" ! COMMITTEE PRINT 110TH CONGRESS

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S. PRT.

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COMMITTEE STAFF REPORT TO THE

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USE OF EDUCATIONAL GRANTS BY

PHARMACEUTICAL MANUFACTURERS

PREPARED BY THE STAFF OF THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

MAX BAUCUS, Chairman

CHARLES E. GRASSLEY, Ranking Member

APRIL 2007

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34–364

" ! COMMITTEE PRINT 110TH CONGRESS

1st Session

S. PRT.

2007

110–21

COMMITTEE STAFF REPORT TO THE

CHAIRMAN AND RANKING MEMBER

USE OF EDUCATIONAL GRANTS BY

PHARMACEUTICAL MANUFACTURERS

PREPARED BY THE STAFF OF THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

MAX BAUCUS, Chairman

CHARLES E. GRASSLEY, Ranking Member

APRIL 2007

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

DEBBIE STABENOW, Michigan

MARIA CANTWELL, Washington

KEN SALAZAR, Colorado

CHARLES E. GRASSLEY, Iowa

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

PAT ROBERTS, Kansas

RUSSELL SULLIVAN, Staff Director

KOLAN DAVIS, Republican Staff Director and Chief Counsel

(II)

(III)

C O N T E N T S

Page

I. Executive Summary ....................................................................................... 1

II. Introduction .................................................................................................... 2

III. Scope and Methodology ................................................................................. 4

IV. Background .................................................................................................... 5

Off-Label Use ........................................................................................... 5

Partners in Compliance and Oversight ................................................. 5

Food and Drug Administration .............................................................. 5

Departments of Justice and Health and Human Services ................... 7

Pharmaceutical Research and Manufacturers of America ................... 8

Consumers ............................................................................................... 8

V. Discussion ....................................................................................................... 9

General Funding Statistics ..................................................................... 9

Accreditation ............................................................................................ 9

Policies and Procedures for Awarding Grants ...................................... 10

Clinical Practice Guidelines ................................................................... 11

Policies for Accrediting Educational Providers ..................................... 12

VI. Observations ................................................................................................... 15

VII. Considerations ................................................................................................ 16

Kickbacks ................................................................................................. 17

Veiled Advertising ................................................................................... 17

Bias in Clinical Protocols ........................................................................ 17

Off-label Promotion ................................................................................. 18

Appendix A—Accreditation Council for Continuing Medical Education

(ACCME) 2004 ‘‘Standards for Commercial Support: Standards to Ensure

the Independence of CME Activities’’ ................................................................. 19

Appendix B—Health and Human Services Office of Inspector General (HHS

OIG) 2003 ‘‘Compliance Program Guidance for Pharmaceutical Manufacturers’’ ........................................................................................................................ 25

Appendix C—Pharmaceutical Research and Manufacturers of America

(PhRMA) 2002 ‘‘Code on Interactions With Healthcare Professionals’’ ........... 41

Appendix D—Food and Drug Administration (FDA) 1997 ‘‘Guidance for Industry: Industry-Supported Scientific and Educational Activities’’ ....................... 97

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I. Executive Summary

The United States Senate Committee on Finance (Committee)

has exclusive jurisdiction over the Medicare and Medicaid programs. Accordingly, the Committee has a responsibility to protect

the safety and well-being of the more than 80 million Americans

who receive health care coverage under Medicare and Medicaid, as

well as a responsibility to all Americans to ensure that program

funds are spent properly. In recent years, Medicaid payments for

prescription drugs have grown faster than any other area of the

Medicaid program. With the addition of the outpatient prescription

drug benefit to the Medicare program in 2006, Federal spending on

prescription drugs became even more substantial. Therefore, drug

marketing and utilization patterns are of great concern to the Committee.

Pharmaceutical manufacturers fund educational programs that

physicians and other health care workers attend, including some

used to fulfill their licensure requirements. In 2005, the Committee

staff became aware through reports that pharmaceutical companies

were routinely using educational grants to help build market share

for their newer and more lucrative products. This raises two primary concerns. First, new products tend to be more expensive than

older products, thereby increasing total program spending. Second,

new products have less clinical history, and may expose patients to

greater risks than older products with better established safety and

efficacy.

Beginning in June 2005, the Committee wrote to the 23 largest

pharmaceutical manufacturers to inquire about their use of educational grants and subsequently sent questions to the Accreditation Council for Continuing Medical Education (ACCME), the primary accrediting body for continuing medical education (CME) for

physicians. The Committee staff reviewed answers from the pharmaceutical manufacturers and the ACCME, as well as reports published in journals and the popular press and other publicly available data.

In reviewing enforcement actions by Federal agencies, and reports in the popular press and medical journals, the Committee

staff found that drug companies have used educational grants as

a way to increase the market for their products in recent years.

This practice is of particular concern when the companies use educational grants to encourage physicians to prescribe products for

uses beyond their Food and Drug Administration (FDA) approval.

Based on the Committee staff’s review of responses from the pharmaceutical manufacturers, it appears the manufacturers have implemented policies meant to rein in these activities. The companies

have taken steps to separate the grant-making process for educational programs from their marketing efforts. In addition, various

industry groups and government agencies have created guidelines

2

for educational grants to reduce the potential for abuse. Drug companies, however, are not mandated to follow the guidelines and a

significant gray area continues to exist regarding the use of educational grants to serve marketing purposes.

Indeed, ACCME’s records reveal numerous cases over the past 3

years in which companies had too much influence over the content

of supposedly independent educational programs. In one case, a

CME provider was cited for allowing a company to help select presenters; in another, the company allegedly influenced the setting

and frequency of educational events. One CME provider was cited

for promoting the ‘‘proprietary business interests of a commercial

interest’’ during an educational program. During 2005 and 2006, 18

of the 76 CME providers reviewed by ACCME—or 24 percent—did

not comply with at least one of the standards meant to ensure

independence.

