Life Science Compliance Update

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February 28, 2011

Maryland House: HB 818 Manufacturers of Prescribed Products - Payments to Health Care Professionals - Prohibition

Maryland General Assembly 
This Thursday Maryland lawmakers are holding a hearing to consider legislation to ban "gifts" and most payments for services from manufacturers to health care providers in the wake of allegations that a Towson cardiologist was "indirectly influenced" to perform unnecessary stent procedures by device maker Abbott Laboratories.    

According to an article from the Baltimore Sun, much of the momentum towards a gift ban in Maryland stems from “Last year's stent scandal, in which Dr. Mark G. Midei was accused of placing medically unnecessary coronary stents, made by Abbott Laboratories, into hundreds of patients at St. Joseph Medical Center.” This event, and a Senate investigation and report from Senator Charles Grassley (R-IA) “has renewed interest in the laws, which are among several options being considered during this year's legislative session.”

Another reason for attention surrounding physician-industry collaboration is the ProPublica database. Sharstein pointed out that “hundreds of Maryland doctors and a handful of nurses have accepted payments from pharmaceutical companies in the past two years in exchange for promoting drugs to other physicians, according to recent company disclosures.” The Baltimore Sun reported that about $6 million split among 450 Maryland practitioners. Abbott was not among the companies included in the database.

Unfortunately, the bill is a similar to a Vermont law which has driven out industry and research from their state.  Whereas Vermont has almost no life science companies to speak of, Maryland has a robust life sciences industry and restrictions would apply to many of our countries top scientists.

Maryland Gift Ban

On February 11, 2011, Maryland Delegates Nicholaus Kipke (R-Anne Arundel County) and Health and Government Operations Committee Chairman Peter Hamme (D-Baltimore City) introduced HB 818, known as the Manufacturers of Prescribed Products – Payments to Health Care Professionals – Prohibition. As introduced, the purpose of the legislation is to prohibit a manufacturer of prescribed products from offering or giving a gift to a health care professional. A full summary of HB 818 appears below.

While the legislation authorizes certain exceptions from the prohibition of payments to health care professionals (HCPs), such as samples or medical devices, HB 818 will have significantly negative impacts on patient health and outcomes, medical training, and physician and patient education. The legislation will also hurt the economy in Maryland, resulting in a loss of jobs and innovation in the medical sector. If passed, the Act would take effect October 1, 2011.

Maryland House of Delegates hearing on HB 818 
Thursday, March 3, 2011 at 1:00 p.m
Government Operations Subcommittee, Rm 240, 
House Office Bldg. Anapolis, MD 

Summary of HB 818 – Prohibited Payments to Health Care Providers

HB 818 explicitly states that a manufacturer (pharmaceutical, biotech, medical device company) may not offer or give any gift to a health care professional. The legislation defines gift as any payment, food, entertainment, travel, subscription, advance, service, or anything else of value provided to a health care professional (HCP), unless the HCP reimburses the cost at fair market value.

Similar to the legislation enacted in Vermont, HB 818 defines a significant educational, scientific or policy conference or seminar as an event that is:

Offered by an entity accredited by the Accreditation Council for Continuing Medical Education (ACCME) or a comparable organization; and

  • Offers CME credit;
  • Has multiple presenters on scientific research; or
  • Is authorized by the sponsoring association to recommend/make policy

Consequently, HB 818 allows a manufacturer to provide a HCP:

  • Samples of a prescribed product to give free to patients
  • Loan of a medical device not to exceed 180 days
  • Peer-reviewed academic, scientific or clinical articles or journals that serve a “genuine educational function” for the benefit of patients
  • A scholarship for students, residents or fellows to attend programs
  • Payment to sponsor of a program if:
    • The payment is not made directly to the HCP;
    • Payment is used solely for bona fide educational purposes; and
    • All program content is objective, free from industry control, and there is no specific product promotion
    • Payment for a government-sponsored educational program if:
      • Program is sponsored by federal, state, local government for purpose of developing, implementing or evaluating government policy
      • Payment is used solely to underwrite the program or expenses; and
      • All program content is objective, free from industry control, and there is no specific product promotion
    • Honoraria and payment of expenses of a HCP who serves on faculty of a program if:
      • There is an explicit contract with specific deliverables that are restricted to educational, scientific, policy or medical issues and not marketing; and
      • The content of the presentation, including slides/written materials is determined by the HCP
    • Direct and indirect costs of a bona fide clinical trial
    • Payment for bona fide scientific consulting if:
      • The consulting is governed by a written agreement between the HCP and manufacturer;
      • The payment is at fair market value and reimbursement for reasonable expenses including travel and lodging associated with the bona fide consulting work;
      • There is no marketing activities; and
      • Payment is not based on or related to a decision to use a prescribed product
    • Payment or reimbursement for reasonable expenses, including travel and lodging for training HCP on medical devices (must have written agreement)
    • Royalties and licensing fees paid to HCPs for contractual rights to use/purchase a patented discovery which HCP holds ownership right to
    • Health care products donated to public/private nonprofit education or health care organization for training or free distribution to patients or public, if the donation does not require the organization to purchase a prescribed product.
    • Unlike the Vermont and Massachusetts laws, the Maryland bill would not require manufacturers to report payments to HCPs.

