Med/surg distributors never did get into gift-giving as much as other reps calling on healthcare providers. That’s because, most of the time, distributor reps lack expense accounts for giveaways, bagels, lunches, sports tickets or anything else for their customers. So, state and federal laws severely restricting gift-giving on the part of pharmaceutical reps and medical device/equipment manufacturers have had relatively little impact on Repertoire readers.
On the contrary, in some ways, such laws have actually improved selling for many med/surg reps. How’s that? For one, the laws have reduced pressure on distributor reps to match the largesse of their pharmaceutical counterparts. What’s more, such laws have challenged med/surg reps to keep their focus – and the focus of their customers – on what it is that reps should be doing, that is, providing value to the medical practice, hospital or long-term-care facility. That’s a challenge most Repertoire readers have successfully met for years. Still, it never hurts to stay in shape and keep practicing.
Legislation on the books
As of January 2011, 10 states and the District of Columbia had adopted marketing and gift disclosure laws governing the conduct of pharmaceutical and/or medical device manufacturers, points out the Health Industry Distributors Association in its “2011 Gift Disclosure Report.”
The federal government has gotten involved too. As of January 2012, federal law calls for manufacturers of drugs, devices, biological or medical supplies to record any gifts, food, entertainment, trips, consulting fees, royalties, speaking fees or other payments made to customers. Beginning March 2013, manufacturers will have to start reporting such gifts to the U.S. Department of Health & Human Services, and those reports will be made available to the public on the Internet.
Why are the states and the feds concerned about gift-giving to medical professionals? Because, in a sense, they feel they’re the ones who ultimately get stuck paying the bill.
Gift-giving can be interpreted as a violation of the Medicare and Medicaid antikickback statute, which provides criminal penalties “for individuals or entities that knowingly and willfully offer, pay, solicit or receive remuneration in order to induce business reimbursed under the Medicare or State health care programs,” according to HHS. Prohibited conduct includes not only remuneration intended to induce referrals of patients, but also to “induce the purchasing, leasing, ordering or arranging for any good, facility, service or item paid by Medicare or State health care programs.”
There’s little doubt that much of today’s attention to gift-giving stems from highly publicized misconduct on the part of manufacturers of high-tech, physician-preference products, such as orthopedic implants, as well as some pharmaceuticals. Just this past June, for example, five U.S. senators asked the Inspector General of HHS to investigate physician-owned distributorships, which allow spine and orthopedic surgeons to pocket a percentage of the profits whenever an implant is implanted into a patient. Also in June, Merck Serono SA (not related to Merck & Co.) agreed to pay $44.3 million to settle allegations that it gave kickbacks to doctors to prescribe multiple sclerosis drug Refib.
“While distributors occasionally get mentioned in state legislation, once we educate legislators on how the business works, we have been successful in getting distributors removed from [the legislation],” with a couple of exceptions, says HIDA CEO Matt Rowan. The HIDA report mentions that Minnesota and Nevada do include distributors in their laws. “If there ever was a time when lavish gifts were a routine part of the distributor/customer relationship, that time has long passed,” he says. “So I don’t see a big impact on sales or distributors’ activities going forward.”
These laws don’t change the dynamic of the distributor sales process, he continues. “They do place the focus on value more than ever, and potentially eliminate a non-product-related issue for everybody, from supplier to provider to manufacturer.”
Many with whom Repertoire spoke said the same thing.
“Honestly, in my career, gift-giving was never a big part of anything from the distributor perspective,” says Tony Gadzinski, vice president of marketing and business development, MMS – A Medical Supply Company. “The only time I ever noticed it was with pharmaceutical reps passing along gifts to physicians. But even that was a while ago. I don’t see it much anymore.” Still, in the past, med/surg reps did feel pressure to pony up. “But we would simply say, ‘It’s not part of our business, and our margins don’t allow it,’” he says.
“Historically, we’ve been a pretty lean organization as it relates to providing customer gifts or incentives,” says Dave Myers, executive vice president, Seneca Medical. True, there’s the typical trade show, where Seneca might hand out pens or low-dollar giveaways, or sponsor the occasional raffle that might occur on the show floor. But even some of that activity has been curtailed due to the scrutiny around gift-giving, he says.
But Myers isn’t disappointed. On the contrary. “It levels the playing field with competitors who might provide entertainment, whether it’s golf or dining, or the occasional collaborative think-tank meeting, where a customer is invited to speak and enjoy a short get-away trip. Since we are careful with such entertainment scenarios, I have no problem with this legislation.”
And the attitude seems to have permeated the industry, he continues. “We’re very rarely asked anymore if we can sponsor a lunch.” Even when the Seneca team and customers gather for a periodic business meeting, the customer is just as likely to pay for lunch as Seneca. “If you’re bringing value, most customers view it as their responsibility to take the Dutch approach. Occasionally, if we’re asking somebody to take time out of their day for a project that might be related to them, we may offset that time by covering a lunch. But that’s more of a convenience factor than entertainment.”
Still, customers do periodically approach Seneca about contributing to a fund-raising event, such as a foundation golf outing, dinner or raffle. “We can’t do all of them,” he says. “So we try to choose those events where we feel the objective is aligned with how we want to spend our philanthropy dollars.”
Says one med/surg rep who calls exclusively on doctors, “We never had budgets to give gifts or fancy dinners and lunches. It has always come out of our pockets if doctors or administrators have asked for such. Everyone should be on a level playing field as far as selling, and I am happy to see this legislation enforced.”
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