$1.2 Billion

In the November 13, 2006 edition of TheDeal.com Alex Lash reports on a study released the previous Thursday by the Tufts Center for the Study of Drug Development in Boston. Lash reports that the study finds that it takes more than $1 billion to develop a successful biotech drug; $1.2 billion to be exact. This includes the cost of drugs that ultimately fail. But ultimately, $1.2 billion is the number to reach the plateau of success. Even when stripped of all capital costs the figure is still in excess of $550 million.

Whew! I don’t know about the rest of you, but that’s more than I make in a year!.............. (The statement is true – very true).

When the price of success is this large a true barrier to entry has been established. Only the mega drug firms can afford the R&D necessary to invent the cures for our many ailments. This begs the question, “What happens to R&D and our modern cures when and if Medicare adopts a policy of competitively bidding or otherwise fixing the price of drugs?”

In the season just past there was a great deal of political posturing concerning Medicare’s current prohibition from engaging in activities to reduce the price of drugs to consumers. “We should be like Canada” the critics cry. “The Feds were wrong. We need to fix Medicare.” But, if we do behave like Canada will consumers really be served? Lower retail prices are one possible way to serve consumers, but is it the only need that should be addressed?

It is in recent memory that many drug classes, like HMG-CoA reductase inhibitors (statins) for example, appeared that have the promise of extending the lives of an entire generation. Are consumers better served by having low prices for that which has already been invented, or by benefiting from never-ending waves of new technology, each better than the previous, that change and extend our lives? America’s drug industry is second to none in the development of products that truly benefit mankind. It is not by accident that drug firms do not call Canada home, nor do they heavily promote their latest and greatest in that bastion of social engineering. It is also not by accident that these firms do call the US home.

Before we tamper with Medicare and the retail price structure of drugs we need to ask ourselves, “Are we willing to grant our current seniors lower prices at the expense of a brighter future for our grandchildren?” Because that is ultimately the likely result of any action that makes the US like Canada. It must be pointed out that countries like Canada – those that do not pay their fair share of R&D - are technology parasites living off those that do: the US and other free market nations.

I am not a fan of the entitlement program referred to as the Medicare Prescription Drug Benefit. In 2000, when I heard both Al Gore and George Bush trying to out promise each other relative to a new senior drug benefit program, I knew that they had both been bought by the pharmaceutical PACS and that they were both selling a bill of goods to the American public (who usually self centered seniors bought it hook, line and sinker). However, despite my personal distain for this transfer of wealth from the public coffers to the drug companies I do not believe we should further compound the disaster by structuring it in such a manner as to destroy the world’s largest source of funding for technology development.

If we don’t like the Medicare structure, repeal it. But don’t, I repeat, don’t throw out the baby with the bathwater by reducing the margin on all drugs to the point where R&D is no longer possible. I like my statins; I like my anti-allergy drugs; and I even like my now over-the-counter Rogaine. The illnesses that plagued my father to death, literally, are still bothersome, but less so. I hope to live longer than my father. My hope is that my children and grandchildren benefit even more. I’m willing to pay the right price to see that this continues to happen. While I would like a bargain, I don’t want one at the expense of my children’s bright future. $1.2 Billion is a lot of money in any industry. Particularly when that is your investment before you make the first sale.

Strategic Asset?

So much has been written and spoken about the Toyota model of supply chain (aka Toyota Production System) that when using the term in circles outside of other supply chain professionals you learn to be careful. Terms such as “Lean” and the “7 wastes” have become dangerous in the hands of amateurs. For example, I have witnessed “Lean” used as an excuse for staff reductions, and the “7 wastes” distorted to justify working with some dangerously low levels of inventory. When this occurs I like to point out that besides having a word meaning change for the better, Kaizen, the Japanese also have a word for change for the worse, Kaiaku. Staff layoffs for short term gains and ill conceived inventory reductions are usually referred to as Kaiaku.