Another continuing concern for the Committee staff is the lack

of proactive or real time oversight for educational grant programs.

CME providers are not required to run prepared text by the FDA,

ACCME, or any regulatory authority in advance of CME programs,

and the FDA and ACCME do not routinely place monitors in CME

audiences to assess what information is presented. Both the FDA

and ACCME have intervened after the fact when presented with

evidence that abuse occurred in educational grant programs. They

do not, however, pre-approve or directly monitor educational grant

programs and oversight actions may occur long after the problematic educational activity occurred. Even when ACCME determines

that the CME providers repeatedly failed to distance themselves

from the drug companies that sponsor them, ACCME can take

years to impose penalties. Based on ACCME policies, it can take

as long as 9 years from the date of a non-compliant educational activity for an educational provider to lose accreditation.

II. Introduction

The United States Senate Committee on Finance (Committee)

has exclusive jurisdiction over the Medicare and Medicaid programs. Accordingly, the Committee has a responsibility to protect

the safety and well-being of the more than 80 million Americans

who receive health care coverage under Medicare and Medicaid, as

well as a responsibility to all Americans to ensure that program

funds are spent properly. In recent years, Medicaid payments for

prescription drugs have grown faster than any other area of the

Medicaid program. With the addition of the outpatient prescription

drug benefit to the Medicare program in 2006, Federal spending on

prescription drugs became even more substantial.

Pharmaceutical manufacturers fund educational programs that

physicians and other health care workers attend, including programs used to fulfill their licensure requirements. These educational grants have become a well-established tool that all of the

major pharmaceutical manufacturers use to disseminate information to the medical community. Drug companies routinely fund

educational grants to support programs that favorably discuss the

companies’ newer and more lucrative products, thereby encouraging physicians to prescribe those products and, ultimately, driving sales. The Committee staff has reviewed numerous recent cases

3

and reports that highlight the potential for abuse with educational

grants:

• Warner-Lambert was accused by the Department of Justice

(DOJ) and the Health and Human Services Office of Inspector

General (HHS OIG) of using educational grants to fund purportedly independent educational programs that actually

served to promote the anti-epilepsy drug Neurontin for offlabel uses. In 2004, Warner-Lambert paid $430 million to settle claims involving off-label promotion of Neurontin.

• In 2005, Serono Laboratories paid $704 million to settle claims

involving off-label promotion of the AIDS drug Serostim. The

government’s allegations against Serono included the use of

educational grants to fund purportedly independent educational programs that actually served to promote Serostim for

off-label uses.

• Steven J. Fiorello, a pharmacy official for the State of Pennsylvania, was charged in 2006 with conflict of interest and other

ethics violations for accepting educational grant money from

drug companies and failing to disclose those payments. As Director of Pharmacy for the Office of Mental Health for the

Pennsylvania Department of Public Welfare, Mr. Fiorello

helped decide what psychiatric drugs would be used in all state

hospitals, thereby influencing more than $9 million in annual

Medicaid drug spending.

Beyond the potential civil and criminal issues that arise from the

abuse of educational grants, cases like these raise various concerns.

First, new products tend to be more expensive than older products,

thereby increasing total spending by Medicare, Medicaid, and other

health care programs funded by taxpayers. Second, new products

have less clinical history, and may expose patients to greater risks

than older products with better-established safety and efficacy. Evidence of safety and effectiveness for off-label uses of new products

may be even more sparse.

Senators Max Baucus (D-MT) and Charles E. Grassley (R-IA),

Chairman and Ranking Member of the Committee, began an inquiry into the use of educational grants in 2005, after reports that

drug companies were using the grants to promote prescription

drugs for conditions not approved by the FDA. In June 2005, the

Committee wrote to the 23 largest drug manufacturers based on

U.S. sales to inquire about their use of educational grants. Based

on each company’s initial response, the Committee sent follow-up

letters. All manufacturers voluntarily complied with the Committee’s requests for documents and information.

The Committee staff reviewed the manufacturers’ responses, including information regarding written policies and procedures for

educational grants, data on the magnitude and distribution of past

grant spending, and information on budgeting for grant spending.

Senators Baucus and Grassley also sent questions to the ACCME,

the primary accrediting body for CME for physicians.

This Committee staff report presents the information received

from the pharmaceutical manufacturers and the ACCME, as well

as other publicly available data. The appendices to this report include:

4

(1) Appendix A—Accreditation Council for Continuing Medical

Education (ACCME) 2004 ‘‘Standards for Commercial Support: Standards to Ensure the Independence of CME Activities’’;

(2) Appendix B—Health and Human Services Office of Inspector

General (HHS OIG) 2003 ‘‘Compliance Program Guidance for

Pharmaceutical Manufacturers’’;

(3) Appendix C—Pharmaceutical Research and Manufacturers of

America (PhRMA) 2002 ‘‘Code on Interactions With

Healthcare Professionals’’; and

(4) Appendix D—Food and Drug Administration (FDA) 1997

‘‘Guidance for Industry: Industry-Supported Scientific and

Educational Activities.’’

III. Scope and Methodology

In June 2005, the Committee wrote to the 23 largest pharmaceutical manufacturers (based on U.S. sales) to inquire about their

use of educational grants. Based on each company’s initial response, the Committee sent follow-up letters tailored to the particular information provided. All manufacturers voluntarily complied with the requests for documents and information. The Committee greatly appreciates the manufacturers’ high level of cooperation with its inquiry.

ACCME is the primary accrediting body for CME for physicians.

Many of the manufacturers’ responses indicated that the manufacturers rely on grant recipients’ accreditation by ACCME and the

recipients’ promise to comply with ACCME’s Standards for Commercial Support as safeguards that the educational grants will be

used for legitimate purposes. A primary principle of ACCME’s

standards is that CME programs must be independent and the

commercial sponsor must not control program content. The pharmaceutical manufacturers described most of their grants as funding independent education programs, but none of them elaborated

on what independence means or the extent to which they can select

what educational topics they wish to fund, while still designating

the programs as independent.

