1:30 pm: This post has been updated.

Payments to doctors by medical device company Medtronic could pose conflicts of interest, especially when the compensation is significant or when doctors could benefit financially from the success of a specific product, according to a letter by Sen. Charles Grassley, R-Iowa.

Medical devices, just like drugs, must be approved by the FDA for use on patients. This often occurs through clinical trials conducted by doctors. Both pharmaceutical companies and medical device companies pay doctors for speaking, consulting, and research on particular products. Though these payments are standard practice in both industries, Grassley raised particular concerns about doctors conducting clinical research on a product when they have a stake in the outcome.

In a letter to the Food and Drug Administration, the lawmaker urged the agency to outline the circumstances in which physician payments could present “too significant a conflict” for a physician to be involved in clinical studies of a medical device. From the letter:

For example, the company reported consulting payments ranging from almost $40,000 to one physician to almost $2 million to another. Three of the physicians also received about $1 million in royalties, while another received several thousand in Medtronic stock.

Medtronic’s production also included financial disclosure forms that were submitted to the FDA for more than 50 other clinical investigators. Almost all of these investigators received significant payments from Medtronic. Two of the investigators met three of the four criteria for disclosure to the FDA. Not only did they receive “significant payments of other sorts,” but they also had a proprietary interest in the product tested and a financial arrangement where the value of compensation could be influenced by the outcome of the study.

Check out a redacted disclosure form, which notes that a physician serving as a clinical investigator for Medtronic was receiving compensation that “could be influenced by the outcome of the study,” and that the investigator had a “proprietary interest in the product tested.” 

As we’ve noted, Grassley was an author of a provision in the health care reform bill known as the Physician Payments Sunshine Act, which requires disclosures of doctor compensation by drug companies and medical device companies. These disclosures, however, won’t be made public until 2013.

Medtronic, the world’s largest publicly traded medical technology company, announced in June that it was posting data for payments to U.S. doctors exceeding $5,000 annually. (The Physician Payments Sunshine Act will require disclosure of all payments exceeding $100.)

We’ve asked Medtronic for comment, but have not yet received a response. The company told the Minneapolis Star-Tribune that the arrangement between medical device companies and clinical investigators "is a cornerstone of the innovation in medical technology."

The company has in the past been accused of paying kickbacks to doctors who purchased its products. From the Wall Street Journal:

In 2006, the company agreed to pay $40 million to settle government civil charges that its orthopedic business paid kickbacks to surgeons to induce them to buy Medtronic products. Medtronic denied wrongdoing.

Royalty payments to orthopedic surgeons for their inventions—screws, metal cages and scopes used in back surgery and the like—command high fees, ranging into the millions of dollars. So it can be difficult to discern whether payments are legitimate royalties or inducements to sell products.

Last month, the company also settled thousands of lawsuits brought by patients after a 2007 recall of faulty heart defibrillators that shocked some patients and caused at least 13 deaths, reported the Star-Tribune. Medtronic agreed to a $268 million settlement.

In our coverage of the pharmaceutical industry, we’ve noted that most patients are concerned about their doctors receiving money from the drug industry, and that some of the doctors paid by pharmaceutical companies—while touted as leaders in their field—lacked credentials or faced disciplinary action. (Our survey did not cover physician payments by medical device companies.) We’ve also highlighted some of the top earners—doctors who earned more than $200,000 from drug companies since 2009.

Update: Medtronic spokesman Brian Henry tells me "there are safeguards in place to ensure against conflicts of interest," adding that such conflicts are “mostly perceived."

Those safeguards, according to Henry, include rules barring physicians who collect royalties on a particular device from conducting clinical trials for the same product, except in pilot-stage studies. Royalty-collecting physicians may write about their device and get paid for consulting and training other physicians on the safe use of their device, and they may serve as clinical investigators for other devices.

I asked how the above safeguards address the concerns raised in Sen. Grassley's letter—and the information in the redacted disclosure form—but have not yet received a response to that question.

Update 2: We received a response from Medtronic to our specific question about the concerns of Sen. Grassley and the information in the redacted disclosure form, especially given the company’s assertion that it has safeguards against perceived conflicts of interest. Here’s Medtronic’s response in full:

To your specific question, here is our response:
-- Our renumeration [sic] of physicians is appropriate, legitimate and represents fair market value for their intellectual property and consulting work.
-- We have been, and continue to be, committed to transparency and reporting physician payments in our regulatory submissions.