The current preferred description of cutting edge supply chain, Strategic Supply Chain Management (SSCM), is described by Shoshanah Cohen and Joseph Roussel in their 2005 text “Strategic Supply Chain Management: The Five Disciplines For Top Performance”. This book documents the collective thinking of many serious students of supply chain, including participants from the prestigious Institute for Supply Management, Penn State University, MIT and others.

The first discipline is to view supply chain as a strategic asset - not an overhead function to be endured and operated with the minimum of resources, involvement and information. This brings to mind many questions in the current hospital environment.

• Is senior leadership involved in supply chain
• Is supply chain represented on the senior leadership team
• Is the supply chain executive viewed as a thought leader in their area
• Is supply chain a department or management function or both
• Is supply chain defined as all non-labor expense
• Are all supply chain functions governed by an organization-wide set of policies and procedures
• Does supply chain focus beyond obtaining low prices
• Does supply chain integrate process improvement and standards adherence
• Have key suppliers been identified for collaboration and development
• Are all stakeholders required to participate in collaborative models
• Are there periodic and routinely scheduled supply chain planning meetings involving senior leadership
• Is the supply chain expected to drive strategic results in areas such as marketing and new product line introductions

The questions could go on for another 2 columns, but the message should be clear: Supply Chain as a Strategic Asset is not Purchasing in the basement. Neither is supply chain like any other area. Only supply chain can bring value from outside the organization to meet its primary needs in myriad ways. If your organization has not permitted or encouraged this development then supply chain is an overhead expense – not a strategic asset. This is a pity – and a key reason why many hospitals find themselves unable to turn the bottom line from red to black.

The Comfort Zone

Anyone who has ever raised an infant child will have had this experience: You spot your darling baby sitting with a big contented smile on their face. You reach out to them. Their smile gets even bigger. As you pick them up you suddenly catch the smell – whew!! Only a parent will continue – and clean them up. The kid was sitting there happy as all get out sitting in a pile of you-know-what for heaven knows how long. So much for the baby cries when their diaper’s dirty theory.

There is a lesson here. As we get older we may grow bigger, become smarter, wiser, more mature, etc. - become toilet trained - but our fundamental nature does not change. As human beings we have the ability to get comfortable anywhere: even in stinky piles.

What is comfort? It is always something familiar, something known. Classic symbols of comfort include the worn EZ chair, washed out blue jeans, old sneakers – familiar and known. Ah, the comfort zone – safe and secure. The unfamiliar and the unknown are almost always uncomfortable: new shoes, new job, and breaking old habits. Sitting in old chairs and wearing old clothes will never be viewed as detrimental. But, when the metaphor translates to other aspects of our lives we often have to rethink the concept of a safe comfort zone.

Most people would agree in conversation with the premise that change is good. However, this usually means that actual change is good for other people. Personally I have never met anyone who really wants to live in a state of constant change. In fact most people demonstrate behaviors that could be only interpreted as a fear of change. Think about it: constant strangeness, nothing’s familiar. We strive to be expert in our fields, but we cannot even be competent in what we do not know. No, the land of change is not a place for R&R. But what is continuous process improvement if not constant change?

Maybe this is why we tend to embrace and endorse change that is really more of the same – repackaged old ideas that avoid conflict at all costs – places where our competence can be comfortably demonstrated. Maybe this explains the inertia encountered when attempting to initiate new behavior patterns capable of generating radically different results. Maybe this explains why, despite decades of publicly endorsing process improvement, American healthcare organizations remain woefully deficient in so many basic categories. A prime example is patient safety, but it is only one of many – of which myriad articles may and should be written.

Am I comfortable? Am I comfortable while sitting in a malodorous pile?

Election Results: ISM - AHRMM

INSTITUTE for SUPPLY MANAGEMENT Election Results

Congratulations to the new elected officers that will help lead ISM's Medical Industry Group beginning October 1, 2006. Those elected are as follows:

Chair: Ron Feldman, CMRP

First Vice Chair: Mike Nelson, C.P.M.

Second Vice Chair: Ray Bossung

Secretary/Treasurer: Ann Dioquino, C.P.M.

Director/Committee Chair: Stephen Tambolas

Chair Emeritus: John A Efthemis, C.P.M.