In December 2006, the Committee wrote to ACCME to inquire

about how much influence ACCME would allow sponsoring pharmaceutical manufacturers to exert over topic selection, without

deeming a CME program to lack independence, and the extent of

ACCME’s ability and actions to ensure that accredited CME is

truly independent from sponsors’ influence and compliant with

ACCME’s standards. The Committee greatly appreciates ACCME’s

full cooperation with its inquiry.

In addition to information gathered directly from the pharmaceutical manufacturers and ACCME, Committee staff considered

other relevant sources of information, including: publicly available

data on industry funding of medical education; reports in the popular press and medical literature; codes of conduct promulgated by

the industry; compliance guidelines issued by the HHS OIG and

the FDA; and publicly reported enforcement actions undertaken by

DOJ and the HHS OIG.

5

1 ‘‘Off-Label Prescribing Among Office-Based Physicians,’’ DC Radley et al., Archives of Internal Medicine, 2006; 166:1021–1026. 2 ‘‘Indictment of Doctor Tests Drug Marketing Rules,’’ The New York Times, July 22, 2006.

IV. Background

Off-Label Use

When the FDA deems a drug to be safe and effective for a specific use, the FDA approves the drug to be marketed for that indication. However, once a drug is approved and legally marketed for

an indication, it is legal for physicians to prescribe the drug for

other uses, even though the FDA has not deemed the product safe

and effective for those other uses. These unapproved uses are

known as off-label uses. Drug companies can earn profits from offlabel sales of their products, but they are not permitted to advertise or otherwise promote the products for off-label uses because

the Food, Drug, and Cosmetic Act (FDC Act) prohibits drug companies from promoting their products for any uses other than those

approved for marketing by the FDA. In addition to the FDC Act,

off-label promotion may also implicate the False Claims Act because the underlying FDC Act violation potentially renders any

claim for Federal health care dollars a false claim.

Despite the prohibition on promotion, off-label uses account for

a substantial volume of drug prescriptions and, accordingly, drug

profits. A recent study funded by the Agency for Health Research

and Quality attempted to estimate the percent of prescriptions for

outpatient drugs that reflect an off-label use, and concluded that

off-label uses account for upwards of 20 percent of drug prescriptions in the United States.1 The study further concluded that 73

percent of off-label drug uses, and 94 percent of off-label uses for

psychiatric medications, lack evidence of efficacy. For some drugs

the magnitude of off-label use is even more striking.

Neither the ACCME nor the pharmaceutical manufacturers compile information regarding the number or percent of manufacturersponsored educational programs that discuss an off-label use of the

sponsor’s drugs. ACCME, in fact, changed its rules in 2004 to allow

speakers at its educational programs to make presentations about

prescription drugs without saying whether the recommended use is

off-label or on-label, according to a New York Times article published in July 2006.2

Partners in Compliance and Oversight

Several parties play a role in enforcing drug companies’ compliance with the Anti-Kickback Statute, the False Claims Act, and the

prohibition on off-label promotion.

Food and Drug Administration

The FDA has primary responsibility for enforcing the FDC Act.

The FDC Act imposes limits on how manufacturers may advertise

their products and forbids them from marketing or promoting their

drugs for uses that have not been approved by the FDA. However,

these marketing restrictions and the prohibition on off-label promotion apply only to entities involved in the manufacture or sale

of the drugs. The FDA lacks jurisdiction over favorable discussions

6

of a product, including a product’s off-label uses, by individuals or

in settings independent from the manufacturer. Thus, the FDA

does not claim jurisdiction over academic discussions or exchanges

of scientific thought regarding off-label uses, except where attributable to the manufacturer.

Evidence suggests that educational programs are commonly used

as a forum for favorable discussions of off-label drug uses. Whether

or not the FDA has authority to regulate these activities hinges on

whether the product messages can be attributed back to the drug’s

manufacturer. In 1997, the FDA released guidelines for companies

involved in industry-supported educational activities. The guidelines expressed the FDA’s intention not to regulate CME as long

as it is independent from the companies whose products are discussed. The FDA advised that educational providers should maintain control over the content of their programs, disclose company

funding of programs and connections to speakers, and discuss all

relevant treatments for a condition, rather than focusing entirely

on the newest medication or on one particular company’s product(s). Beyond this guidance, the FDA does little to ensure that

educational grants are used for bona fide educational purposes. Nor

does the FDA have a system in place to monitor educational programs.

The FDA enforces the prohibition on off-label promotion through

two departments: the Division of Drug Marketing, Advertising, and

Communications (DDMAC) and the Office of Criminal Investigation (OCI). Based on information the FDA provided to the Committee, DDMAC currently employs 41 people, including 22 investigators who conduct primary reviews of promotional materials released by drug companies. DDMAC reviews more than 60,000 promotional materials every year, including brochures, promotional

posters, and print, Internet and television advertisements. Most of

these materials are submitted voluntarily to the FDA by drug manufacturers, but agency investigators also independently review television, print and Internet advertisements.

DDMAC fields about 150 complaints about promotional materials

from people outside the agency. Of those complaints, 5 to 10 per

year are lodged against educational materials or programs. In determining which promotional materials to review first, the division

considers the overall impact on public health, whether the drug in

question is new or has a high-risk profile, and whether the drug

has a history of problems.

When DDMAC finds questionable material or receives wellfounded complaints, it asks the company to stop using those promotional materials, make corrections if possible, and to respond in

writing within 15 days. Most companies comply with requests from

DDMAC, though some ask to discuss the reasoning behind these

requests. If investigators find that the company used a misleading

statement in numerous promotional pieces, they will ask that all

such materials be withdrawn. In serious cases, DDMAC will ask

the drug company to release a corrective notice or advertisement

in the same manner as the offending promotion explaining any inaccuracies or misstatements in its promotions.

