No More Free Lunch:
Understanding the New Massachusetts Pharmaceutical and Medical Device Marketing Law and Regulations
By Colin J. Zick , Foley Hoag LLP, Boston, Massachusetts
“You have to learn the rules of the game. And then you have to play better than anyone else.” -Albert Einstein
In 2008, the Massachusetts Legislature passed an omnibus bill designed to reduce health care costs and increase health care quality in the Commonwealth. One key element of this legislation sought to address the utilization of prescription drugs and medical devices by regulating industry-physician interactions. In so doing, Massachusetts joined the District of Columbia and at least six other states in regulating the relationships between the pharmaceutical and medical device industries and physicians.
The Massachusetts regulatory scheme enacted two key requirements: 1) industry adoption and adherence to a Massachusetts-specific code of conduct; and 2) public disclosure of payments from industry to physicians. The regulations expressly aim to eliminate financial conflicts of interest that may inappropriately influence prescribing decisions. As such, they prohibit most gifts from drug and device company sales representatives to most types of Massachusetts health care providers.
On July 1, 2009, the new code of conduct and the disclosure tracking provisions went into effect, and required covered drug and device companies to file a compliance certification and submit a filing fee of $2,000. The first disclosure reports to the Massachusetts Department of Public Health (“DPH”) are due July 1, 2010 (covering the period from July 1, 2009 through June 30, 2010). It is anticipated that these reports will be made public by DPH shortly after they are filed. By July 1, 2010, drug and device companies also must begin annual certifications to DPH that they have conducted an annual internal audit of compliance with their code of conduct.
The penalties for non-compliance are significant. There is a $5,000 fine for each knowing and willful violation of the regulations. Because each reportable payment that is not reported in a timely manner could result in a $5,000 fine, the cost of non-compliance with the regulations could be very high.
Because of their breadth and reach, understanding these regulations is of import to anyone involved in the biotechnology, health care, drug or device sectors who does business in Massachusetts or with Massachusetts providers, and not just if their company is based in Massachusetts.
What are the Covered Companies?
The regulatory definition of what is a covered “pharmaceutical or medical device manufacturing companies” (“PMDMCs”) includes companies that are “directly” engaged in the packaging, repackaging, labeling, relabeling or distribution of prescription drugs, biologics or medical devices. The definition of PMDMCs has been interpreted to mean companies with actual products for sale. The types of activities covered under the regulations include “sales and marketing,” which are defined so broadly that they cover virtually any interactions between industry and individual providers.
Who are the Covered Providers?
The regulations apply to licensed health care providers (“HCP”) in Massachusetts who are authorized to write prescriptions, which includes physicians, dentists and nurse practitioners. The definition of HCPs also includes partnerships or corporation comprised of such HCPs or their agents, so as to include receptionists and administrative staff in medical practices.
Specific Compliance Obligations and Practical Implications
By July 1, 2009, each PMDMC that “employs or contracts with a pharmaceutical or medical device manufacturer agent” was required to: (a) adopt a code of conduct consistent with the regulations; (b) adopt a description of a training program for the code of conduct; (c) certify compliance with the code of conduct “to the best of the company’s knowledge”; (d) adopt a program for addressing non-compliance with the code of conduct; and (e) identify a compliance officer responsible for adherence to the code of conduct.
The single most common question that is asked about these regulations is, “Can I still take Dr. Smith to dinner?” The answer to that question is that it depends on the context. For many Massachusetts doctors, however, the days of free lobster dinners or free box seats at Red Sox games may be over. In particular, under these new regulations, Massachusetts now prohibits meals that are:
- Part of an entertainment event;
- Offered without an informational presentation made by a marketing agent, or without the agent being present;
- Offered outside of a HCP’s office, hospital, academic medical center, or “specialized training facility”; or
- Provided to the HCP’s spouse or other guest.
With regard to gifts, Massachusetts now prohibits:
- Providing or paying for entertainment or recreation items of any value to any nonemployee HCP;
- Payments in cash or cash equivalents except as compensation for services;
- “Complimentary items” such as pens, coffee mugs, gift cards, and the like;
- Grants, scholarships, contracts or practice items in exchange for prescribing drugs or using medical devices.
The restrictions on support of continuing education are not quite as onerous as are the rules about meals and gifts. Under the Massachusetts regulations, PMDMCs may provide:
- Sponsorship of CME seminars accredited by the Standards for Commercial Support of the Accreditation Council for Continuing Medical Education (or the equivalent group) or meeting those standards but without formal accreditation;
- Cost of travel, lodging or other personal expenses of faculty at conferences and meetings (although these may be reportable to DPH);
- Reasonable compensation or reimbursement to an HCP serving as a speaker or providing actual substantive services (also potentially reportable); and
- General support to a conference provider or organizer, but not direct payment for meals at conferences.
Amid all these restrictions, there are still several forms of industry-provider interactions that are allowed by these new regulations. These include:
- Provision of peer reviewed academic, scientific or clinical information;
- Advertising in peer reviewed academic, scientific or clinical journals;
- Limited free use of devices for use by and education of patients;
- Legitimate compensation for professional consulting services in connection with research and clinical trials;
- Expenses for technical training of a medical device, including travel and lodging, if part of a purchase contract; and
- Price concessions, including rebates and discounts.
Massachusetts Disclosure Requirements
PMDMCs that “employ or contract with” marketing agents must make an annual disclosure to DPH regarding the following interactions with Massachusetts “covered recipients”:
- Value, nature, purpose, and recipient of any fee, payment, subsidy, or other economic benefit with a value of at least $50 which the PMDMC provides, directly or through its agents;
- To any “covered recipient”;
- Made in connection with the company’s “sales and marketing activities.”
The regulatory definition of “covered recipient” is broader than HCP and includes persons authorized to prescribe, dispense or purchase prescription drugs or medical devices in the Commonwealth, including hospitals, nursing homes, pharmacists, health benefit plan administrators, or HCPs. However, there is one significant exception to the reporting requirement: reporting is not required for clinical trials and genuine research, “particularly where the primary purpose is to generate data in support of an application filed with the FDA seeking approval for a new drug, biologic or medical device or ‘new use’ or similar marketing or labeling claim requiring FDA approval . . . .”
Protection of Prescriber Data
Finally, perhaps the least-noticed element of the new Massachusetts requirements obligates pharmaceutical manufacturers using non-patient identified prescriber data to: (a) maintain confidentiality; (b) develop policies regarding use of the data and educate employees about such policies; (c) designate an internal contact person for data inquiries; (d) establish appropriate disciplinary actions for data misuse; (e) withhold the data from sales representatives at the request of HCPs, and (f) give HCPs the opportunity to request that their prescriber data be withheld from company representatives and not be used for marketing purposes.
Are These New Rules Here To Stay?
The new Massachusetts statute and regulations were adopted in the face of significant opposition from the pharmaceutical and medical device industry and some physicians. Opposition to them continues even now, as evidenced by the formation and an initial July 2009 meeting of a group that seeks to roll back these regulations—the Association of Clinical Researchers and Educators. Its stated mission is to “emphasize[s] the value of [industry] collaboration” with health care providers and it seeks to roll back the Massachusetts regulations and others like them. Legislation also is being considered to close what are perceived as loopholes in the current regulatory scheme. For the time being, however, these regulations are in effect and they must be complied with.
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