AHRMM Election Results

Congratulations to the new President-Elect and Board Representatives who were recently elected by the AHRMM membership. The following new officers will begin their terms on January 1, 2007.

President-Elect: Mary Ann Michalski, CMRP, FAHRMM

Region 2 Representative (NJ, NY, PA): James Smoker, CMRP

Region 7 Representative (AK, LA, OK, TX): Becky Daniel

Region 8 Representative: Liz Veazey RN, MBA, CMRP

WORLD CLASS SERVICE

Did you know......?

Each year the staff of the Materials Management Departments at our nation’s healthcare facilities handles many billions of pieces - some of them 2-3 times! While the average hospital logistics center handles a huge dollar volume of stock supplies the average cost per piece is actually somewhat, make that very, low. It is the incredible piece count that primarily accounts for the high dollar values. A piece is anything that has to be handled one at a time: an each, a box, a case, etc. Some pieces weight grams; some weight 100's of pounds.

Every weekday millions of overnight-rush-gotta-have-it-right-now-most-important-in-the-world packages arrive requiring special processing and delivering. Talk about rapid response techniques! Today many, if not most, suppliers of high unit cost medical devices have placed warehouses as close as possible to FedEx's main hub in Tennessee. Use of overnight delivery, once a novelty, is now routine, resulting in massive reductions in supply chain inventory investments. This increases freight expense, but reduces total overall costs in the supply chain. As more freight carriers develop dependable overnight services prices continue to decline, and the practice more common. Proximity to good highways, once the key factor in locating a warehouse, is giving way to proximity to good airports: preferably an overnight carrier’s main hub.

World-class logistics is a generic term applied to companies that fill 97% or more of their customers’ requests the first time. Few suppliers to the medical industry meet this test (regardless of claims to the contrary). Yet many healthcare organizations have achieved consistent fill rates to their internal customers that exceed 98%: very world class and better than their best supplier! Many organizations generate daily status reports that communicate to their users any problems or unusual occurences with products. This innovation saves users many thousands of telephone calls while documenting service levels in an every day report card.

Today we should salutes the staff and vendor personnel who routinely count, order, track and handle the many tons of supplies, one piece at a time, which we use to treat our patients each and every day. They're not only good; they're real busy and good! Let's never forget that each and every life ever saved at our hospitals involved the sweat of someone in logistics. Be proud of that. Together we really do make a difference.

Tomorrow: “Give Thanks”

WORLD CLASS TECHNOLOGY

Did you know......?

The Supply Chain Department at many hospitals are evolving into some of the most efficient and innovative users of computers in any industry.

Remote user entry into the MM information system is now being used by many if not most major hospitals by almost every clinical and support department. Users, with access to electronic catalogs and requisitions, are able to directly enter purchase and storeroom requisitions that are approved and validated to budgets, contracts and product standards using software algorithms and transmitted to vendors’ computers; or a Logistics Distribution Center; or an advanced e-portal - such as GHX; often within minutes. The transaction is tracked through electronic confirmations, advance ship notices, online instant feedback, received electronically and automatically matched to an electronic invoice in Accounts Payable.

End users are able to inquire online to look up prices, dates items were ordered, received, the PO number assigned to a requisition, etc. Errors and problems are corrected before they actually affect the business cycle. Each year millions of lines of data entry as well as millions of telephone calls have been eliminated, while same day processing rates of supply requisitions for many organizations exceeds 99%.

Catalogs and contracts reside on websites that can be downloaded, validated, and loaded into resident systems with zero errors in seconds - a process that used to take weeks of man-hours with far more than zero errors.

Advanced architectures move beyond traditional ordering cycles and instead alert suppliers and others of the need for product prior to actual use. Often through means as simple as transmitting surgery schedules in advance, or mirroring requisitions to pre-selected suppliers. Trusted collaborative partners have access to data such as preference cards and are alerted to product needs prior to actual consumption. This facilitates minimizing inventory levels through the entire supply chain by drastically reducing lead times from usage to receipt of replacement stock, while minimizing errors in reorders. Maintaining good information in preference cards (front end) assures higher end results in a cascade of processes.This, coupled with hand held terminals, use of internet ordering for items like office supplies and forms, and clinical staffs that are not afraid of the technology, is helping America’s healthcare supply chains gain status as true world class users of information systems: building the modern end-to-end architecture.