The FDA’s OCI has primary jurisdiction for all FDA criminal investigations. It can seek fines and restitution in cases of off-label

7

promotion in violation of the FDC Act. DDMAC often refers cases

to OCI for enforcement. Again, based on information the FDA provided to the Committee, OCI can have up to 226 full-time employees and is currently near that limit. OCI handles all criminal inquiries at the FDA, but most of its work relates to prescription

drugs. For fiscal year 2006, 73 percent of OCI cases dealt with prescription drugs, as compared to 8 percent for devices and 19 percent for other inquiries.

The FDA’s oversight of CME generally occurs after the educational event. DDMAC receives few complaints about CME and

has referred some of those to OCI. None of those criminal inquiries

had been completed as of March 1, 2007. Dealing with complaints

about CME is complicated because the events are convened and

conducted by third-party providers. Investigators must first determine whether a drug company exerted undue influence on the medical education company that was supposed to be independent before

continuing on with their inquiry. To do so, the FDA sends inquiry

letters to the drug companies and asks them about their involvement in the CME, subsequent to the educational event.

Departments of Justice and Health and Human Services

The Departments of Justice and Health and Human Services,

through its Office of Inspector General (HHS OIG), are responsible

for pursuing violations of the Anti-Kickback Statute and the False

Claims Act. Several recent actions against pharmaceutical manufacturers included allegations of illegal off-label promotion. In 2004, Warner-Lambert paid $430 million to settle claims involving off-label promotion of Neurontin. The government alleged

that Warner-Lambert used educational grants to fund purportedly

independent educational programs that actually served to promote

Neurontin for off-label uses. Warner-Lambert had extensive input

into the speakers and content covered at those educational seminars, according to DOJ and the HHS OIG. The action was initiated

by company employees acting as whistleblowers. Pfizer, the corporate successor to Warner-Lambert, remains subject to a corporate

integrity agreement (CIA) the company executed with the HHS

OIG. The CIA obligates Pfizer to take certain corrective actions,

and includes terms to ensure the company does not engage in offlabel promotional activities.

In 2005, Serono paid $704 million to settle claims involving offlabel promotion of Serostim. The government’s allegations against

Serono included the use of educational grants to fund purportedly

independent educational programs that actually served to promote

Serostim for off-label uses. The action was initiated by company

employees acting as whistleblowers. Serono remains subject to a

CIA the company executed with HHS OIG. The CIA obligates

Serono to take certain corrective actions, and includes terms to ensure the company does not engage in off-label promotional activities.

Besides pursuing enforcement actions, the HHS OIG has taken

a proactive role in offering pharmaceutical manufacturers guidance

on how to comply with the fraud and abuse laws. In May 2003, the

HHS OIG released the ‘‘Compliance Program Guidance for Pharmaceutical Manufacturers.’’ That guidance document discussed

8

educational grants as a key area of potential risk for fraud and

abuse and recommended the following measures to reduce that

risk:

(1) manufacturers should separate grant making functions from

sales and marketing functions;

(2) manufacturers should establish objective criteria for awarding grants that do not take into account the volume or value

of the recipient’s purchases;

(3) manufacturers should establish objective criteria for awarding grants that ensure that the funded activities are bona

fide; and

(4) manufacturers should not have control over the speaker or

the content of educational activities funded by grants.

HHS OIG’s compliance program guidance is not mandatory.

Rather, it represents HHS OIG’s suggestions for strategies to ensure compliance with the fraud and abuse laws. Many of the drug

companies surveyed stated that they had voluntarily adopted the

principles of the HHS OIG compliance program guidance.

Pharmaceutical Research and Manufacturers of America

The Pharmaceutical Research and Manufacturers of America

(PhRMA) is the primary trade association representing the drug

companies we surveyed. In 2002, PhRMA promulgated a new ‘‘Code

on Interactions with Healthcare Professionals’’ (PhRMA Code). The

PhRMA Code allows drug companies to sponsor educational events

operated by third-party CME providers, but requires that the CME

provider retain control over the selection of content, faculty, educational methods, materials, and venue for the activity.

The PhRMA Code also restricts what remuneration drug companies may provide to physicians. In the context of educational programs, the PhRMA Code allows companies to underwrite general

program costs, but prohibits direct funding of specific attendee’s

participation, and limits the types of hospitality that may be provided in conjunction with the educational event.

Many of the drug companies we surveyed specifically included

compliance with the PhRMA Code in their educational grant policies. The Committee staff did not inquire about actions taken by

PhRMA to actively enforce its code or identify violations of its Code

by member companies.

Consumers

Several types of consumer litigation against pharmaceutical

manufacturers have involved allegations of misuse of educational

grants and off-label promotion. Civil actions include:

(1) product liability claims by patients who used the drugs;

(2) fraud actions on behalf of shareholders who purchased stock

in reliance on false information disseminated by the company; and

(3) actions by pension plans and private insurers to recover payments for illegally promoted drugs.

One example of consumer litigation currently receiving significant attention in the press involves the drug Zyprexa, and its manufacturer, Eli Lilly & Co. The FDA approved Zyprexa for the treatVerDate 11-MAY-2000 15:26 Apr 19, 2007 Jkt 095484 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 34364.000 SFIN1 PsN: SFIN1
9

3 ‘‘Pa. Sues Eli Lilly, AstraZeneca Over Antipsychotic Medications: State Says Three Drug

Makers Fraudulently Marketed Medicines’’ Margaret Cronin Fisk, Bloomberg News,

March 5, 2007.

ment of schizophrenia and acute mania in bipolar disorder. In the

course of a consumer-driven products liability action, documents

came to light suggesting Eli Lilly & Co. promoted Zyprexa for elderly patients with dementia and other off-label uses and concealed

the risks of the drugs. The States of Alaska, Louisiana, Mississippi,

Pennsylvania, and West Virginia are suing Eli Lilly & Co. on behalf of their Medicaid programs for money spent on Zyprexa as

well as costs to treat injuries caused by the drug.3

V. Discussion

General Funding Statistics

All of the 23 pharmaceutical companies surveyed funded educational grants. Most of the companies spent tens of millions of dollars annually to fund thousands of educational grants and educational programs. Educational grant budgets reported by individual companies for 2004 ranged from less than $2 million to $117

million. In 2004, total expenditures by commercial sponsors to support CME exceeded $1 billion.

