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Massachusetts Legislation Concerning
Proposed Pharmaceutical Gift Ban –
Implications for Pharmaceutical,
Biotech and Medical Device
Manufacturers
J. Mark Waxman
Lawrence Vernaglia
January 28, 2009
The Program

Introduction

The Background to the New Law – G.L. Ch.. 111N (S.2863)

Effective Dates and Implementation

Coverage and Definitions

The Key Provisions

The Proposed Regulations – December 11, 2008

A Comparison with the Industry and Academic Guidelines

PhRMA

AdvaMed

Academia: AAMC and Stanford

The AMA
The Program


How does G.L. 111N Compare to other State Laws?

Vermont

California

Minnesota
The Federal Level: The Physician Payments Sunshine Act
– Possible Pre-Emption

What’s Next?
Learning Objectives
1. Understand Massachusetts “gift ban” law
and proposed regulations
2. Learn to follow the guidelines for hospitals,
physicians, and other providers in dealing
with PMDMC industry, sponsored CME
and marketing efforts
3. Anticipate what will be expected in terms
of compliance, and public disclosure
requirements
The New Law
 The Background
 Large Pharma and Device Settlements
 False Claims Act Recoveries
 Off-Label Marketing Schemes
 Kick-Back Claims
 Adverse Publicity and Public Suspicions
 Conflicts of Interest
 Over prescribing and over utilization
 JAMA Articles
 Industry’s and Academia’s Own Positive Changes
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PhRMA
AdvaMed
ACCME
Academia
 Congressional Interest, Inquiries And Interactions
Effective Dates and Steps to
implementation
 “An Act to Promote Cost Containment,
Transparency, and Efficiency in the Delivery
of Quality Health Care,” Chapter 305 of the
Acts of 2008
 Sen. No. 2863, Signed by Gov. Patrick on
Aug. 10, 2008
 Comprehensive health legislative package
 Creates G.L. 111N
 Effective January 1, 2009
Effective Dates and Steps to
implementation (cont.)
 Proposed regulations published December
11, 2008
 Public hearings in Boston (1/9/09) and
Worcester (1/12/09)
 MA DPH informal guidance: no entity will be
subject to sanction until regulations are final
 Covered Companies must adopt and
comply with Codes of Conduct and certify
by July 1, 2009
 Disclosure reports July 1, 2010
Coverage and Definitions
 Applies to practices conducted in Mass –
regardless where manufacturer is headquartered.
 “Participates in a Commonwealth Health Care Program”
(Prop. Reg. has def’s)
 Regulates marketing practices that are not
otherwise illegal and adds in the Federal AKS
(Prop. Reg. 105 CMR 970.008).
 Requires disclosure of confidential business
information.
 Establishes reporting regime.
 Mandates compliance programs.
 Limitations on continuing education and other
academic/professional presentations.
 Financial penalties.
Coverage and Definitions
Applicable to:
 “Pharmaceutical or medical device
manufacturing company” (PMDMCs)
 What’s a medical device?
 Biologics included
 PMDMC “agents”
 PMDMC “marketers”
Participating in a Commonwealth
HealthCare Program
 Does business with a State program
 Directly or indirectly
 Prop. Reg: Includes: MassHealth, GIC, Mass. State Employees
Retirement Bd., and UMASS Correctional Health or the
contractual medical provider for the Dept. of Corrections.
 What’s left out?
 Medicare
 Private health plan efforts
 Still unclear about what “indirectly.”
Coverage and Definitions
Applicable to:
 Physicians and other prescribers
 Hospitals, nursing homes,
pharmacists, and health benefit plan
administrators.
Mandatory marketing code of
conduct
 Mass. DPH was to adopt
 “based on” “applicable legal standards
and incorporate principles of health care”
 Shall be “no less restrictive” than PhRMA
and AdvaMed Codes.
 But as proposed, little reliance on
PhaRMA or AdvaMed Codes
Mandatory marketing code of
conduct
Code “shall not allow” (Prop. Reg. 105 CMR
970.006)
 Payment for meals for practitioners that are
(a) part of entertainment or recreational event;
(b) offered without an informational presentation made
by “pharmaceutical marketing agent” or without the
agent being present;
(c) outside health care practitioner’s office or hospital
setting; or
(d) provided to practitioner’s spouse or other guest;
 Hospital setting (under Prop. Regs.) includes
specialized training facility
 Certified to DPH
 To approximate actual conditions
Mandatory marketing code of
conduct
Code “shall not allow”
 Entertainment or recreational items of any value
(e.g. tickets to theater/sporting events, sporting
equipment, or leisure or vacation trips) to any
health care practitioner who is not a salaried
employee of the company;
 Sponsorship or payment for CME that doesn’t
meet ACCME Standards For Commercial
Support, or directly to a health care practitioner
(Prop. Reg. 105 CMR 970.007)
Mandatory marketing code of
conduct
Code “shall not allow”
 Cost of travel, lodging, other personal
expenses of non-faculty practitioners
attending CME, third-party scientific or
educational conference, or professional
meetings, directly “or indirectly to the
event’s sponsor”
 funding to compensate for the time of
practitioners participating in CME, thirdparty scientific or educational
conferences, or professional mtg
Mandatory marketing code of
conduct
Code “shall not allow”
 Payment for meals directly at CME, third-party
scientific or educational conferences, or
professional meetings