Today we should salute our many internal and external customers who have embraced these new technologies and are making this quiet revolution possible.

Unfortunately, we still have to handle the actual stuff manually - haven't figured out how to automate that part, yet. PS - You ain't seen nothing yet. Many minds are busy behind the scene raising the bar.

Tomorrow: “World Class Service”

THE FATHER OF MODERN MATERIALS MANAGEMENT

Did you know......?

Henry Ford, the father of the production line, is also the father of modern Materials Management in a non-military setting. Henry saw the need for reliable sources of supplies to keep his production lines humming. And he saw how a supply chain originated at the level of raw materials and continued in an end-to-end architecture to the finished product. Through his innovations in supply chain management he vastly improved the quality of an automobile while reducing the price to consumers by over 75%. Starting with Ford the American auto industry had long been the world’s laboratory for inventory management and logistics concepts.

The now defunct Healthcare Materials Management Society (HCMMS) was the first healthcare supply chain professional society (and where I got my first professional credentials - CPHM). It started as a specialty subgroup of the International Materials Management Society: a group then dominated by auto industry executives. HCMMS eventually spun off in the mid-1980's due to the perceived differences between the needs of heavy industry and healthcare. Seems the industry officials were appalled by the inability of healthcare MM's to plan production. I guess we should figure out a better way for society to get specific ailments on a scheduled basis. Also, by the early 1980's the average hospital used and tracked more than 75 times the number of items used by the average auto manufacturer! It has only gotten more complex. And we don’t know what the ED will use this afternoon.

It is now broadly recognized that the same concepts that work in one industry will work in another: good supply chain is based upon a few good management principles tailored and applied to our particular circumstances. Uniqueness is a terminal concept.

Today we should salute all the members of the supply chain from manufacturers through distributors, and all of the many healthcare based supply chain professionals who collectively make our uncertain industry capable of performing at high confidence levels through rapid response techniques and ever evolving end-to-end architectures.

Tomorrow: “World Class Technology”

OUR ORIGINS

Did you know......?

Two of healthcare's key professions have a common root: military campaigns. Nursing and Materials Management (Logistics in military parlance) both grew up in response to the needs of war.

Stories of brave nurses in the battlefields over history abound. But, did you know that military historians credit good logistics management as the key to the success of Hannibal, Alexander the Great, Genghis Khan and many others? Clearly the Roman Empire was built via logistics (being part of Rome made trade possible for any conquered nation). They also attribute logistics ignorance to some well-known military debacles. Ancient armies were most dependent on food sources; so good logistics usually meant having something for the soldiers to eat (not to mention having an adequate supply of arrows).

Every serious student of history learns of Napoleon freezing his you-know-what off in Russia without food and other basic needs. The Russian strategy was to cut off the French supply chain – which they did - and thus won the war without winning a single battle! Modern armies still require supplies, but the subject matter changes. General Patton's tank crews fighting hand-to-hand combat because the “brilliant” general outran his gasoline supply line is the classic modern example. In MM circles the General is known as aggressive, but .........

Reruns of MASH continue to remind us of the role of caregivers and supplies in the battlefield. Our brave soldiers fighting in Afghanistan and Iraq bring home many stories of saved limbs and lives due to high quality and high technology medical care now being available in war zones.

Thankfully, most of us commonly ply our trade in a more peaceful setting.

While today's message communicates how MM evolved from a military discipline MM has much to do with why modern industry is... well, modern. It's just kind of hard to sell the rest of the world on "Logistics makes the world go round". They all think it is money, or love, or something else. We need a catchy phrase - or at least a better PR agent.

For this first day of National Materials Management Week all MM professionals in healthcare should salute our fellow military descendants: the Nurses with whom we work.

Pass this on to any nurse who makes you proud of being in our industry!