In addition to providing information on total grant spending, 18

of the companies provided data that included grant funding by

therapeutic area, allowing Committee staff to analyze spending by

therapeutic areas. In 2003, 2004, and 2005, oncology was the therapeutic area that received the most grant funding, followed by cardiovascular disease and then neurology/psychology. The companies

reported that for 2005 they had budgeted approximately $218 million in total grant funding for oncology, $112 million for cardiovascular disease, and $104 million for neurology/psychology. Total

grant spending on these three therapeutic areas was even higher

in 2004, with approximately $230 million spent on oncology, $186

million on cardiovascular disease, and $182 million on neurology/

psychology. Actual spending in these areas for all 23 surveyed companies was higher, as these calculations do not include spending by

the five companies that did not break down grant funding by therapeutic area.

Accreditation

The bulk of pharmaceutical manufacturers’ educational grant

money is used to fund accredited educational programs for physicians. ACCME is the main accrediting body for programs targeting

physicians, but some educational programs may be accredited by

medical societies or local accrediting organizations. Generally, physicians may only count accredited CME towards licensure requirements. Continuing education for nurses, pharmacists, and other

health care workers as well as patients, lay care givers, and the

general public also receive industry funding, although not to the

same extent as physician education. Educational programs targeting members of other health professions are generally not accredited by ACCME, but may be accredited by other organizations

specific to those professions (e.g., the Accreditation Council for

10

4Data from ACCME 2005 annual report (available at http://www.accme.org/dir—docs/

doc—upload/9c795f02-c470-4ba3-a491-d288be965eff—uploaddocument.pdf).

Pharmacy Education or the American Nurses Credentialing Center). No comparable accreditation system exists for educational programs targeted at patients, lay care givers, or the general public.

Over a billion dollars of pharmaceutical industry money is used

each year to fund ACCME-accredited CME for physicians.

The Committee asked the drug companies to provide information

regarding how much of their grant spending supported ACCMEaccredited educational programs versus programs not accredited by

ACCME. A few companies responded that they did not track

whether programs were accredited, or by which accrediting body.

However, most of the companies submitted detailed information

about the magnitude of grant funding they provided to sponsor accredited versus non-accredited educational programs. All of the

companies that reported accreditation data indicated that the majority of their grant funding went towards accredited educational

programs. On the high end, three companies reported that 90 percent of their grant funding went to accredited programs and five

other companies reported 80 percent. On the low end, one company

reported that 57 percent of its grant funding went to ACCMEaccredited programs and another reported 62 percent. Committee

staff’s compilation of the companies’ responses yielded an estimate

of 75 percent of the total educational grant funding is used to support accredited educational programs.

Most of the pharmaceutical companies’ educational grant funding

goes to accredited CME providers to sponsor programs for physicians. Only one pharmaceutical manufacturer reported providing

educational grants to individual physicians and physician group

practices. Most of the educational grants are awarded to thirdparty CME providers, such as medical education and communication companies, that are accredited by ACCME to run CME programs. More than 700 entities are accredited by ACCME as CME

providers. ACCME tabulated data indicate that in 2005, $2.25 billion was spent on ACCME-accredited CME, of which $1.12 billion

represented commercial support.4

Policies and Procedures for Awarding Grants

Based on the responses provided by the pharmaceutical manufacturers, it appears that most of the major companies established

written policies and procedures regarding educational grants. Review of the policies submitted indicates that most of the companies

established, or are in the process of establishing, a centralized

grant process, which involves submitting grant requests through a

central portal and using designated personnel to review the requests. Most of the major drug companies explicitly prohibit sales

representatives from soliciting or accepting grant requests, or from

promising grant funding to customers. Only one pharmaceutical

manufacturer reported allowing field representatives to collect

grant requests from customers.

Most of the major drug companies budget grant funding by product or by disease state or category. Grant funding is generally

11

budgeted at the headquarters level and is no longer broken down

by geographic region or particular sales representative or team.

The participation of sales and marketing personnel in the grant

process has generally been limited, but not entirely eliminated, and

it has been transferred from field operations to company headquarters. Examples of statements in corporate policies include:

• ‘‘The marketing department has a limited role in grant-making

to support independent medical education (IME). The marketing department is permitted to make an initial determination regarding whether the general IME topic is one of interest

to [the drug company]. If the marketing department determines that a proposal is of interest, the proposal is forwarded

on to the medical education department for review and analysis.’’

• ‘‘[The drug company] permits its marketing teams to provide

[the drug company’s grant office] staff with information regarding their business strategy for a given year. This helps [the

drug company’s grant office] review committees, which are

comprised of employees from [the drug company’s] medical organization, ensure that the Company’s grant making is consistent with its business strategy. However, our policy expressly precludes any contact between [the drug company’s

grant office] and [the drug company’s] marketing personnel

with regard to any individual grant request or requestor.’’

Most of the companies surveyed promulgated policies professing

a commitment to comply with all relevant fraud and abuse laws.

Many drug companies included broad statements denying an untoward purpose for educational grants. The following is one such example from one company’s submission to the Committee: ‘‘[The

drug company] adheres to a policy that grant support not be conditioned on any implicit or explicit agreement by the recipient organization to purchase, prescribe, recommend, influence, or provide favorable formulary status for [drug company] products.’’

Many of the companies also expressed an intent to comply with

the PhRMA Code on Interactions with Health Care Professionals,

the ACCME Standards for Commercial Support, and the HHS OIG

Compliance Program Guidance for Pharmaceutical Manufacturers.