 Exception: Meals for all participants from financial
support to CME provider or organizer (Prop. Reg. 105
CMR 970.007(1)(c))
 payments in cash or cash equivalents to
practitioners “either directly or indirectly, except
as compensation for bona fide services”
 Ban extends to “complimentary items” (Prop. Reg. 105
CMR 970.008(1)(6))
Mandatory marketing code of
conduct
Prop. Reg. includes broad limitation:
Code “shall not allow”
 “payments of any kind including cash or
cash equivalents, equity, “in kind” or
tangible items including any
“complimentary” items such as pens,
coffee mugs, gift cards, etc. to health
care practitioners either directly or
indirectly, except as compensation for
bona fide services”
(Prop. Reg. 105 CMR 970.008(1)(b))
Mandatory marketing code of
conduct
“Bona fide services”? (cont.)
 consulting services, research, participation on
advisory boards, collaboration with 501(c)(3)
organizations dedicated to the promotion of health
and the prevention of disease, presentations at
company-sponsored training including U.S. Food
and Drug Administration (“FDA”) required education
and training involved in producing safe and
effective medical devices,
 Expressly includes “licensing IP” in a written
agreement based on FMV.
(Prop. Reg. 105 CMR 970 CMR 970.004 ¶2)
Mandatory marketing code of
conduct
“Bona fide services”? (cont.)
Requires specific written agreement with FMV characterized by:
 legitimate need for the consulting service;
 connection between the competence/expertise of consultant and
purpose of arrangement;
 number of healthcare professionals retained not greater than
reasonably necessary;
 maintains records concerning arrangement;
 makes appropriate use of services provided by consultants; and
 Venue/circumstances of meeting with consultants conducive to
consulting services and activities related to services are primary
focus of the meeting.
(Prop. Reg. 105 CMR 970 CMR 970.004 ¶2)
Mandatory marketing code of
conduct
Code “shall not allow”
 grants, scholarships, subsidies, support,
consulting contracts, or educational or
practice related items to practitioner
 in exchange for prescribing prescription
drugs, biologics or medical devices
 or using medical devices or commitment to
continue prescribing or using
 Acts prohibited by Federal AKS (42
U.S.C. §1320a-7b)
Mandatory marketing code of
conduct
Code “shall allow”
 the provision, distribution, dissemination or
receipt of peer reviewed academic, scientific or
clinical information
 Advertising in journals
 Prescription drug samples for patients
 Comp for “substantial professional or consulting
services” of practitioner in connection with
genuine research project or clinical trial (written
agreement required. Prop. Reg. 105 CMR
970.008(2))
 “Genuine Research Project” – Generalizable
knowledge, freely published results of significant
interest or value
 IRB approval not required unless applicable clinical
trial
Mandatory marketing code of
conduct
Code “shall allow”
 Reasonable expenses for technical training on
medical device if part of vendor’s purchase
contract for device.
 Price concessions such as rebates or discounts
in the ordinary course of business (Prop. Reg.
105 CMR 970.008(2)
 Provision of reimbursement information
 Drugs in qualifying patient assistance programs
(OIG Advisory Opinion No. 06-03)
Pharm Data Confidentiality Rule
(Prop. Reg. 105 CMR 970.005(2))
 Pharmaceutical co. that uses “non-patient identified
prescriber data” [no def.]
 to “facilitate communications” with health care
practitioners must:
a. maintain data as confidential;
b. develop policies regarding data use;
c. educate employees and agents about policies;
d. maintain internal contact person to handle inquiries;
e. identify disciplinary actions for misuse; and
f. comply with practitioner requests not to make prescriber
data available to sales reps.
Pharm Conflict of Interest Rule
(Prop. Reg. 105 CMR 970.005(3))
 Pharm co’s must require health care
practitioner who is:
 member of committee that sets formularies or
develops clinical guidelines and also
 serves as speaker or commercial consultant for
the company
 to disclose to committee the nature and
existence of relationship.
 Continue for at least two years beyond term
of speaker/consultant deal.
Mandatory Compliance
Program
PMDMC that employs a person to sell or
market in MA must:
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Adopt/comply with the Code
Training program for all sales and marketing staff on (w/o
lim) the Code
Annual audits to monitor compliance with the Code
Adopt policies/procedures for investigating noncompliance
with Code; take corrective action
Mandatory reporting of noncompliance to “the appropriate
state authorities”
Identify compliance officer for operating and monitoring the
Code
Section 5 Reports (Structural)
PMDMC that employs a person to sell/market
“prescription drugs or medical devices” in
MA annually submit to DPH:
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Description of its training program
Description of its investigation policies
Compliance officer contact info
Certification that it has conducted its annual
audit and is in compliance with the marketing
code of conduct.
Section 6 Reports
(Substantive)
 PMDMC that employs person to sell/market “drug, medicine,
chemical, device or appliance” in Mass shall disclose to DPH:


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the value,
nature,
purpose and
particular recipient
 of any fee, payment, subsidy or other economic benefit with a
value of at least $50, which the company provides, directly or
through its agents,
 to any physician, hospital, nursing home, pharmacist, health
benefit plan administrator, health care practitioner or other
person in the commonwealth authorized to prescribe,
dispense, or purchase prescription drugs or medical devices
in the commonwealth.
Disclosure of Fees - Proposed
Regulatory Limitations
 Proposed Reg adds new limitation: “in
connection with the company’s sales
and marketing activities.”
 Important limitation for many “covered
recipients,” like hospitals
(Prop. Reg. 105 CMR 970.004 ¶21)
Disclosure of Fees - Proposed
Regulatory Limitations (cont.)
“in connection with the company’s sales and marketing activities”
also includes as def:
Any fee, payment, subsidy or other economic benefit ($50+) to
practitioner for any purpose other than “reasonable
compensation for substantial professional or consulting
services in connection with a genuine research project or
clinical trial.”
(Prop. Reg. 105 CMR 970.004 ¶21)
 An important interpretation for protecting research and clinical
trial information.
 At 1/9/09 DPH hearing, Sen’s Montigny and Moore spoke in
opposition to this interpretation.
Disclosure of Fees - Proposed
Regulatory Limitations (cont.)
to practitioner for any purpose other than
“reasonable compensation for substantial
professional or consulting services in
connection with a genuine research project or
clinical trial.”
(Prop. Reg. 105 CMR 970.004 ¶21)
 Note that def of “clinical trial” requires (1) human
subjects and (2) FDA or IRB approval.
 Unclear of broader def of “genuine research project”
can encompass animal studies, early-stage work
and collaborations.
Section 6 Reports
(Substantive)
 “All disclosed data” (likely from Section
6 Reports not Section 5 Reports)
 publicly available and
 easily searchable on its website.
 DPH has not provided further detail on
website content or search capacity.
Enforcement
 No PMDMC or agent may “knowingly and willfully”
violate the Code.
 $5,000 fine for each transaction, occurrence or
event in viol of Ch. 111N
 Collateral consequences of violations?
 Enforced by DPH, AG, DAs
 DPH to report to AG any payment, entertainment, meals,
travel, honorarium, subscription, advance, services or
anything of value provided in violation of the market [sic.]
code of conduct.
 DPH Prop. Reg.: no PMDMC or other person may
retaliate
Areas of uncertainty
 Who’s really covered?
 Different sections of 111N apply to different
types of industry players
 Application to multi-corporate entities?
 Separate R&D vs. sales entities
 Marketer “or any other person” . . .
 DPH Proposed Regs perpetuate confusing dual status
 “Participates in a Commonwealth health care
program” still imprecise, regs only name the
programs.
 Medical Device Companies
 Software?
Areas of uncertainty
 What types of sponsorships are acceptable
in Mass?
 Conference where meals/reception paid for by
other vendors?
 What about ed programs that can’t be done
in the office/hospital? (medical device
training facilities – Philips, Hologic, Smith &
Nephew Endo)
 Addressed in the Proposed Regs.
Areas of uncertainty
 Proposed Reg limitation on disclosable
fees: “in connection with the
company’s sales and marketing
activities”
 Does definition swallow itself? Or can you
harmonize?
 Purchase of assets
 Prop. Reg. “licensing” of IP
Areas of uncertainty
 Rebates and discounts
 Prop. Reg. distinguishes from
impermissible payments, maybe also
from disclosable fees. Could be
interpreted to exclude.
 FAQs and public statements disagree.
 What activities outside of
Massachusetts are covered?
Areas of uncertainty
 How do you estimate the value of a
product sample, when PDMA prohibits
sale? Is it a value to the HCP? Is the
value Zero?
 How do you value/report value of an
evaluation unit if never purchased?
Areas of uncertainty
 Travel and lodging for bona fide
employees or consultants?
 What is minimum level of detail in
Section 6 Reports?
 What protections for trade secrets
other confidential information? (Prop.
Reg. approach)
How does it stand up to other
laws and policies?
 PhRMA
 AdvaMed – Announced update
December 18, 2008
 Academia
 The States
 Vermont
 California
 Minnesota
PhRMA-Pharmaceutical Research and
Manufacturers of America
 Code of Interactions with HealthCare