Tomorrow: “The Father of Modern MM”

Writers Wanted

Do you have some thoughts on healthcare supply chain? Have you ever wanted to write and publish your ideas but didn’t want the hassle of shopping an article to publishers - and don’t feel like spending the time to set up your own blog? Is a current topic in the industry sticking in your craw to the point where you’re thinking it will make your frontal lobe explode if you don’t say something? Have you done something right or made some observations that you’d just love to share with your peers? If you answered yes to any of these questions you’re reading the right piece.

In 2007 The Travels wants to publish some select guest articles. We’re hoping to catch those 4 or 5 other folks in North America who find the topic to be good dinner conversation material for a first date or the folks who named their first daughter Kaizen and an unplanned mongrel puppy Kaiaku – or at least the 2 of them who can clearly communicate their thoughts on paper.

While most articles are written from a hospital point-of-view a supplier’s perspective would be especially welcome. Any supplier with the honesty to tell hospitals what our relationships look like from their position would be a breath of fresh air.

Some other suggested topics of special interest would be:

1. Examples of end-to-end architecture in distribution
2. Demonstrated use of metrics to drive decision making
3. Examples of supplier – buyer relationships that work
4. How Supply Chain’s position has changed within an organization
5. Threats over the horizon
6. All of the other stuff I can’t think of

Gentlemen (and ladies) start your word processors!

Technical and Legalese

Articles for guest submission should be in Word or Text format, no more than 1200 words in length (approximate) and be proofed for spelling, grammar, etc. “Travels” reserves the right to edit content, but all edits will be submitted to and discussed with the author for final copy approval prior to publishing. Under certain circumstances a nom de plume will be permitted. However, the author’s true identity must be known to The Travels. Submit manuscripts via e-mail to stambolas@comcast.net and use the word MANUSCRIPT for the subject. Guest articles published will stay on the site for 30 days and be open to comments from readers subject to our 4 Rules policy. After that they will become part of our permanent archive under a new “Download Past Guest Articles” site. Travels will retain rights to all articles published though any article may be re-printed by the author in other outlets.

Collaboration

Negative (adj. - pessimistic or tending to have a pessimistic outlook).
Tone (noun - the way somebody says something as an indicator of what that person is feeling or thinking).

Regular readers of the healthcare industry press know that almost every article concerning supply chain is written in a negative tone, often describing a broken system that somehow needs to be fixed. And that suppliers and physicians are the co-conspirators/villains that keep the system broken. Why?
For starters, almost every writer in the industry press comes from the hospital side or writes to a hospital audience. Suppliers will hardly write articles critical of their customers (at least not suppliers desiring to stay in business), and physicians who publish tend to stick to matters of science (or tort reform). This leaves hospitals free to point the finger in any direction they choose without challenge. For some reason this dynamic brings to mind the parent and child in some public place where Johnny carries on, but the parent decides to ignore their charge – somehow believing that the child’s behavior will improve through neglect, except Johnny’s behavior never improves. It only gets worse until the parent addresses the problem. Bad behavior left unchecked only begets more bad behavior. After serving this industry for over 30 years I feel qualified to flatly state that many hospitals are in desperate need of an attentive parent.

Strategic Supply Chain Management (SSCM), a clearly defined set of disciplines and behaviors, is as pertinent to healthcare as it is other industries and it is no more difficult to implement in healthcare than it is in other industries. Some hospitals get it, but most do not. Unfortunately, most cannot even articulate the five (5) requisite disciplines or attributes of SSCM. This is not surprising. While supply chain has long been recognized as a factor that separates the winners from the losers in most human enterprises, it is not easy or intuitive. Otherwise it would not be a factor. Further, supply chain is a dynamic process, requiring continuous attention.

Henry Ford was the father of the modern supply chain concept in industry, which resulted in his firm having a cost advantage over his competition. His successors lacked his vision and as a result Ford now trails industry leaders like Toyota. Every serious observer of the auto industry attributes the changing fortunes of these two firms to their different approaches to supply chain. Toyota, the acknowledged market leader, continues to evolve and improve its underlying SSCM processes – choosing to not assume that what worked in the past will work in the future.