The companies expressed a commitment to ensuring the independence of CME, as required by PhRMA, ACCME, and the HHS OIG,

but several companies have policies that include provisions that

may give their companies more input into the design of the educational programs they sponsor. For example, several companies’

grant policies prohibit them from offering unsolicited suggestions

for speakers or topics to be covered in CME programs, but allow

the companies to make these suggestions if requested by the CME

providers they fund. Similarly, some company policies prohibit the

unsolicited presentation of study data, including data regarding offlabel uses of the company’s products, but allow the companies to

provide this data if requested by the CME provider.

Clinical Practice Guidelines

Physicians and third-party payers increasingly rely on evidencebased medicine and treatment algorithms to guide clinical decisionVerDate 11-MAY-2000 15:26 Apr 19, 2007 Jkt 095484 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 34364.000 SFIN1 PsN: SFIN1
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5 ‘‘Doctors and Drug Companies,’’ D Blumenthal, NEJM, 351;18, Oct. 28, 2004, 1885–1890,

1886.

making. Thus, it is important to know the genesis of these recommended treatment protocols and ensure that they are free from

commercial bias. The Committee staff also examined pharmaceutical companies’ use of educational grants to fund development

of clinical protocols, such as treatment algorithms and clinical practice guidelines. The drug companies’ responses revealed a few examples of industry funding for protocol development.

Several companies helped fund the Texas Medical Algorithm Program (TMAP) run by the Texas Department of State Health Services to develop psychiatric treatment algorithms. The State of Florida also ran a similar program, the Behavioral Pharmacy Management Program, to define optimal psychiatric treatment regimens.

The pharmaceutical companies’ corporate policies allowed the companies to fund protocol development, but stated that funding

should not entail influence over content or favorable treatment for

the sponsor’s drugs.

Whether industry-funded protocols remain free from bias is difficult to determine. The Committee staff is aware of several press

reports criticizing the commercially-sponsored protocols for recommending the use of newer more expensive drugs, even where less

expensive drugs may be equally effective.

The involvement of drug companies in clinical protocol development entails more than direct sponsorship from the drug companies. The experts tasked with developing the guidelines often have

preexisting relationships with companies that market drugs the

protocols will evaluate. ‘‘As many as 59 percent of the authors of

clinical guidelines endorsed by many professional associations have

had financial relationships with companies whose drugs might be

affected by those guidelines.’’ 5

Policies for Accrediting Educational Providers

ACCME is responsible for accrediting CME providers. ACCME

accreditation largely determines whether a physician’s participation in a particular activity will qualify as CME to satisfy professional licensure requirements. The ACCME imprimatur identifies

an activity as educational, as opposed to promotional, and thus,

lends credibility. Therefore, physicians may have greater motivation to attend accredited CME versus non-accredited CME, and

may be more likely to believe information learned in the former

context rather than the latter.

In 2004, ACCME promulgated ‘‘Standards for Commercial Support: Standards to Ensure the Independence of CME Activities’’

(ACCME Standards). The ACCME Standards require CME providers to ensure that the following decisions are made free from the

control of the commercial interest:

(1) identification of CME needs;

(2) determination of educational objectives;

(3) selection and presentation of content;

(4) selection of all persons and organizations that will be in a

position to control the content of the CME;

13

(5) selection of educational methods; and

(6) evaluation of the activity.

ACCME policies further require that ‘‘presentations must give a

balanced view of therapeutic options.’’

In December 2006, the Committee wrote to ACCME seeking information about how ACCME ensures that CME providers actually

operate with the required level of independence. ACCME’s response

revealed that ACCME reviews accredited CME providers at intervals of 2, 4, or 6 years, depending on the CME provider’s past history of compliance. ACCME uses three sources of information to

conduct these re-accreditation reviews:

(1) self study report—written by the CME provider and submitted to ACCME;

(2) accreditation interview—conducted by two individuals from

ACCME involving an interview of representative(s) of the

CME provider; and

(3) a sample of CME activities—ACCME selects a sample of the

CME provider’s CME activities (usually 15 activities per provider) and asks the CME provider to submit a documentary

file on each activity—ACCME then reviews the documents

submitted to look for policies and procedures indicating that

the CME provider complied with ACCME policies. It appears

that ACCME review relies on information supplied by

ACCME-accredited CME providers, and does not involve an

independent investigation and/or review. ACCME reviews

the CME provider’s submission of the policies and procedures used to develop a CME activity and the signed contracts with the commercial sponsor, but does not appear to

conduct an independent assessment of the content of the

CME programs.

ACCME reviews the information described above as part of its

process for determining whether a CME provider complies with

ACCME standards, and ultimately whether the provider should retain ACCME accreditation. ACCME describes the re-accreditation

process as follows: ‘‘ACCME compliance findings are determined at

a provider level, not the activity (or presentation) level. Generally

speaking, when ACCME finds that 80 percent of activities are

found ‘in compliance’ from documentation review, then the ACCME

will find the provider ‘in compliance’ with the accreditation element.’’ Thus, a CME provider would be deemed to be in compliance

with ACCME standards even if ACCME determines, based on the

CME provider’s own information, that some of the CME provider’s

educational activities failed to comply with its standards.

If ACCME determines that a CME provider is not in compliance

with ACCME standards, the CME provider enters a multi-year corrective action process that may eventually result in the loss of accreditation. When an accredited CME provider is found not in compliance, the CME provider has an opportunity to provide ACCME

with a written submission that describes the provider’s compliance.

The provider is generally allowed 1 year to submit this progress report to ACCME. If ACCME decides that the progress report adequately demonstrates compliance, no further action is taken. If

ACCME decides that the progress report does not adequately demVerDate 11-MAY-2000 15:26 Apr 19, 2007 Jkt 095484 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 34364.000 SFIN1 PsN: SFIN1
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onstrate compliance, then the provider may be allowed 6 months

to submit another progress report. If that second progress report

also does not demonstrate compliance, ACCME may put the provider on probation. If the CME provider does not resolve the problem after 2 years on probation, ACCME may rescind their accreditation. ACCME’s finding of non-compliance is the first step down

the road to potentially losing accreditation, which may occur up to

31⁄2 years after the initial finding of non-compliance and as many

as nine years after the problematic educational activities occurred.

