How Drug Companies Hid Millions in Physician Payments in Vermont

Vermont is one of a handful of states that requires drug companies to disclose their payments to physicians. But the law contains a loophole as big as the Ritz—companies are allowed to withhold information on payments that they consider “trade secrets.”

Ever since the Vermont law was passed, many have wondered what on earth these “trade secrets” might be. A research letter published in this week’s edition of JAMA (Journal of the American Medical Association) finally provides the answer.

The non-profit group Public Citizen sued to obtain information on the trade secret payments, and here it is. During the two year period from the summer of 2002 to the summer of 2004, drug companies made 21,409 payments, primarily to doctors, totaling $4.90 million. 42.9% of these payments, totaling $2.72 million were labeled “trade secrets.”

The researchers, led by Dr. Joseph Ross at Mt. Sinai School of Medicine in New York, focused their analysis on those payments to physicians of more than $100 (the Vermont law requires disclosure of all payments of at least $25). There were 4743 payments that exceeded $100, totaling $3.2 million. 49% of these larger payments were trade secrets. The median trade secret payment was $500 per doctor, far greater than the median non–trade-secret–designated payment of $177.

What kinds of payments were considered trade secrets? One would assume these would be for consulting arrangements in which doctors give advice about secret new products in the pipeline. But “consulting” constituted only 8.2% of trade secret payments.

By far the majority of trade secret payments were for promotional speaking (43.2%) and for “educational” activities—presumably CME (41.7%). Most such gigs are well-publicized by mailings to doctors' offices, and they are typically for products that are already FDA-approved.

Calling promotional speeches and CME events “trade secrets” is Orwellian double-speak at its finest. Luckily, the Physician Payment Sunshine Act, likely to be passed by Congress in the coming year, does away with this loophole.