The payoff for failed back surgery

Device firms outpace drug companies in making payments to physicians

Back surgery ranks as one of the worst performing operations in the surgical canon. Spine experts say just a third of patients experience relief from the operation, while about 40% continue to suffer similar or worse pain afterwards. One doctor calls the permanent post-operative pain this growing tribe suffers “failed back surgery syndrome.”

Yet the number of back surgeries performed in the U.S. has sextupled over the past three decades to more than 1.2 million per year. Spinal fusion operations, which range from $60,000 to $110,000 per procedure, have become the nation’s fastest growing surgical category. Patient advocates and insurers’ cautionary warnings about unnecessary back surgeries have had little impact on the underlying trend.

A new study in Health Affairs offers insights into why. When it comes to making payments to surgeons who use their products, medical device firms have been outspending their drug industry counterparts – who usually get the bulk of criticism for this practice – by a seven-to-one margin.

Since 2013, the Center for Medicare and Medicaid Services has required medical device and drug firms to disclose payments to physicians in a publicly accessible database. Researchers from the University of Pennsylvania and Columbia business schools found device firms paid on average $904 million a year to the nearly 200,000 surgeons and other physicians who use their products. That’s an estimated 1.7% of total industry revenue. Firms in the much larger drug industry, by contrast, paid on average of $821 million a year to over 330,000 physicians, which was less than ¼ of 1% of industry revenue.

The payments range from five- and six-figure consulting and speaking fees paid to physician “thought leaders” to pizzas and swag delivered to their office staff. Nearly half the medical device payments in any given year go to surgeons in the form of royalties for the help they gave companies in developing their implantable medical devices. The payments help make cardiovascular, orthopedic and neurological surgeons are among the highest paid specialties in medicine.   

In the years running up to 2010 passage of the Physician Payments Sunshine Act, the medical literature was filled with studies about how those conflicts of interest influence physician decision-making. A 2009 Institute of Medicine report concluded every form of payment – even a pizza – had the potential to influence physician behavior and elevate their personal financial interests over the best interests of their patients. The tens of thousands of dollars companies paid to individual physicians for speaking engagements, consulting contracts and royalties posed a much more serious conflict.

One notable example cited in the IOM report involved then Minneapolis-based Medtronic, which in 2006 signed a “corporate integrity” agreement to settle a Justice Department lawsuit alleging the company made unlawful payments to physicians to promote its spinal implants. The company paid a $40 million fine as part of the settlement.

But in its final recommendations, the IOM stopped short of calling for an outright ban on the practice – something critics had advocated (I ran the Center for Science in the Public Interest’s Integrity in Science project at the time and was among that group). One of the report’s major recommendations called on physicians to refuse gifts, grants or consulting fees from drug and device firms “except when a transaction involves payment at fair market value for a legitimate service.”

Ignoring recommendations

Most drug and device firms, as well as the physicians accepting the cash, paid little attention to the report. In 2019, companies paid out $10 billion to physicians, the highest amount ever, according to the Open Payments database.

As those payments mounted, whistleblowers and government officials continued to turn to the Civil War-era False Claims Act to pursue drug and device firms they believe are making payments to promote unapproved (off-label) uses of their products. The suits allege such payments defraud Medicare or Medicaid.

In one long-running battle, Medtronic (again) faces charges made by a former company sales representative that it illegally promoted the off-label use of one of its lower back spine implants. Medtronic, now headquartered in Dublin, Ireland to avoid paying taxes, scored $2.5 billion in revenue from spine implants in 2019. The suit has been joined by the Justice Department and 30 states’ attorneys general.

In a ruling last Friday, the 9th Circuit Court of Appeals in San Francisco overruled the district court that had dismissed the case. The three-judge panel said the lower court should reconsider whether Medtronic defrauded the Food and Drug Administration when it won approval of its lower back spine implant as a “follow-on” device. Under the FDA’s 510(k) approval process, devices considered similar to something already approved do not require comprehensive clinical trials proving their safety and effectiveness. After its approval, the company began making payments to physicians who touted its use as a cervical or neck implant, something for which it had not been tested nor approved.  

It’s a case worth watching since it lays bare one of the major drivers of rising health care costs. Medical device manufacturers get a device approved without clinical trials by claiming it is similar to a device that has already been approved by the FDA. They then make payments to surgeons who tout good results from its use in a related affliction – in this case, neck pain, not lower back pain. They earn consulting fees, speaking fees and often royalties for these extra curricula activities.

It’s win-win for Medtronic and the surgeons. And lose-lose for taxpayers and the 40% of patients whose pain continues unabated.