Increasingly in healthcare, just like other industries, the winners can be clearly distinguished from the losers by their openness to adopt the disciplines of SSCM. Of the five (5) core SSCM disciplines (not all of which are reported here), one of the least understood or applied in healthcare is the building of a collaborative model. To the contrary, the usual situation in healthcare is to create an antagonistic model. Two on one alliances are regularly created: physician and supplier vs. hospital, physician and hospital vs. supplier, or hospital and supplier vs. physician. It doesn’t have to be this way, and ultimately doesn’t work for anyone.

The Altoona Regional Health System (ARHS) located in Altoona, Pennsylvania provides an example of how things can be turned around - and quickly. The system was formed via a merger of two (2) hospitals in 2004: Altoona and Bon Secours-Holy Family. Both predecessor hospitals utilized what can be called the traditional hospital/supplier relations model: mutual distrust. Jim Barner, ARHS President and CEO, and Charles Zorger, CFO recognized that improving supply chain performance was critical for the system to continue its track record of profitability and to fully realize the system vision: “….to be a world-class health care organization.” From late 2005 through mid-2006 I was privileged to work with this organization as they retooled their supply chain operations.

The first order of business was the hiring of a new VP of Supply Chain. Gary Zuckerman took over the reigns in February, 2006. What he has accomplished relative to collaboration in 6 months should be a primer for other organizations seeking to improve their position. In this period ARHS has launched a full redesign of their old value analysis approach to a resource management model that incorporates executive leadership and participation by physicians and management at every level. Supply Chain is no longer viewed as a department, but instead as a core management function. An executive council and at least three (3) standing committees have been organized and actuated.

Gary and the Director of Pharmacy, Nick Genovese, have launched a formal supplier relations program and in three (3) months provided an in-person orientation to over two-hundred (200) supplier representatives and fifty (50) internal staff members (they require staff who meet with suppliers to sit through the same orientation as the suppliers.) This orientation provides their suppliers with clear expectations and a how-to for improving their firm’s position with the system. They have used a team approach to tackle one of their highest expense lines and have already realized savings in the 20-25% range. Note this was done by creating a supplier and physician and hospital collaborative approach.

Gary Zuckerman and the ARHS executive team are rebuilding their supply chain function based upon the disciplines of SSCM - the same core disciplines used by Toyota and every other successful organization. They get it! And because they get it, ARHS is reaping the benefits – quickly! Better yet, their process includes continuous improvement – not one-time savings or reductions. ARHS is building true strategic relationships with suppliers, physicians, and internal staff. The bottom line here is in lieu of ARHS moaning about what could not be done and how things were broken, they set about to make right whatever they could. And they have done this in an open and forthright manner. They understand that only the customer i.e. the hospital can initiate the relationships needed for a true collaborative model. And they are discovering that their suppliers can be vast resources for improvement and change. The kind of change needed if you are “….to be a world-class health care organization.” World class organizations tend to avoid negative tones.

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It Is Worse Than We Thought

A recent exposé by NY Times reporter Reed Abelson documents payments from Medtronic Sofamor Danek to physicians that can only be described as obscene. One physician, a spine surgeon, was receiving $400,000 a year for 8 days of “consulting.” Others are identified as receiving annual sums ranging from $75,000 to $700,000. The company, in response to a lawsuit brought by a former employee, admits paying physicians at least $50 million over 4 years through June or later 2005.

Let’s assume that Dr. $400,000 did all of his work at a single hospital. Do you believe that hospital made $400,000 on all of his cases? How many hospitals make any money on spine surgery? This is one of the worst procedures from a hospital reimbursement perspective, with some, but not all, hospitals accepting it as a loss leader/community service. Would $50 million dollars in the hands of America’s hospitals made that big of difference over the past four years? Maybe not, but it would have helped those willing to allow this procedure. Few hospitals schedule high end spinal procedures due to poor reimbursement relative to the cost of the procedure. How many patients have had to wait or travel long distances to get a needed medical procedure whose cost we now learn is artificially inflated due to the practice of legal bribery? We only know that Medtronic spent $50 million. How much is the total from all companies? Would that have made a difference? I suspect it would.