ACCME reported that it reviewed 76 accredited CME providers

for compliance with the ACCME Standards. Eighteen of these CME

providers were found to be in non-compliance with at least one element of the ACCME standards. Examples from ACCME’s written

findings of non-compliance include [emphasis in original]:

• ‘‘The provider does not ensure that decisions regarding the

planning and implementation of CME activities are made independent of commercial interests. A commercial interest influenced where and how many presentations were scheduled for

three years of a CME activity.’’

• ‘‘The provider does not ensure that decisions regarding the

planning and implementation of CME activities are made independent of commercial interests. Evidence from one activity reviewed indicates that a commercial interest was involved in

the selection of faculty and other activities that interfered with

independence.’’

• ‘‘The provider does not ensure that a mechanism(s) has been

implemented to identify and resolve all conflicts of interest

prior to education activities being delivered to the learner.’’

• ‘‘The provider does not demonstrate appropriate management

of commercial support. . . . Written agreements for commercial

support were signed after the CME activity. However, the

ACCME Standards for Commercial Support require written

agreements to include the terms and conditions to which both

provider and supporter agree to abide. Therefore, it is the expectation of ACCME that agreements are signed prior to the

activity taking place.’’

• ‘‘The provider does not demonstrate appropriate management

of commercial promotion associated with educational activities.

One commercially supported activity contains recurring use of

one company’s product trade name at the exclusion of other

products.’’

• ‘‘The provider does not demonstrate that the content and format of educational activities is without commercial bias. One

activity reviewed promotes the proprietary business interests

of a commercial interest.’’

The inquiry to ACCME also sought delineation of the scope of

independence the CME provider must have in selecting the topic

for a commercially-sponsored CME program. ACCME’s response indicated that a commercial sponsor can designate the topic (e.g., diagnosis or treatment of a particular disease) for the CME activity

without being determined to control content or otherwise violating

ACCME policies. ACCME does not keep track of how many CME

programs favorably discuss a drug sold by the commercial sponsor

15

either for an approved use or for an off-label use. No information

was gathered regarding whether the CME providers’ educational

activities favorably discuss uses of the commercial sponsor’s products in a fashion that is disproportionate to what might be expected from an independent activity that has no relation to the

sponsor’s commercial interests.

VI. Observations

The pharmaceutical industry is paying increased attention to

educational grants and its compliance with fraud and abuse laws.

The Committee staff’s review suggests that, in recent years, the

major drug companies have limited the direct involvement of field

sales representatives and sales and marketing departments in the

educational grant-making process. Until a few years ago, it was

common industry practice for the drug companies’ marketing departments to be responsible for awarding educational grants and

for grant funding to come directly from the marketing budget, often

from the specific product budget for a particular sales team. While

many companies still allow marketing personnel to offer input, the

grant-making authority has largely been removed from the marketing department and placed with medical affairs departments,

medical education departments, or general business units.

In the past, companies generally allowed field representatives to

solicit grant requests from customers and collect grant applications.

With one exception, the companies have terminated this practice

and have generally removed field representatives from the grant

process.

The responses to the Committee’s inquiry showed that the companies have undertaken some efforts to train employees in complying with corporate policies. However, the responses did not include any information that would allow Committee staff to draw

conclusions regarding the quality or effectiveness of this training,

or measures of actual employee compliance.

The response from ACCME indicates that some CME activities

offered by accredited CME providers are improperly influenced by

commercial sponsors. The Committee staff has not gathered information to show the extent to which the educational programs sponsored by pharmaceutical manufacturers actually operate with the

level of independence promised by ACCME standards or recommended by the HHS OIG Compliance Program Guidance or the

PhRMA Code. The use of third party CME providers makes it difficult to demonstrate that the educational programs’ favorable

product messages should be attributed to the sponsoring drug company.

The Committee staff’s review suggests that much of the industry

funding for CME occurs in the following manner: A for-profit medical education and communications company submits a grant proposal seeking funding to run an ACCME-accredited educational

program. The drug company agrees to fund a program on a general

topic (e.g., treatment of a specific condition—and the condition is

one for which at least one of the sponsoring drug company’s products is used), but the specifics of the content are determined by the

medical education and communications company.

16

The documents provided by the pharmaceutical companies do not

reveal an explicit agreement that the CME program will favorably

discuss a company product or an off-label use of a company product. However, it is possible that both parties reasonably expect that

to be the result.

VII. Considerations

The Committee staff found some promising trends in pharmaceutical manufacturers’ use of educational grants, but risks remain

for fraud and abuse in several areas. In recent years, the pharmaceutical manufacturers appear to have moved grant policies to the

front-burner and crafted corporate policies that, if fully implemented, would ensure that the companies’ actions comply with all

applicable laws. This is clearly a step in the right direction, and a

dramatic improvement from the past when many companies lacked

formal policies or had official corporate policies that did not reflect

a commitment to compliance. However, while the fact that corporate headquarters now espouse a commitment to compliance is

certainly promising, it does not guarantee that all the company’s

agents, operating in a highly competitive marketplace and an industry in which employees’ compensation is often tied to sales volumes, will put those policies into practice. There is evidence that

some companies have taken some steps to train field employees on

these issues. However, it is difficult to know whether this training

has effectively imparted knowledge to the field staff, whether field

staff members perceive it as a true corporate commitment to compliance, and whether field staff actually adhere to the companies’

professed principles in their daily activities.

Continuing medical education has developed into a multi-billion

dollar a year industry, much of which is funded by pharmaceutical

manufacturers. It seems unlikely that this sophisticated industry

would spend such large sums on an enterprise but for the expectation that the expenditures will be recouped by increased sales.

