as consultants and agreeing to hire their family members. In one case, pharma agreed to engage and pay a KOL thousands of dollars as a consultant in order to review its local promotional materials. The true purpose behind the payment, however, was to pay the KOL to place the company’s new and very expensive drug on the hospital’s formulary list. In another case, pharma hired a high-prescribing doctor’s girlfriend to serve as the lead regional medical representative in charge of obtaining sales from that particular doctor and his hospital.
If someone has information about an SEC-regulated company (or one of its local affiliates, subsidiaries, or agents) being involved in one of the schemes discussed above and would like to discuss making a confidential or anonymous submission under the Dodd-Frank reward program, please feel free to contact me at firstname.lastname@example.org for a free consultation. For more information and details about how the reward program applies to FCPA whistleblowers, please click here.