Professionals
 Updated Code takes effect January, 2009
 The operative principle: “...a healthcare
professional’s care of patients should be
based, and should be perceived as being
based, solely as each patient’s medical
needs and the healthcare professional’s
medical knowledge and experience.”
Key Provisions
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Informational Presentations
Prohibition on Entertainment and Recreation
Support of CME
Consultants
Speaker Programs and Training Meetings
Formulary or Clinical Practice Guideline
Committees
Scholarships and Educational Funds
Prohibition on Non-Educational and PracticeRelated Items
Educational Items
Prescriber Data
Independence and Decision Making
Training and Conduct of Company Representatives
PhRMA vs. Mass. Law
 Meals
 Sponsorship of programs not meeting
ACCME standards
AdvaMed-Advanced Medical
Technology Association
 Code of Ethics Adopted effective January 1,
2004
 Added FAQ’s: April 15, 2005
 “[T]o facilitate Members’ ethical interactions
with those individuals or entities that
purchase, lease, recommend use, arrange
for purchase or lease of, or prescribe
Members’ medical technology products in
the United States.”
 New Update effective July 1, 2009
Areas Covered  Member-Sponsored Product Training and
Education
 Supporting Third party Educational
Conferences
 Sales and Promotional Meetings
 Arrangements With Consultants
 Gifts
 Provision of Reimbursement and Other
Economic Information
 Grants and Other Charitable Donations
AdvaMed’s revised Code
(12/18/08)
 Voluntary listing of companies that certify their adoption of
AdvaMed Code.
 Prohibition on Entertainment and Recreation to non-employed
HCPs.
 Prohibition on gifts, including all non-educational branded
promotional items (even of minimal value).
 Allow royalty arrangements for substantial contributions that
improve medical technologies.
 Evaluation and Demonstration Products may provide nocharge products to educate HCPs and patients on
new/improved medical technologies.
 Provision of objective reimbursement, coverage and health
economics information to HCPs.
 Updates on consulting agreements, company-conducted
training and education, and research and educational grants.
AdvaMed vs. Mass. Law
 “Healthcare practitioner”(§1) vs.
“Healthcare professionals” (FAQ 2)
 “recommend”
 “arrange” for purchase or lease
 Gifts
 Reimbursement Support Programs
 No Mass. Law analogy
ACCME
 Standards for Commercial Support
 Tools for Implementation
 Implementation Tools
 Accreditation Policies
 Essential Areas and Their Elements
The Standards
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Independence
Resolution of Personal Conflicts of Interest
Appropriate Use of Commercial Support
Appropriate Management of Associated
Commercial Promotion
 Content and Format Without Commercial
Bias
 Disclosure Relevant To Potential
Commercial Bias
Academia
 The AAMC Report: Report of the AAMC
Task Force On Industry Funding of Medical
Education (June, 2008)
 Focus on industry funding of education
 Addresses the broad spectrum of service
providers
 Focus on self-regulation and staged
approach to manage, or when appropriate,
prohibit academic-industry interaction
Academia
 Recommendations
 Gifts to individuals
 Central management
 “Alternative ways” to manage sample distribution to
protect professionalism
 Site access by Pharmaceutical/Device Reps
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Restricted to non-patient care and non-public
By appointment or invitation only
Not present during patient care without consent
Student interaction under faculty supervision
Academia
 Recommendations
 CME
 Compliance with ACCME standards
 Only ACCME accredited providers
 Centralized office for oversight and control
 Industry sponsored programs
 Prohibit faculty, students, trainees from
 Attending non-ACCME accredited industry events billed
as CME
 Accepting payment for attendance or personal gifts at
such events
 Ghostwriting
 Prohibited – any kind
The Stanford Policy
 Effective October 1, 2006 and enhanced
August, 2008
 CME – Banning industry directed funding
(September 1, 2008)
 Gifts – Stanford physicians banned from
accepting gifts (of any size) including drug
samples, anywhere physicians practice (oncampus or off-site clinics)
 Includes non-Stanford operated (non-faculty
urged to do the same)
The AMA Guidelines
 The AMA Statement and Ethical
Opinions on Gifts To Physicians
 Guidelines and E-8.061