Press reports and documents exposed in litigation and enforcement

actions confirm these suspicions in some instances. There is also

evidence from ACCME that some accredited CME providers still

allow commercial sponsors to exert improper influence on educational activities that are supposed to be independent from commercial interests.

What can be learned by relying on voluntary cooperation from

the pharmaceutical companies under review is limited. The Committee staff’s review has led to the conclusion that the major drug

companies have adopted corporate policies that, on their face, do

not allow educational grants to be awarded for unlawful purposes.

However, corporate policies still allow this industry to walk a fine

line between violating rules prohibiting off-label promotion and

awarding grant money in a manner likely to increase sales of their

products, including sales for off-label uses. The opportunity for

abuse remains, particularly in the following four areas: (1) kickbacks; (2) veiled advertising; (3) bias in clinical protocols; and

(4) off-label promotion.

17

Kickbacks

The Anti-Kickback Statute prohibits pharmaceutical companies

from providing remuneration to induce or reward physicians for

prescribing the company’s products for beneficiaries of Federal

health care programs, including Medicare and Medicaid. In the

past, the pharmaceutical industry commonly used CME sponsorship as a conduit for remuneration to physicians. Companies funded physicians’ travel to and participation in CME programs, where

it appeared that sometimes entertainment overshadowed education. The companies’ ostensible purpose was to give physicians

something of value (e.g., money, tickets to sporting events, meals,

entertainment, plane tickets, and hotel stays) in exchange for prescribing certain drugs.

It appears that the overt use of educational grants to provide

kickbacks to physicians who attend educational programs has decreased over time. At the same time, it is difficult to quantify the

risk of kickbacks related to industry-sponsored education where

companies overpay high-prescribing physicians as ‘‘consultants’’ or

‘‘speakers’’ for minimal work to develop educational material or

teach at educational programs.

With one exception, the major pharmaceutical companies are not

overtly giving educational grants to individual physicians or physician group practices. Although this was a common practice in the

past, the major pharmaceutical companies now conduct their educational grants activities in a way that is less likely to involve the

direct transfer of remuneration from the company to physicians.

Veiled Advertising

Educational grants are often used to sponsor programs to teach

physicians about treatment options for particular diseases. The information presented often encourages physicians to change their

prescribing practices to favor certain drugs. When favorable messages about a drug are delivered in the marketing context, physicians should easily recognize the potential bias favoring the drug

being promoted, and should be aware of the need to weigh information from other sources to ensure the promotional message does not

exert undue influence. However, when the favorable message is delivered in the context of education—even if corporate sponsorship

is disclosed—there is an imprimatur of credibility and independence.

The Committee staff’s review suggests that some CME programs

that claim to be independent from commercial interests may not

actually operate with true independence. There is a risk that physicians will allow favorable drug messages learned in an educational

context to change their clinical practices to favor use of those

drugs, without critically appraising the evidence or fully assessing

information from other sources.

Bias in Clinical Protocols

As with educational grants, commercial funding of clinical protocol development raises concerns about the introduction of commercial bias—favoring products marketed by the companies that

helped fund the program. However, nothing in the documents produced by the drug companies suggests that any funding for clinical

18

protocols was tied to the conclusions of the protocols. While company funding of protocol development, and involvement of experts

with financial ties to the industry, certainly raise questions about

company influence over the treatment recommendations, more investigation would be required to make such a determination, if it

exists.

Off-label Promotion

The off-label promotion risk of educational grants appears to

pose the greatest threat to the Federal health care programs and

beneficiaries, but it is also the most difficult to demonstrate conclusively. There is a risk that the drug industry may be using the

medical education industry to deliver favorable messages about offlabel uses that the drug companies cannot legally deliver on their

own using standard marketing tools.

Encouraging doctors to prescribe drugs for unapproved uses exposes patients to heightened risks. While drug companies are forbidden to promote off-label uses of their products, it is legal for

independent third parties to run educational sessions that recommend those products for off-label uses, so long as the educational program is independent and the decision to favorably discuss the off-label use cannot be attributed to the drug company. It

is noteworthy that, in recent years, a multi-billion dollar industry

of for-profit medical education and communications companies has

developed to run medical education programs sponsored by drug

companies.

Equally important, it is not possible to know exactly how much

of the pharmaceutical market represents off-label use, but it is definitely substantial. The drug companies earn significant profits from

off-label drug use. For some drugs, the magnitude of off-label use,

and proportional magnitude of company profits, is striking. There

is a fine line between illegal pharmaceutical company promotion

and legal company-sponsored education that happens to recommend an off-label use. If pharmaceutical manufacturers adhere

to the relevant guidelines referenced in this report, educational

grants will be less prone to abuse.

(19)

APPENDIX A

ACCREDITATION COUNCIL FOR CONTINUING MEDICAL EDUCATION

(ACCME) 2004 ‘‘STANDARDS FOR COMMERCIAL SUPPORT: STANDARDS TO ENSURE THE INDEPENDENCE OF CME ACTIVITIES’’

(21)

22

23

(25)

APPENDIX B

DEPARTMENT OF HEALTH AND HUMAN SERVICES OFFICE OF INSPECTOR GENERAL (HHS OIG) 2003 ‘‘COMPLIANCE PROGRAM GUIDANCE FOR PHARMACEUTICAL MANUFACTURERS’’

(27)

28

29

30

31

32

33

34

35

36

37

38

39

(41)

APPENDIX C

PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA

(PHRMA) 2002 ‘‘CODE ON INTERACTIONS WITH HEALTHCARE

PROFESSIONALS’’

(43)

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

(97)

APPENDIX D

FOOD AND DRUG ADMINISTRATION (FDA) 1997 ‘‘GUIDANCE FOR

INDUSTRY: INDUSTRY-SUPPORTED SCIENTIFIC AND EDUCATIONAL

ACTIVITIES’’

(99)

100

101

102

103

104

105

106