- Open Access
Regulating pharmaceutical companies’ financial largesse
© The Author(s). 2018
- Received: 15 March 2018
- Accepted: 25 April 2018
- Published: 14 May 2018
The original article was published in Israel Journal of Health Policy Research 2017 6:45
Nissanholtz-Gannot and Yenkellevich (NGY) explore the impact of a 2010 amendment to the Israeli National Health Insurance Law that requires annual reporting of payments from pharmaceutical companies (PCs) to doctors and healthcare organizations. The amendment was adopted to ensure transparency and to facilitate appropriate regulation of interest conflicts. To learn whether the amendment was having the desired effects, NGY interviewed multiple representatives of an assortment of stakeholders. They found broad agreement among the respondents that financial relationships between PCs and physicians should be transparent. But they also discovered that ignorance of the 2010 amendment was widespread, especially among physicians, and that knowledgeable respondents thought loopholes rendered the law ineffective. Lastly, NGY found that the improvement in the transparency culture has more to do with pressure put by international and non-Israeli national actors on the multi-national PCs operating in Israel than with the Israeli new law.
In this short paper we critically review NGY’s study. We are much less optimistic than they are about the situation in Israel. For example, we show that the new law has not increased transparency vis-à-vis the patients as virtually all reports to the government specify only the institutions receiving them and not individual physicians’ names. We are skeptical of the effectiveness of self-regulation or government regulation. Instead, we propose some ways to increase patients’ oversight, such as facilitation of class actions to enforce fiduciary duties and disclosures, as well as structuring co-payments for drugs in ways which will signal to the patients their relative efficacy.
Nissanholtz-Gannot and Yenkellevich (NGY) explore the impact of a 2010 amendment to the Israeli National Health Insurance Law that requires annual reporting of payments from pharmaceutical companies (PCs) to doctors and healthcare organizations when the value conferred exceeds 2500 NIS. The amendment was adopted to ensure transparency and to facilitate appropriate regulation of interest conflicts. According to reports filed with the Israeli Ministry of Health (MOH), tens of millions of dollars are transferred by PCs every year .
To learn whether the amendment was having the desired effects, NGY interviewed multiple representatives of an assortment of stakeholders. They found broad agreement among the respondents that financial relationships between PCs and physicians should be transparent, meaning that payments from the former to the latter should be disclosed. But they also discovered that ignorance of the 2010 amendment was widespread, especially among physicians, and that knowledgeable respondents thought loopholes rendered the law ineffective. For example, the law allows PCs to “channel  payments to physicians without public scrutiny” by engaging them as consultants, compensating them for lectures, sponsoring organizations that appoint them to their boards, funding post-marketing research, and paying hotel charges and registration fees for doctors who attend conferences abroad. Interviewees implied that many such payments were excessively lavish, their purpose being to buy loyalty rather than to cover actual costs. Many respondents added that lax enforcement by the MOH weakened the law as well.
In contrast, the interviewees had more positive things to say about private regulation, which takes the form of ethics codes adopted by multinational PCs, their umbrella organizations, medical associations, and employers. These codes “[brought] issues of transparency and accountability to the fore,” led many PCs to restrict gifts to doctors, and encouraged the use of contracts that compensate doctors and organizations for providing services of identified types in place of unrestricted gifts. Self-regulation also led PCs to route support payments to physicians via employers, instead of giving directly to physicians as before. In practical effect, the PCs and the health plans that employ Israeli physicians are responsible for ensuring adherence to the ethics codes that the involved business entities and organizations have adopted. To the extent that they succeed, the burden on public enforcers like the MOH is reduced.
Finally, NGY studied official reports and found substantial differences between payments reported to the MOH as having been made and payments reported as having been received. This discovery supports the opinion of the interviewees that enforcement of the disclosure law by the MOH is spotty. It may also reflect ambiguities in the 2010 law that foster disagreements between donors and recipients regarding the money transfers that must be reported.
It is important to recognize that the NGY study does not attempt to evaluate the extent to which Israeli physicians are unduly influenced by PCs. This is literally (actually much more than) a million dollar question, though one which NGY cannot answer. Instead they report an improvement in the perceived ethical environment in Israel. And yet, they report that the perceived improvement has more to do with pressure exerted by international and non-Israeli national actors on the multi-national PCs operating in Israel than by the new Israeli law or any enforcement of it by the MOH .
We have offered ways to strengthen patients’ oversights of their physicians. Another option is enhancing competition. The best protection consumers of all types can have against interest conflicts is providers’ profit-motivated desire to provide better services at lower cost. In Israel, the United States, and other countries where third-party payers, including government agencies as well as private insurers, control the flow of dollars, competitive pressures are impaired. The possibility of restoring them by delivering more services on a first-party payment basis should therefore be considered. For example, some countries in Europe have a system of tiered copayments where the most effective, or cost-effective, drugs are assigned a lower copayment, while less preferred drugs are assigned higher copayments (Barnieh et al. 2015). If we require doctors to not only reveal the risks and benefits of various alternative drugs but also the size of the copayments associated with them, patients might get reliable signals on the desirability of drugs for them just by looking at the co-payments.
Both authors read and approved the final manuscript.
Charles Silver is a professor of law at University of Texas at Austin and is the coauthor of the forthcoming book: OVERCHARGED, Why Americans Pay Too Much for Health Care.
Ronen Avraham is a professor of law at Tel Aviv University Buchmann Faculty of Law and a Lecturer at the University of Texas.
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