Here’s how a loophole in a transparency law can distort medical practices

For the past four years, the federal government has required drug makers to report any meals they buy for doctors, as well as any payments for speaking, consulting, and running clinical trials.

The system has succeeded in shining a light on financial ties that may unduly influence medical practice and research, a concern heightened by a series of pharma scandals involving illegal marketing, as well as studies showing such payments sway prescribing.

There is, unfortunately, an exception to the reporting requirements — and it needs to be fixed.

Here’s the problem: A company is not required to report payments if it does not yet market a medicine approved by the Food and Drug Administration. This means that a slew of small companies can fly under the radar as they line up allies in the medical community on their way to the marketplace.

Now, it may be true that physicians are unlikely to change the way they practice if the drug they’re paid to discuss or review is not yet available for treating patients. But it’s also likely a doctor will remember those later, when the drug has been approved and he or she is in a position to write a prescription or make recommendations to others.

“This is not what Congress intended,” said Paul Thacker, a former staffer at the Senate Finance Committee, where he investigated conflicts of interest between companies and physicians and helped draft the law that led to the creation of the OpenPayments database.

The opening is certainly being exploited, though.

In one brazen example, a small biotech that is developing a gene therapy recently solicited experts to attend an overnight meeting for advice about winning over hospitals. The company, AveXis, which does not yet market any medicine, offered to pay a fee along with travel and lodging — and expressly noted it would not report these payments to the database.

In short, the company used the lack of transparency as a selling point, which only underscores that some companies are acutely aware doctors want to avoid showing up in the database.

Why might such a pitch help convince some physicians to participate in a paid retreat?

Before and after the database was launched in 2013, some doctors complained that the requirement to report all such financial transactions was unfair and even offensive. Many argued that payments from drug makers — especially for such items as a modest meal — do not influence their medical judgments, and they derided studies suggesting otherwise.

Such complaints appear to have since diminished. And the American Medical Association supports the database, despite concerns about reporting errors. But one expert maintains that any move to require reporting by small companies without marketed medicines could be a costly mistake.

“It takes a lot of man-hours to compile and report the information,” explained Marci Juneau, a partner at Helio Health Group, which advises drug makers on regulatory compliance. “You have to weigh if the money and effort goes to transparency, instead of going to R&D, and if so, where’s the benefit?”

That’s a fair point. Smaller companies without revenue have tough choices to make. And no one wants to see investment in drug development compromised.

But this line of thinking only goes so far, because the loophole can also undermine long-term transparency.

Think of it this way: The business model for so many small biotechs calls for developing a drug to the point where they can sell it (or sell themselves) to a large drug maker. When it finally brings the drug to market, that bigger company certainly has the means to capitalize on any prior relationships the small biotech had with physicians.

In this way, doctors can remain useful as “key opinion leaders” who talk up the drug to their colleagues, in addition to prescribing it to their patients. Thacker conceded that he never thought of this scenario when writing the bill.

“I don’t think it’s hard to imagine that payments made prior to [FDA] approval may still influence a person later,” said Dr. Aaron Kesselheim, a Harvard Medical School professor, who also heads the program on regulation, therapeutics and law at Brigham and Women’s Hospital.

Indeed, choking off this exception should be added to the congressional to-do list.

Otherwise, transparency may remain elusive. And that’s a prescription that doesn’t help anyone.