Early this year, the Louisiana Board of Ethics issued a two-part advisory opinion addressing whether certain practices of pharmaceutical and biotechnology employees constitute activity regulated under applicable lobbying laws or prohibited by Louisiana’s Code of Governmental Ethics.

On January 17, 2006, the Ethics Board published the first part of the opinion (Board of Ethics Advisory Opinion No. 2005-560 (1/17/06)), concluding that efforts by sales reps to educate “physicians and other health care professionals practicing or affiliated with public hospitals” about available pharmaceutical products and the risks and benefits associated with those drugs constitute lobbying under Louisiana law. The Board reasoned that state hospitals are agencies of the executive branch of government and thus “physicians and other health care professionals practicing or affiliated with public hospitals” are technically executive branch officials. Similarly, it follows that the execution of powers, functions, or duties by such executive branch officials constitutes executive branch action. As such, any direct act or communication intended to influence an executive branch action, such as the prescription of medicine, constitutes lobbying. In addition, the Board advised that placing a drug on a formulary is also an executive branch action and, under the same logic, concluded that actions taken to facilitate formulary placement constitute lobbying under Louisiana law.

Less than a month later, the Board released the second part of its opinion (Board of Ethics Advisory Opinion No. 2005-260b (2/10/06)) addressing whether sales representatives for pharmaceutical companies are prohibited from giving drug samples to “physicians working for the state” for the specific use of patients of a public hospital or its clinics. Under the Louisiana Code of Governmental Ethics (La. R.S. 42:1100 (et seq.)), public servants, including physicians working for the state, are prohibited from receiving anything of economic value for the performance of their official duties and from accepting anything of value as a gift or gratuity from a person that has a substantial economic interest affected by performance of the official’s duties. The Ethics Board concluded the Code does not prohibit the donation of samples so long as the donated samples are used for the benefit of public hospital patients, despite the fact that samples have substantial resale value regardless of the Prescription Drug Marketing Act’s prohibition against their resale.

Effects on Pharmaceutical Representatives in Louisiana:

Registration Requirements

Pharmaceutical reps engaged in lobbying must register with the Ethics Board within five days after making over $500 in lobbying expenditures. As part of the registration process, a lobbyist must provide the Board, in writing, with the lobbyist’s name, business address, the name and address of the lobbyist’s employer, and the name of the person or persons who pay the lobbyist. The lobbyist also must submit a recent passport-sized photograph. This notice must be accompanied by the payment of a $110 annual registration fee. Lobbyists must renew their registration every year and inform the Ethics Board if they cease lobbying in Louisiana.

Reporting Requirements

Pharmaceutical and biotechnology employees who have registered as lobbyists must file semi-annual expenditure reports with the Ethics Board disclosing all expenditures for that calendar year. Additionally, when the aggregate expenditure for any one executive branch official exceeds $50 on any one occasion or exceeds $250 in a reporting period, the executive official’s name must be reported along with the total expenditures attributed to him or her. Any expenditure over $10 for food, drink, or refreshments consumed in the lobbyist’s presence counts for reporting purposes as do sympathy flowers and donations over $10 made on behalf of a public hospital affiliate or employee. Trinkets and promotional items of nominal value are not considered expenditures and are, therefore, exempt from reporting.

Activities of Lobbyist Employers

Employers, or principals, of lobbyists need not register or file reports with the Ethics Board. Employers must, however, inform their lobbyists of any direct expenditure they make which would be reportable if made by the lobbyist. Failure to adequately report such expenditures to a lobbying for his or her lobbying purposes will result in the employer having to register independently and maintain the same expenditure reporting schedule as lobbyists.

Unresolved Issues:

The advisory opinion issued by the Ethics Board leaves a number of issues unresolved. In the first part of its Advisory Opinion, the Board somewhat cryptically describes the class of hospital executive branch employees, the detailing of whom would constitute lobbying, both as “physicians and other health care professionals practicing or affiliated with public hospitals” and “state hospital employees.” Far from semantic nitpicking, the use of both terms without distinction or explanation leaves unclear whether the class of hospital executive branch officials referred to in the opinion includes: employees paid by the hospital, doctors with admitting privileges at the hospital, or both. In oral discussions with an Arent Fox attorney, a representative of the Ethics Board advised that hospital executive branch officials include only those persons who are “on staff,” a term which the official equated with being paid by a public hospital. Based on this interpretation, doctors who only have admitting privileges at public hospitals would not be considered executive branch officials under the Code and the detailing of such doctors would not constitute lobbying. Because this interpretation is informal and significantly narrows the scope of the Ethics Advisory Opinion, it would be prudent for sales reps to review their relationships with healthcare professionals working at public hospitals with the Ethics Board before deciding whether they need to register.