What happened to the AdvaMed Code of Ethics - the 16 page industry document that stresses the term bona fide when addressing the matter of consultants? And those bona fide consultants must be compensated consistent with a fair market value of their services? Is $50,000 a day fair market value? On the subject of gifts the code calls for “modest gifts” only if they “serve a genuine education function.” Well since the article also reports that Medtronic’s people were taking surgeons to strip clubs I guess they tied these visits to anatomy lessons. Some time ago a Medtronic sales rep proudly handed me a copy of the code and announced that Medtronic was the driving force behind its adoption. He took me to the AdvaMed website where I could see that Medtronic was a full supporting member of this group, and how every member had to adopt the code. I still remember that first reading of the code - how refreshing! At last, I thought, the industry is cleaning itself up. I was mistaken. The industry was simply throwing another smokescreen at those of us charged with making it work the way it’s supposed to in an ideal world. I now know that was a set up, that the AdvaMed Code of Ethics is a shill, raised to quiet people like me and to get us to stop asking questions. I was duped. I will never give it credence again. This is part of the price Medtronic’s practices exposed extracts from the entire industry. I have no choice but to be skeptical of everyone. Burn me once, shame on you. Burn me twice…..

Unfortunately, I would bet the ranch that Medtronic is not out of step with its competitors. They should not be singled out for scorn or punishment. The NY Times was able to get the goods on this firm only because of a lawsuit resulting in legal discovery procedures that were made public. The books of their competitors are closed. But, do you believe that Medtronic was paying $50 million while their competitors were paying nothing?

A group of physicians recently published an article in JAMA entitled “Health Industry Practices That Create Conflicts of Interests.” In it they advocate that academic centers take the lead in eliminating many of the conditions (bribery) that create these conflicts. The authors represent a who’s who of prestigious academic centers. This should bring hope to the industry. It’s too bad they are naïve and should be totally ignored. Their solution is simply more self regulation. Better yet, regulation by the same profession that is being bribed to the tune of millions. How credible is that? Is this more smokescreen from the other side of the transaction? There are legitimate, bona fide, needs for physicians to serve as industry consultants. The rapid growth of technology in medical science is a result of this dynamic. But, who is to set the definition separating legitimate, bona fide, consulting from outright bribery? Who can establish fair market value? I am reminded of a definition of insanity - doing the same things over and over again while expecting different results. More self regulation of the potential bribers by the potentially bribed - how long are we going to take it?

Attempting to delineate the necessary from the obscene will only lead to more confusion and further abuse. The only answer that makes any sense is simple full public disclosure of the dollar amounts and to whom they are paid. Hospital administrators need to lobby the heck out of Congress and the Senate to make disclosure of these payments public information, including notification to all patients. Make failure-to-disclose a criminal act punishable by high fines and jail time if necessary for company officers and physicians alike. Let’s face it - the dynamic of selecting products to use in surgery will completely change when everyone knows that a physician is a highly paid representative of the firm for whose products they are advocating. Likewise patients have a right to know that “their” doctor is a paid representative of the company that makes the implant that they are recommending for use in their case. Demands couched in “best quality” and “best interest of the patient” will sound a little shallow coming from someone with this large of a financial stake.

In the meanwhile hospitals should:

1. Since the firms sell to the hospitals and not the physicians it is fair for all hospitals to require, via contract, that all payments to consultants or others doing business on the hospital premises be disclosed by any company selling to the hospital. This should be a part of every hospital’s supplier certification program.
2. Implement a requirement that all members of their medical staff disclose all payments made from third parties, other than insurers, for any services performed on their premises. This should be part of credentialing.
3. Here’s a novel idea: require that all payments made to consultants be matched as price reductions for product purchases. The physician gets $400K – the hospital, and ultimately the payors, gets a $400K break.
4. Not do business with any company refusing to agree to this. After all, if the company is adhering to THE CODE, then this should not be an issue.


The AdvaMed Code of Ethics: What a joke!

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