October 02,2008

Senator Grassley’s Letter to Medtronic Regarding Financial Relationships with Physicians

September 30, 2008

Via Electronic Transmission
Bill Hawkins
President and Chief Executive Officer
Medtronic, Inc.
710 Medtronic Parkway
Minneapolis, MN 55432-5604

Dear Mr. Hawkins:

The United States Senate Committee on Finance (Committee) has jurisdictionover the Medicare and Medicaid programs. As a senior member of the United StatesSenate and as Ranking Member of the Committee, I have a special responsibility toprotect the health of Medicare and Medicaid beneficiaries and safeguard taxpayer dollarsauthorized by Congress for these programs. This includes the responsibility to conductoversight of the health care industry, including makers of medical devices, which receivehundreds of billions of taxpayer dollars every year for the care of Americans.

In carrying out this duty, I have been examining the substantial financial tiesbetween the device industry and practicing physicians. I have also been examining thesafety and cost of medical devices that are sold to the American public. As the largestmedical device company in the United States, the practices of Medtronic Inc. (Medtronic)have a profound impact on American healthcare.

Last week, the Wall Street Journal (WSJ) reported on allegations of financialperks provided to doctors that included “entertainment at a Memphis strip club, trips toAlaska and patent royalties on inventions they played no part in.”[1] I would appreciateyour assistance in better understanding these allegations and would like to take thisopportunity to lay out my specific concerns and questions.

First, I am glad to hear that Medtronic told the WSJ that the company is“committed to reform and transparency in the industry.” I also appreciate Medtronic’simportant support for the Physician Payments Sunshine Act, which would require drugand device companies to make public their payments to physicians and bring greatertransparency to medicine. However, until this legislation is enacted, the public willremain largely in the dark about such payments. As I am sure you are aware, somepharmaceutical companies have already taken the lead on this issue by voluntarilymaking public their payments to physicians. In the spirit of transparency, I hope that

[1] David Armstrong, “Lawsuit Says Medtronic Gave Doctors Array of Perks,” Wall Street Journal,September 25, 2008.

Medtronic will consider making public its payments to physicians in the future andthereby show similar leadership in the device industry.Second, according to WSJ, the lawsuits against Medtronic remain under seal. Iwould like to better understand the status of these lawsuits and the procedural processthat has led to the current situation.

Third, the WSJ also reported allegations that one of the incentives Medtronicprovided physicians was to include them on patents for medical devices and reward themwith royalties, even though the physicians may not have contributed to the developmentof the product. Specifically, the article alleges that Medtronic “paid patent royalties todoctors who didn’t contribute novel ideas to products….” Allegations that a devicecompany paid patent royalties to disguise kickbacks are serious, and I would appreciateyour help in better understanding what practices led to these allegations and what haschanged since that time.

Fourth, earlier this month the WSJ reported on problems with off-label use ofMedtronic’s Infuse.[2] Infuse is a bone graft replacement technology that uses a proteinwhich creates bone. Specifically, it was reported that Medtronic gave payments tophysicians, in the form of consulting agreements, as a means of increasing sales ofInfuse. The allegations that Medtronic has been disguising these consulting agreementsas inducements or kickbacks for physicians to use Infuse are equally troubling. Likewise,this is a practice that I would like to better understand and I would like to know what, ifanything has changed since these reported events.

In light of the issues set forth above, I would also appreciate receiving both abriefing and written responses to the questions and requests addressed below. Pleaserepeat the request and follow with the appropriate response. These questions are for theperiod of January 2003 to the present.

1) Has Medtronic considered, or is Medtronic currently planning on,publically disclosing payments to individual physicians? If so, pleasedescribe what type of information will be disclosed, when that disclosurewill occur, and how the information will be made publically available.2) Please provide the following information for all physicians with whomMedtronic has consulting agreements for Infuse.

a) name of physician;
b) copy of the consulting agreement;
c) date of payment(s);
d) the specific focus of their consulting agreement;
e) dates and descriptions of services performed by each physicianpursuant to the consulting agreement;
[2] David Armstrong, "Medtronic Product Linked to Surgery Problems," Wall Street Journal, September 4,2008.
f) the amount of payment(s); and
g) annual total of payments.
3) Please provide a list of all adverse events reported involving off-label useof Infuse.
4) Please provide any documents, receipts, emails, and records regarding atrip to Europe made by Dr. Jeffrey Wang and his family and paid for byMedtronic.

Thank you in advance for your continued cooperation in this matter andcommitment to transparency. Please contact Paul Thacker or Chris Armstrong at (202)224-4515 to set up a briefing, to include Medtronic General Counsel, Mr. Terry Carlson.All formal correspondence should be sent electronically in PDF format toBrian_Downey@finance-rep.senate.gov or via facsimile to (202) 228-2131 by no laterthan October 14, 2008.


Charles E. Grassley
Ranking Member