Continuing the ongoing trend of transparency and disclosure in the health care industry, Forest Laboratories (FRX) became the latest in an ever-growing list of companies to publicly report all payments it makes to physicians to develop, market, and educate colleagues on its products. According to Q2 Metrics’ Company & Physician Aggregate Spend Solution (COMPASS), Forest Labs doled out more than $11.1M in payments to over 63,000 US-based physicians in Q1. Payments disclosed by the company included those for consulting fees, speaking fees, travel expenses, educational items, meals, and independent physician research funding.What is interesting about Forest Labs’ Q1 disclosure is that professional speaking fees represented a substantial 70% of Q1 payments (or $7.9M). Conversely, other professional service fees for consulting and independent research represented less than 4% of Forest Labs’ Q1 payments (or just over $200K). This spending on professional fees is in stark contrast to the practices of competitive firms. In 2011, Eli Lilly (LLY) spent only 28% of its physician aggregate spend dollars on speaker fees despite spending a staggering 92% of its aggregate spend budget on professional fees. Similarly, Pfizer (PFE) spent only 17% of its physician aggregate spend dollars on speaker fees in 2011 while spending on professional fees in general represented a staggering 87% of its aggregate spend.
There are likely many reasons for the spending discrepancy on speaker fees. First, Q1 2012 represents the first reporting period for Forest Labs and as such, many of the consulting and research agreements the company has with physicians may not yet be complete. Resultantly, the company may not yet be obligated to fulfill the financial obligations underlying these consulting and research agreements. Second, and maybe more importantly, Forest Labs is smaller than most pharma companies that are currently reporting physician payments, has a largely undifferentiated pipeline, and is not often first to market with products. Despite this, the company has demonstrated that it can successfully launch new drugs into mature markets (e.g. Lexapro, Namenda, & Bystolic), not an easy task without having a significant volume of clinicians speaking on your behalf. Because Forest Labs was compelled to make these disclosures as part of a legal settlement and will continue to report within 60 days after the end of each quarter, COMPASS subscribers will be able to see if this trend continues.
The debate surrounding whether or not the acceptance of industry-supplied payments creates a conflict of interest is not new. While research has repeatedly shown that even small giveaways can curry favor and influence physician choices when it comes to prescribing a treatment solution, pharma and medical device companies maintain that such payments are crucial to the advancement of technology. Some of the pharma and device companies currently disclosing payment data, whether voluntarily or through similar settlements, include Allergan (AGN), AstraZeneca (AZN), Boston Scientific (BSX), GlaxoSmithKline (GSK), Johnson&Johnson (JNJ), Medtronic (MDT), Merck (MRK), Novartis (NVS), and Stryker (SYK).
About Q2 Metrics, Inc.
Q2 Metrics Inc. is a leading provider of customizable metrics and tools in the health care space. Q2 Metrics Principals are veterans of the information industry, and specifically in providing high-value data solutions and insights to the health care field.