(Bloomberg View) — Selling prescription drugs is a classic principal-agent problem. The key decision-makers are the doctors who write the prescriptions, but they’re not the ones paying for the drugs, or taking them. So competing on, for instance, price is dumb. Doctors may not even know how much the drugs they provide cost, and they don’t have much in the way of fiduciary responsibility to insurance companies. Competing on effectiveness is better; I gather that most doctors do care about their patients’ health. But at some level the simplest way to sell prescription drugs is to bribe doctors to prescribe them. This is all well known, and bad and illegal. You can’t just bribe doctors to prescribe your drugs, come on.
So you have to fall back to competing on effectiveness. But just making an effective drug isn’t enough; you also have to convince doctors that your drug is effective. How do you do that? Well, you get them in a room, and you have someone — like another doctor with experience prescribing your drug — explain to them how your drug works and why it’s good, either in person or in a pre-recorded presentation. If sometimes the room is Le Bernardin, well, at least the doctors are getting a useful explanation with their fancy meal. And if the recorded presentation is played on a laptop turned toward the wall and with the sound off, well … at least the doctors are getting a fancy meal?
Many of these doc-in-the-box programs were little more than a mechanism to provide the attendees with extravagant dinners and an opportunity to socialize, and the speaker with $250 per event for doing little to nothing. Sales representatives often would not play the pre-recorded programs. And if the programs were played, the laptop or other device on which they were played was placed in a location where it could not be seen or at a volume at which it could not be heard.
That is from a Justice Department complaint against Raleigh, North Carolina-based Salix Pharmaceuticals Inc., which settled a kickback case for $54 million on June 9. (Here is the settlement, which admits many of the facts in the complaint.) Salix was bought by Valeant Pharmaceuticals International of Bridgewater, New Jersey, last year, shortly before everything became embarrassing for Valeant; this can’t particularly help. “All of the conduct alleged in the government’s complaint predated Valeant’s acquisition of Salix and involved personnel who are no longer with the company,” said a Valeant spokeswoman.
Anyway, the way the “doc-in-the-box” pre-recorded program worked is, a Salix sales representative would show the recorded presentation, or not, and would pay a doctor to be on call to take any questions, by telephone, at the end of the presentation. There often weren’t any questions. Because, you know. There wasn’t a presentation. Even if there was, the doctors who saw it probably wouldn’t have any questions, because they had heard it before:
The same doctors were repeatedly invited to the same doc-in-the-box programs, which simply served as opportunities for them to have an evening out with their colleagues paid for by Salix. An email from a former Maryland sales representative to a Washington, D.C., doctor, dated September 28, 2012, reflects the sham nature of the pre-recorded speaker programs. In the email, the sales representative wrote to the doctor: “I’m showing the Xifaxan video at the Suburban GI journal club next Wednesday, can you be available at 6:00 if there are any questions that arise? (considering this is the third time I’ve shown the video to them, I doubt they will have any questions this time either) ha-ha.”
Ha-ha. One assumes the sound was off there too. The doc-in-the-box programs were a way to give a bunch of doctors a fancy dinner, and one doctor a small fee, but the real money was in the live speaker programs, where a doctor — normally chosen because he prescribed a lot of Salix drugs — could be paid thousands of dollars for talking about Salix drugs, or not talking about Salix drugs, whichever:
A doctor from Providence, Rhode Island, was the paid speaker for numerous events during the Covered Period, earning more than $190,000 in honoraria. For approximately half of these events, the medical discussion lasted 15 minutes or less, including multiple events that were entirely social in nature with no medical discussion. The events were primarily a get together for the attendees, who in many instances knew each other and even practiced together. On multiple occasions, the sales representative announced that the attendees could just have dinner.
This is all dumb and bad, but it is worth trying to imagine yourself in the shoes of the doctors or, better, the sales representatives. Of course these dinners were bribes. The doctors chosen to attend the events, and paid to speak at them, were the ones “who prescribed comparatively more of Salix’s drugs or who Salix identified as having the potential to be high prescribers.” The sales representatives were told to “spend, spend, spend, spend, spend, spend” on the dinners. They were “expected to schedule so many speaker programs that, practically speaking, there was little or no way for them to avoid conducting programs where the same attendees attended the same programs over and over again.” By the third time you are showing the same recorded presentation to the same group of doctors, of course you are going to turn the volume off and tell everyone to dig in. We are all human beings here. The food is good; the presentation was probably boring the first time.
And yet the sales representatives were also told to make it look good.
Pursuant to Salix’s internal policies, the venue for speaker programs — which were typically held in restaurants, and during which a meal was provided to the speaker and attendees — was supposed to be “conducive” to the exchange of information.
In addition, under Salix’s policies, the cost of the meal was supposed to be “modest” by local standards of restaurant meals, and the attendees were supposed to consist entirely of health care professionals with a legitimate interest in the scheduled topic.