Rejecting pleas from industry, Gov. Deval Patrick of Massachusetts signed a sweeping health care cost containment and quality bill into law on August 10, 2008 (The text of the legislation is available here). Under the new law, pharmaceutical and device manufacturers that employ sales representatives in the commonwealth will be required to adopt and implement a Marketing Code of Conduct (MA Code) that will be set forth in regulation by the Department of Public Health. Manufacturers must appoint a compliance officer, train their Massachusetts sales representatives on the MA Code, conduct annual audits to monitor compliance, put in place procedures to investigate non-compliance, and submit annual reports to the Department of Public Health. Those reports must describe their training program and investigative policies, identify their compliance officer, certify that the annual audit has been conducted, and certify that the company is in compliance with the MA Code. The regulations implementing the new law could, but will not necessarily, provide more details about the expected scope and process for the annual audit.

By law, the MA Code must be no less restrictive than the most recent versions of the Code on Interactions with Healthcare Professionals developed by the Pharmaceutical Research and Manufacturers of America (available here) and the Code on Interactions with Healthcare Professionals developed by the Advanced Medical Technology Association (available here). Moreover, given the statutory list of activities that must be prohibited by the MA Code, it will, absent changes in the recently revised PhRMA Code or the AdvaMed Code, be stricter than those industry standards. 

The new law requires the MA Code to prohibit:

• Payments for meals for healthcare practitioners offered as part of an entertainment or recreational event; offered without an informational presentation; offered, consumed, or provided outside of the healthcare practitioner’s office or the hospital setting; or provided to a practitioner’s spouse or other guest.

• Payments for entertainment or recreational items, regardless of value, for any healthcare practitioner who is not an employee of the manufacturer.

• Sponsorship of CME that does not meet ACCME Standards for Commercial Support or that provides payment directly to a healthcare practitioner.

• Financial support for travel and lodging expenses of non-faculty healthcare practitioners and funding to compensate non-faculty attendees at any CME event, scientific or educational conference or professional meeting, regardless of whether the payments are made  directly or indirectly through the event’s sponsor.

• Provision of or payment for meals directly at any CME event, scientific or educational conferences or professional meeting.

• Payments in cash or cash equivalents except as compensation for bona fide services.

• Provision of grants, scholarships, subsidies, support, consulting contracts, or educational or practice-related items to a healthcare practitioner in exchange for prescribing prescription drugs or using medical devices or for a commitment to continue doing so.

The prohibitions that must be included in the MA Code go farther than those in the revised PhRMA Code in that all meals outside of a physician’s office or a hospital must be off limits in Massachusetts even though the PhRMA code permits modest restaurant meals at promotional speaker programs and with company representatives not directly involved in or responsible for the immediate management of field sales. The MA Code includes a flat prohibition against supporting CME events that do not meet ACCME standards, whereas the revised PhRMA Code merely suggests that companies limit support to ACCME-accredited programs.  Perhaps most significantly, unlike the PhRMA and AdvaMed Codes, the MA Code actually requires a manufacturer to certify that its marketing practices do not violate the federal or the Massachusetts anti-kickback laws, not just that its practices are compliant with the applicable Code.

The Massachusetts law also lists certain activities that must be permitted under the MA Code. They are:

• Provision, distribution, dissemination, receipt of or purchase of advertising in peer-reviewed academic, scientific or clinical journals.

• Prescription drug samples provided solely and exclusively for use by patients

• Compensation for substantial professional or consulting services of a healthcare professional in connection with a genuine research project or clinical trial.

• Payment for reasonable expenses necessary for technical training on the use of a medical device if that expense is part of the vendor’s purchase contract for the device.

The new law expressly allows payments for bona fide service fees, yet the only category of fees specifically identified as such are those for research or clinical trial work.  It remains to be seen how or whether the implementing regulations address payments for other types of consulting services such as speakers’ bureau activities, legitimate preceptorships, or advisory board assignments.

The new Massachusetts law also includes an expansive disclosure requirement that obligates pharmaceutical and device manufacturers employing sales representatives in the commonwealth to report “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 indirectly to “any physician, hospital, nursing home, pharmacists, health benefit plan administrator, health care practitioners or other person in Massachusetts authorized to prescribe, dispense, or purchase prescription drugs or devices in the commonwealth.” Manufacturers will have to submit a fee, which will be set through regulation, with their July 1 annual disclosures. 

The statute’s disclosure requirement is notable for what it does not exclude.  For example, all discounts and rebates on product sales to practitioners, pharmacists, providers, or health plans would be reportable as would payments to PBMs for disease management programs or to drug stores for compliance program mailings or stocking allowances.  Grant support for CME courses that meet ACCME standards and payments to hospitals to underwrite grand rounds would have to be disclosed.  Reports also would have to be filed on consulting fees paid to scientists or health professionals for any bona fide service, including clinical trial work, as would payments to academic medical centers and community practitioners to cover the cost of clinical trials.  Arguably samples and starter kits that are for the benefit of patients, not practitioners, would not fall within the disclosure rules.

All of the reported information (including amount, purpose, and recipient) are to be made publicly available and easily searchable on the Department of Public Health’s Web site.  Furthermore, the Public Health Department is required to report to the state Attorney General any payment, entertainment, meals, travel, honorarium, subscription, advance, services or anything of value provided in violation of the MA Code. The statute can be enforced by the attorney general, by the District Attorney where an offense occurs, and by the Department of Public Health. Violations of the MA Code or the law’s disclosure obligations are punishable by a fine of not more than $5,000 for each improper transaction, occurrence or event.  Presumably too, the Attorney General may elect to use the state’s all-payer anti-kickback law available here to prosecute companies making payments deemed to be an inducement for prescription or device purchases.

It will be impossible to assess the full impact of the new Massachusetts law until the rule-making process has been completed.  Further, if Congress enacts the Physician Payment Sunshine Act (S. 2029/H.R. 5605), it could preempt the disclosure requirements in the new Massachusetts law.

Arent Fox intends to monitor regulatory developments in Massachusetts and will alert our friends and clients to the promulgation of any rules that flesh out the MA Code and stipulate an effective date for compliance.

Please contact Larri Short if you have further questions.

Larri Short
short.larri@arentfox.com
202-775-5786