Regulating pharmaceutical companies’ financial largesse

Nissanholtz-Gannot and Yenkellevich (NGY) explore the impact of a 2010 amendment to the Israeli National Health Insurance Law that requires annual reporting of payments from pharmaceutical companies (PCs) to doctors and healthcare organizations. The amendment was adopted to ensure transparency and to facilitate appropriate regulation of interest conflicts. To learn whether the amendment was having the desired effects, NGY interviewed multiple representatives of an assortment of stakeholders. They found broad agreement among the respondents that financial relationships between PCs and physicians should be transparent. But they also discovered that ignorance of the 2010 amendment was widespread, especially among physicians, and that knowledgeable respondents thought loopholes rendered the law ineffective. Lastly, NGY found that the improvement in the transparency culture has more to do with pressure put by international and non-Israeli national actors on the multi-national PCs operating in Israel than with the Israeli new law.

In this short paper we critically review NGY’s study. We are much less optimistic than they are about the situation in Israel. For example, we show that the new law has not increased transparency vis-à-vis the patients as virtually all reports to the government specify only the institutions receiving them and not individual physicians’ names. We are skeptical of the effectiveness of self-regulation or government regulation. Instead, we propose some ways to increase patients’ oversight, such as facilitation of class actions to enforce fiduciary duties and disclosures, as well as structuring co-payments for drugs in ways which will signal to the patients their relative efficacy.