 Gifts should be of benefit to patients or work
related
 No cash payments
 Minimal value
 No strings
 Education or practice related (pens,
notepads)
The States
 Vermont: (91 V.S.A. §4632) Pharmaceutical
Marketers
 Covered: Every pharmaceutical manufacturing company
 Scope: “the value, nature and purpose of any gift, fee,
payment, subsidy, or other economic benefit provided in
connection with detailing, promotional, or other marketing
activities by the company, directly or through its
pharmaceutical marketers, to any physician, hospital,
nursing home, pharmacist, health benefit plan
administrator, or any other person in Vermont authorized
to prescribe, dispense, or purchase prescription drugs in
this State.”
 Must be disclosed to office of the Attorney General
 AG will keep confidential all trade secret information.
The States
 Exemptions-
 Free samples for patients
 Reasonable compensation and expenses for
“bona fide” clinical trials
 “any gift, fee, payment, subsidy or other
economic benefit the value of which is less than
$25
 Scholarship or other support for medical
students, residents and fellows to attend
meetings/conferences of specialty medical or
other professional association if association
selects
 Definition of pharmaceutical marketer or
manufacturer
The States
 Minnesota (MN States §151.461)
 Gifts to Practitioners Prohibited
 Covered: Any manufacturer or wholesale drug
distributors (or any agent)
 Scope: Any gift of “value”
 Does not include:
 Professional samples
 Items with a total combined retail value, in any
calendar year, of not more than $50
 Payments to sponsors of medical conferences, etc.
used solely for bona fide educational purposes
 Compensation for “the substantial” professional or
consulting services of a practitioner in connection with
a “genuine” research project
 Publications and educational materials
 Salaries or other benefits paid to employees
The States
 California: (H&SC §119400 et seq.)
 Pharmaceutical companies must –
 Adopt Comprehensive Compliance Programs
(CCP) consistent with
 OIG Compliance Program Guidance (2003)
 PhRMA Guide
 Conforming changes within 6 months of an update
 Establish “explicitly” in CCP specific annual
dollar gift limit
 Payments for “legitimate professional
services” exempt from any limits provided at
FMV
What’s next?
 Physician Payments Sunshine Act
(S. 301) (Grassley)
 Introduced Jan. 22, 2009
 Reporting of (1) Payments or Other Transfer of
Value and (2) Ownership Interests
 Scope: Manufacturer of a covered drug, device
or medical supply
 To a physician, or physician’s employer, or has tenure
with, or an ownership interest in
 Coverage: Payments or other transfers of value
directly or indirectly or through an agent,
subsidiary or other third party
PPSA cont.
 Disclose to Secretary
 Physician's office address
 Affiliated facilities
 Value
 Date
 Nature of transfer or payment
 Definitions:
 Manufacturer – Gross revenues >$100 million
($1 million)
 Payment or transfer of value >$25 (may be
increasing next time)
PPSA cont.
Exclusions:
 Under $100 aggregate.
 Product samples
 Educational materials
 Loan of a evaluation units (not to exceed 90
days).
 Items or services under warranty
 Rebates and Discounts.
 In-kind items used for charity care.
 publicly traded security and mutual fund.
Where MD is patient.
PPSA cont.
 Delayed Reporting for Payments Made
Pursuant to Product Development
Agreements and Clinical
Investigations:
 The earlier of:
 The date of the approval or clearance
of the covered drug, device biological,
or medical supply by FDA;
 Two calendar years after payment
PPSA Cont. – Disclosure
detail
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Name and business address
Date of payment,
Value
Form (e.g., cash, stock)
Nature of Payment
 Consulting, research, honoraria/speaking
fee, gift, entertainment, food, travel,
education, royalty, license, ownership,
charity
PPSA (cont.) – Disclosure of
ownership information



the actual dollar amount invested
the value of the interest
any other information that HHS
deems appropriate.
PPSA - Penalties
 CMPs for the failure or knowing
failure to report required information
 FCA standard of knowing
 If knowing, up to $100,000 for EACH
PAYMENT NOT REPORTED
 If knowing, up to $1MM per year.
 Up to $10k/$150,000 per year if not
knowing.
What’s next?
 State by state effort vs. National
reporting?
Questions?
J. Mark Waxman and Lawrence Vernaglia
Foley & Lardner LLP
111 Huntington Avenue
Boston, MA 02199
617 342-4000