On September 30, 2004, California’s Governor Arnold Schwarzenegger signed dramatic new legislation that will now require pharmaceutical and medical device companies that do business in the State to develop written comprehensive compliance programs and make copies of those programs available to anyone who requests them. Companies will also be required to provide an annual written declaration of adherence to the compliance programs. The law takes effect on July 1, 2005 and penalties for failure to comply can be quite stiff. In addition, both private individuals and State prosecutors appear to be able to bring enforcement actions requesting civil money penalties, injunctions, and even restitution. Under the new law, any company that manufactures, distributes, packages, repackages, labels, or relabels prescription drugs or prescription medical devices in California must develop a Comprehensive Compliance Program (CCP). The CCP must adhere to the US Office of Inspector General’s “Compliance Program Guidance for Pharmaceutical Manufacturers” (the OIG Guidance), which calls on companies to adopt measures to ensure compliance with the rules and requirements of federal health care programs. Measures set forth in the OIG Guidance include designating a compliance officer or committee, introducing regular compliance education and training programs for employees, conducting internal monitoring and auditing, and enforcing policies through well-publicized disciplinary guidelines. The new law requires that the CCP should be updated within six months of any changes to the OIG Guidance.

The CCP must also include policies for compliance set forth in the “Code on Interactions with Health Care Professionals” published by the Pharmaceutical Research and Manufacturers of America (the PhRMA Code) in July 2002. As with the OIG Guidance, the law requires that the CCP be updated within six months of any changes to the PhRMA Code.

Each year companies subject to the law are required to prepare a written declaration of compliance with its CCP and the new law. These declarations must be made available both on a company web site and through a toll-free number where requests for hard copies can be made. The new law will be enforced under California’s Unfair Business and Professions Code that permits State prosecutors, as well as individuals and public interest groups, to institute private enforcement actions.

Because the California law was primarily drafted to affect pharmaceutical companies, there is no mention of the Advanced Medical Technology Association’s “Code of Ethics for Interactions with Health Care Professionals,” (the AdvaMed Code). California officials are presently considering whether compliance with the AdvaMed Code (instead of the PhRMA Code) along with the OIG Guidance could satisfy device company obligations under the law, but authorities have not yet to make any formal statements one way or the other. Companies that currently follow the AdvaMed Code should note that the PhRMA Code is stricter on several points. For example, unlike the AdvaMed Code, the PhRMA Code would not permit conference sponsors to pay for attendance by health care professionals’ spouses or other personal guests.