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by Richard D. Weber, J.D.
MDA Legal Counsel
Published in the November-December 2001 issue of the Journal

Question: I recently came across an ad in a professional journal stating that a major health care company was looking for dentists to become sales representatives for their products. The ad stated that this opportunity would diversify and supplement the dentist's income. Could you comment on the legal and ethical issues involved in dentists selling products to their patients?

Answer: The ADA/MDA Code of Ethics provides that dentists who sell products in the regular course of their practices must take care not to exploit the trust inherent in the dentist-patient relationship for their own financial gain. Dentists should not induce their patients to purchase products or undergo procedures by misrepresenting the product's value, the necessity of the product, or the dentist's professional expertise in recommending the product or procedure. The ethical provision further provides that, in the case of a health-related product, it is not enough for the dentist to rely on the manufacturer's or the distributor's representations about the product's safety and efficacy. The dentist has an independent obligation to inquire into the truth and accuracy of such claims and verify that they are founded on accepted scientific knowledge or research. The provision further requires that dentists disclose to their patients all relevant information the patient needs to make an informed purchase decision, including whether the product is available elsewhere and whether there are any financial incentives for the dentist to recommend the product that would not be evident to the patient.

Although not binding on dentists, it is informative to review the ethics of the medical profession in this regard. According to the AMA Code of Ethics, the sale of non-health related goods by physicians presents a conflict of interest and physicians should, therefore, not sell non-health-related goods from their offices or other treatment settings. With respect to health-related products, physicians should verify that the product has scientific validity and should limit sales to products that serve the immediate and pressing needs of their patients. In addition, physicians must disclose fully the nature of their financial arrangement and should not participate in exclusive distributorships of health-related products that are available only through physician's offices.

What the law says

There is no law in Michigan that restricts dentists or physicians from selling products from their offices or other treatment facilities. Only one state, New Jersey, has a law that restricts doctors from selling more than a week's supply of products and from taking more than a 10 percent profit.

There are other laws, however, that dentists should take into consideration before engaging in selling products from their dental offices. The Michigan Consumer Protection Act, which prohibits unfair, unconscionable, or deceptive methods, acts or practices in the conduct of a trade or business, would apply to dentists who sell products. Any claim under this act would not be a claim for dental malpractice. The distinction between a malpractice claim arising out of the practice of dentistry and a claim arising out of the sale of a product by a dental office is significant. In many ways, it is more difficult to defend against a product claim than a malpractice claim. A malpractice claim requires expert testimony against the dentist; a claim under the Michigan Consumer Protection Act does not. A malpractice claim has a statute of limitations of two years, but the act's statute of limitations is six years. The act authorizes recovery of reasonable attorney fees, where a malpractice action does not. Significantly, a claim under the Michigan Consumer Protection Act may not be covered by the dentist's malpractice insurer. Also, sale of a product could result in a product liability claim, which is entirely different from a malpractice claim. The same concerns relative to insurance coverage would apply in that instance.

Sales tax

If a dentist provides a patient with an item, such as a cap, crown or filling, as part of that patient's service, the dentist need not collect sales tax on that transaction. That is deemed to be part of the service on which no sales tax attaches. However, if a dentist sells tangible property that is not offered as part of the patient's service, such as vitamins, toothpaste or toothbrushes, then the dentist must collect and pay sales tax on that transaction. This requires a whole different accounting and bookkeeping system than required for the practice of dentistry. A dentist who makes sales that are subject to the Michigan Sales Tax who does not keep separate books to account for such sales is susceptible to a punitive tax equal to six percent of the dentist's gross proceeds. Moreover, this tax "pierces the corporate veil," in that its payment would be a personal obligation of the dentist.

Observations

The sale of products by physicians and dentists from their professional practices has increased significantly in recent years. Some argue that this damages the reputation of the profession and portrays doctors to the public as entrepreneurs for trying to increase their income. Others argue that the sale of products is in the best interest of patients and is of the highest priority. It may be that the sale of products directly related to the treatment performed by the doctor is more palatable than the sale of products unrelated to the treatment.

In the final analysis, dentists must make their own decisions as to whether the sale of products from their dental offices is appropriate. Any dentist who elects to sell products from his dental office, however, should make sure that the business conforms to the ADA/MDA Code of Ethics and should heed the caution that dentists who engage in this activity understand the related legal issues, such as liability, insurance coverage and sales tax, and take appropriate measures to protect their practices.


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