Ten years ago, Jesse Gelsinger died while participating in a human genetherapy trial at the University of Pennsylvania (“Penn”). His death came to signify the corrosive influence of financial interests in human subjects research. After Jesse's death, the media reported that one researcher, Dr. James Wilson, held shares in a biotech company, Genovo, which stood to gain from the research's outcome—shares that The Wall Street Journal later valued at $13.5 million, although Wilson maintains he did not make nearly this much. At the time Penn authorized Wilson's deal, internal Penn documents implicitly valued Wilson's stake in Genovo at approximately $28.5 to $33 million.

Jesse's death sparked two separate lawsuits: one by the family, who sued in tort, and one by the federal government, which framed alleged errors in the research trial as a civil False Claims Act violation.

Throughout the world, complex mutually-dependent relationships exist between physicians and pharmaceutical and medical device companies. This article focuses on one particular aspect of these relationships—payments made by drug and device companies to physicians and their organizations and institutions to market drugs and devices. It is widely believed that drug and device company marketing to physicians creates conflicts of interest that corrupt physician judgment and increase the cost of medical care. This article examines first the economic basis of physician/industry relationships that causes conflicts to arise. It next considers the measures that a number of developed countries have taken to respond to these relationships. Finally, it proposes an approach that would comprehensively address the problems caused by drug and device company marketing to physicians.

I suspect that our collective search for villains — for someone to blame — has distracted us and our political leaders from addressing the fundamental causes of our nation's health-care crisis. All of the actors in health care — from doctors to insurers to pharmaceutical companies — work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity and discourage transparent competition based on price or quality.

It would be naïve to argue that money isn't the driving force motivating health care delivery in 2010. At nearly 17% of GDP, health care delivery is a large and growing industrial enterprise that is the largest employer in many communities. Save for free clinics, generating revenue is fundamental to every aspect of the delivery system. From insurance reimbursement rates to the cost of purchasing the latest technology, the surest explanation for understanding changes in the health care system and concomitant development of legal doctrine is, indeed, to “follow the money.”

Determining who controls the money flows usually explains who the dominant players are, and how they are able to organize and change the delivery system. Unquestionably, the most straightforward way to understand how the system functions, where its vulnerabilities lie, and why it is so difficult to institute significant reforms is to identify who controls the money.

Since the demise of the last major health reform initiative in 1994, health coverage for the American people has deteriorated. Private insurance costs have risen, and coverage under private insurance became less comprehensive, with higher deductibles and copayments. Many new treatments for serious diseases and associated provider compensation have become more and more unaffordable, even for those with health insurance coverage. Recent reports document the challenges for cancer patients faced with the soaring cost of cancer treatment. Public programs, such as Medicare and Medicaid, have picked up some slack and have grown in numbers. But gaps remain. Approximately 16 percent of the U.S. population is uninsured. Annual U.S. spending for health care was $2 trillion in 2005, and is estimated to reach $4 trillion by 2015.

Health reform debates in the United States are typically conducted using the language of insurance. President Barack Obama described his hopes for expanding access to care as “health insurance reform.” Both proponents and opponents of reform debated the merits of reform proposals leading to the Patient Protection and Affordable Care Act of 2010 in insurance terms. Yet, disagreements over the structure of reform reveal deep differences in what proponents and opponents of reform mean by insurance and the role it should play in mediating access to health care. Scholars of insurance law are likely to describe insurance somewhat narrowly as a risk spreading device. Industry representatives, among others, often view conventional indemnity insurance as the norm. From this perspective, reforms that move too far beyond underwriting risks can be seen as undermining actuarial fairness, threatening the very idea of insurance and possibly the industry itself.

Israel presents an intriguing conundrum: on the one hand, it provides quality healthcare in a near-universal healthcare system; on the other, it has maintained healthcare costs level at approximately 7.7% of GDP. This comes at a time when all western nations struggle with one or both sides of the equation: how to offer affordable, good quality health care to the population while curbing the sharp rise in health related costs. This paper explains both how Israel has achieved this “flat line” effect and the social and political costs of this achievement.