In a similar vein, although the Board interpreted the law to allow “physicians working for the state” to accept drug samples for the benefit of their patients, the Board left unanswered whether such physicians, who have private practices as well, may accept drug samples for the benefit of their private patients. Also unclear is the extent to which drug samples must be reported as expenditures by the new breed of pharmaceutical lobbyists. Under Louisiana law, expenditures are defined generally as gifts or payments of money or anything of value when the amount exceeds $10. Although the Ethics Board concluded that drug samples have a substantial resale value, it did not explicitly address whether they are “things of value” that must be accounted for by a lobbyist in determining whether the registration threshold has been met or included in semi-annual reports. Until this issue is resolved, a lobbyist would do well to err on the side of caution and include the value of drug samples among reportable expenditures. Of course, this advice raises the obvious question of how to value the samples – at cost of goods, WAC, suggested retail price, etc. Whatever approach is chosen, we recommend explaining the methodology selected on the disclosure form.

Lastly, although the Ethics Board opinion on drug samples carved out a limited exception to the Code of Governmental Ethics gift ban, executive branch personnel are still generally prohibited from accepting a thing of economic value from a party that has a financial relationship with the individual’s agency or has a substantial economic interest which may be affected by the performance of the individual’s official duty. Pharmaceutical and biotechnology employees engaged in lobbying should note that the mere reporting of expenditures will not immunize them from violations of this broader gift ban found in the Code of Ethics.

Pending Legislation:

Apparently in response to the Ethics Advisory Opinion, the Louisiana legislature has proposed two pieces of legislation, which would carve out exceptions to state lobbying and ethics rules as they presently affect pharmaceutical sales reps. The first, Senate Bill 263, would amend the definition of “thing of value” in the Code of Governmental Ethics (La. R.S. 42:1102(22)(a)) to explicitly exclude “pharmaceutical samples provided to physicians or other health care professionals for administration or dispensation to a patient at no cost to the patient.” If passed, the bill would have the practical affect of codifying the Ethics Board’s decision in Part B of its advisory opinion and, in addition, would clarify that drug samples do not have to be accounted for in determining whether the registration threshold has been met or included in semi-annual reports.

The second piece of pending legislation, Senate Bill 320, would amend the definition of “executive branch action” in the Louisiana lobbying laws (La. R.S. 49:72(2)) to exclude “any act by a licensed healthcare professional, or a person acting under a licensed healthcare professional’s direction, to diagnose, treat, or provide medical advice to an individual patient, including prescribing a drug or device for use by the patient.” If passed, the bill would effectively nullify the Ethics Board’s opinion that the detailing of physicians and other healthcare professionals involved in individual patient care at public hospitals constitutes lobbying and would exempt sales reps engaging in such practices from the registration and reporting requirements discussed above. The proposed statutory revision would, however, appear to leave intact the Ethic’s Board’s conclusion that actions taken to facilitate formulary placement at a public hospital constitute lobbying, particularly since S. 320 also categorically prohibits pharmaceutical representatives from “discussing any type of drug or pharmaceutical with members of the Medicaid Pharmaceutical and Therapeutic Committee for the purposes of inclusion into the pharmacopoeia or formulary of drugs their company produces.”

Both SB 320 and SB 263 passed the Senate unanimously on April 6 th and were ordered to the House where they have been referred to the House Committee on House and Governmental Affairs.

Conclusion:

Pending legislation affecting the scope of the Ethics Board’s Advisory Opinion should be monitored closely, as it could significantly alter the responsibilities of sales reps in Louisiana. For the time being, though, pharmaceutical and biotechnology employees who call on healthcare practitioners affiliated with public hospitals are defined as lobbyists in Louisiana and must ensure they comply with all applicable registration and reporting requirements. Disclosure should be a guiding principle and, when in doubt, lobbyists should consult the Louisiana Board of Ethics about questions they may have. Failure to timely comply with all registration and reporting requirements carries stiff penalties – including late fees – as well as censure from the Ethics Board prohibiting the delinquent lobbyist from engaging in lobbying activity for at least 30 days – and should obviously be avoided at all costs.

Larri Short
202.775.5786
short.larri@arentfox.com

David Adkins
202.857.8941
adkins.david@arentfox.com