Sunshine Laws and the Pharmaceutical Industry

Recent research would suggest that the US public should be pleased with the role the pharmaceutical industry plays in advancing public health. Somewhat surprisingly, given widespread concerns about the cost-inflating effects of drugs and other medical technologies, Cutler and colleagues have shown that spending on medical technology is generally cost-effective.^{1 - 3} This is particularly true of new drugs, which often have contributed to stunning decreases in morbidity and mortality—for example, in cardiovascular disease.^{4 - 5} It appears that the huge investments needed to bring new drugs and medical devices to market are wise.

So why is there so much dissatisfaction with the pharmaceutical industry today?⁶ The answer appears to lie in its reliance on a distinctive model of marketing. The mainstay of the marketing effort has been a combination of advertisements to physicians, direct visits to physicians by pharmaceutical sales representatives, and a variety of gifts to physicians and their institutions, supplemented only recently by direct-to-consumer advertising. This approach must have been effective, given the size of the marketing budgets of most manufacturers, but it has also raised persistent issues about conflicts of interest from both legal and ethical points of view.⁷

The leadership of the pharmaceutical industry may see these concerns as the product of overly zealous federal prosecutors and overwrought ethicists. But even business publications now reflect anxieties about the drug industry's damaged reputation, pointing out that the overwhelming majority of physicians and hospital executives think that too much money is spent on marketing drugs and that the public has particular unease about off-label promotion.⁸

Are pharmaceutical manufacturers hearing these concerns and reacting appropriately? The report by Ross and colleagues⁹ in this issue of JAMA suggests that they are not. In an effort to address the problem of conflicts of interest in drug marketing, some states have enacted “sunshine” laws that require reporting of the amounts that companies pay physicians, in cash or other emoluments, in connection with marketing activities. Ross et al reviewed reports received by the Office of the Vermont Attorney General and the Minnesota State Board of Pharmacy pursuant to such mandates.

What these investigations have found is discouraging. First, numerous payments to physicians exceeded the $100 limit that has been suggested by the American Medical Association.¹⁰ Because this amount was also endorsed by the major pharmaceutical industry trade group,¹¹ the finding undermines faith in industry self-regulation. Second, and worse, there are many holes in the reporting. The Vermont law, for example, allowed companies to withhold information about payments to physicians that the companies considered “trade secrets.” The notion that the law should protect important business information against misappropriation by competitors is well accepted, evolving from judicial recognition of companies' legitimate need to safeguard information that is expensive to develop but not covered by other kinds of intellectual property protections.¹² But it is not clear what sorts of trade secrets there are in payments to physicians as part of a drug marketing program. Companies' broad invocation of trade secrets protection compounds concerns about similar arguments that have been made to prevent drug-safety data from becoming public.¹²

In some circumstances, Ross et al found that reports just were not submitted with no reason given. This approach calls to mind similar problems in other areas, such as companies' failure to follow through on commitments to conduct postmarketing safety studies.¹³ In other circumstances, companies made reports but did not provide key elements, such as identifying the recipient of the gift. Although the laws clearly called for the recipient's name, some companies replied simply “doctor.” All of this tends to create an image of an industry that is not at all committed to transparency.

Some may ask, what is the harm? Recently Hampson et al¹⁴ reported that cancer patients, for example, generally are not interested in learning about potential conflicts of interest faced by their physicians.¹⁴ Patients did, however, expect institutions to have reasonable policies in place for dealing with conflicts. If the public does not care about the problems on which the reported information sheds light, perhaps it also will not be troubled by the underreporting.

Moreover, given the extensive efforts through which Ross et al had to go to obtain useful data from the states, are the new laws really applying any “sunshine”? The states' resistance to sharing the information and to putting it into a format that would facilitate analysis suggests that the regulators may not be able to demonstrate more commitment to the concept of transparency than the industry. The statutes they are tasked with implementing also are rather badly constructed, with loopholes that allow use of trade secret defenses (in Vermont), no clear indications of how the public could access the reports, and no affirmative obligations for the attorney general's office (in Vermont) to do anything with the reported data other than pass it along annually to the governor and state legislature. Perhaps this reflects an ambivalence among state legislators about enforcing transparency and imposing substantive limits on gifts to physicians.

The pharmaceutical industry should not be cheered by these observations. Even if some segments of the public are not yet sensitized to the salience of physician conflicts of interest, the medical community increasingly is.^{7 ,15} Nonreporting undermines hospitals' and medical societies' own efforts to police conflicts of interest among physicians. Furthermore, although the state laws have many flaws, they likely will also have many imitators. State governments have deepened their regulatory interest in the pharmaceutical industry in recent years, and companies can expect more laws of this kind, hopefully drafted so as to avoid some of the problems of the pioneering states.

Most importantly, efforts to circumvent the law make the drug companies look silly at best and arrogant at worse. To call small payments to individual physicians “trade secrets” or offer “doctor” as the name of a recipient can only create mistrust.

There are some signs of change in the industry. Pfizer's recent decision to pare its sales representative staff dramatically¹⁶ suggests that some general rethinking of the traditional marketing strategy has begun. Other companies appear to have eschewed the use of the trade secret gambit and reported fully. The authors might also be able to determine whether particular companies adhered to the $100 limit on gifts. Some industry leadership on this issue would be a positive sign and a wise business strategy for companies interested in fostering a more favorable public image.

In summary, pharmaceutical companies have made profound contributions to medical therapy and public health. The achievements of their research programs speak volumes. However, their marketing techniques and their reluctance to disclose them invite further misgivings about the industry. Drug companies' attempt to evade regulation may backfire, as public resentment over noncompliance with existing laws sparks demand for additional regulation.

To be clear, for-profit industries do not share the same ethical norms to which physicians and other health care professionals must adhere. Their primary commitment is to create shareholder value, not maintain an altruistic commitment to patients. But at some point the leadership of the pharmaceutical industry and their boards of directors must begin to recognize that growing public and professional mistrust could substantially detract from that value.