Jennifer Whitney , Editor07.20.06
As news of the latest round of subpoenas hit several major orthopedic manufacturers last month, I was reminded of the recent Harris Poll that found the public overwhelmingly had positive perceptions of the medical device industry—largely because the manufacturers aren’t as identifiable to the average citizen as are, say, the pharma giants. I think it’s safe to assume that anyone who reads a newspaper or watches the evening news is starting to learn a new set of corporate names, thanks to all the recent legal investigations and other activity.
As our annual Top Companies Report (page 55) shows, today’s med-tech companies are gaining major ground in catching the public’s eye, boasting double-digit gains through new product launches and strategic acquisitions. With the flurry of activity occurring in this industry, it seems natural that lawmakers are starting to focus more intensely on the top (and even lower-tiered) players.
This is why I figured now is a good time to share some advice from Andrew Gantt, a partner from Latham & Watkins, who spoke at the recent MDMA annual meeting (see page 108 for more on this event). Noting that the structure of sales and marketing initiatives is directly correlated to the risk of taking a future big hit to your bottom line, he illustrated how easy it can be to fall prey to governmental scrutiny.
“Entertainment is a big issue. I’ve seen companies hold golf outings and post pictures from them on the company Web site. This is a huge red flag to government officials,” Gantt told the audience, many of whom appeared to be surprised by this observation. “Education should be the focus, not entertainment. It’s obviously a fine line.”
Gantt also offered manufacturers the following advice on the topic of consultant agreements: 1. Make sure selection of consultants is completed outside sales and marketing offices, and be very alert when making a selection and outlining the terms of the agreement; 2. Since fair market value for a consultant’s time often isn’t well established, use caution before coming up with exceptionally high numbers, since they attract scrutiny; and 3. When drafting consulting agreements, always use legal counsel. The bottom line, he said, is that “you must document what your consultants are doing before they get paid.”
While the Summer of Subpoenas is heating up, I hope you manage to stay cool. In the meantime, I would love to hear your opinions on the scrutiny this industry increasingly faces from both the public and lawmakers.