PhRMA Statement Opposing HB 818

In response to HB 818, the Pharmaceutical Research and Manufacturers of America (PhRMA) issued a statement respectfully opposing the legislation because it “places unnecessary restrictions on industry-provider communications that could negatively impact patient health and access to new pharmaceutical and healthcare innovations; and creates unnecessary and duplicative regulatory burdens on an industry already in compliance with strict industry-wide guidelines and federal law, which may have a negative affect on Maryland’s economy.” 

HB 818 could have a negative impact on patient health. 

PhRMA asserted that HB 818 could have a negative impact on the dissemination of scientific knowledge about new and existing products and treatments, resulting in harm to patients.  Restricting biopharmaceutical industry interactions with healthcare providers does nothing to protect patients.  Physicians need access to information about new developments in medicine to most appropriately treat patients.  HB 818 could limit the communication about even standard medical guidelines along with information about new medicines or new information about older medicines.  

Moreover, PhRMA added that this legislation could have a chilling effect on the necessary exchange of information about new treatments by limiting biopharmaceutical industry communications with Maryland’s health care professionals. The impact could negatively impact doctor’s ability to access an abundance of information received at educational symposia and conferences held in Maryland. 

Limiting communications between biopharmaceutical industry and health care professionals could put patient safety at risk.  This legislation could have the unintended consequence of reducing the educational opportunities for physicians to learn about new conditions and treatments and access continued medical education.    

HB 818 may have a negative impact on Maryland’s economy by placing a harmful chilling effect on the economic benefits derived from biopharmaceutical industry investments. 

PhRMA’s statement recognized that medical industry conventions are huge revenue source for the state.  Maryland’s fine conference facilities, the abundance of academic research facilities and the presence of the U.S. Food & Drug Administration have made the state an attractive location for educational symposia and conferences.  However, a biopharmaceutical company may be reluctant to support events in Maryland because it would assume the considerable risk of being non-compliant with this ambiguous and unnecessary state law.  

PhRMA also noted that in 2006, biopharmaceutical companies supported 89,675 jobs in Maryland – 28,065 directly in the sector and 61,610 in other sectors that support the biopharmaceutical industry.  Direct biopharmaceutical wages in Maryland were estimated to be $2.3 billion in 2006, resulting in an estimated $537.4 million in federal taxes and $86.4 million in state taxes.  HB 818 may send the unintended message to the biopharmaceutical sector that Maryland is no longer an attractive investment. 

Current regulations and new federal requirements imposed by the Accountable Care Act (ACA) just last year make the proposed Maryland efforts duplicative and unnecessary. 

PhRMA emphasized their continuous commitment to ensure that pharmaceutical marketing practices comply with the highest ethical standards, including their newly revised version of the pharmaceutical industry’s voluntary guidelines (“PhRMA Code”), which went into effect in January 2009. Among the restrictions, the Code prohibits the distribution of non-educational items (pens, mugs, and other “reminder” items), places a $100 cap on educational items of economic value provided to healthcare providers, gives detailed standards regarding the independence of continuing medical education (CME), and provides guidance for speaking and consulting arrangements with healthcare professionals.

Every PhRMA member company and many non-member companies have adopted the PhRMA Code.  If a company has chosen to sign the PhRMA Code, that company’s CEO and Compliance Officers have agreed to and are required to certify annually that their company is in compliance (a process patterned after the concept of the Sarbanes-Oxley compliance mechanism). 

Enforced by the U.S. Department of Justice, pharmaceutical manufacturers are also subject to criminal anti-kickback statutes and other criminal and civil provisions that govern their relationships with healthcare providers. US Health and Human Services Office of Inspector General (OIG) maintains detailed guidelines for pharmaceutical companies designed to deter violations of these federal laws under the threat of criminal and civil penalties. 

Finally, beginning next year (January 1, 2012) the Physician Payment Sunshine provisions of the Accountable Care Act will go into effect.  The new federal law requires drug and medical device manufacturers to publicly reports gifts and payments made to physicians and teaching hospitals. 

It also requires disclosure of payments to all covered recipients including: compensation; food, entertainment or gifts; travel; consulting fees; honoraria; research funding or grants; education or conference funding; stocks or stock options; ownership or investment interest; royalties or licenses; charitable contributions; and any other transfer of value as described by the Secretary of the U.S. Department of Health and Human Services (HHS). This information is compiled by HHS and will be available for the public to view and search on an HHS website.  HHS will also submit an annual report to Congress and each state legislature. 

The forthcoming federal reporting requirements will ensure the disclosure of all Maryland-based industry-physician interactions, which would make the proposed legislation redundant and duplicative in nature.  This legislation would create a patchwork of state regulations that will only serve to increase compliance costs to the pharmaceutical industry.  We urge the committee to oppose the imposition of unnecessary and duplicative regulations on an industry already in compliance industry-wide guidelines and strict federal law.


In announcing this legislative initiative, Maryland pointed to gift bans already in place in Vermont and Massachusetts, even though Massachusetts tried to repeal the law last year, and all candidates, including recently elected Governor Deval Patrick, indicated their support for removing the ban

The bans in both states have been challenged frequently by industry officials saying it hurts business and patients, especially because doctors are required to frequently collaborate with drug and device makers to improve products. As noted above by PhRMA, HB 818 will have negative consequences for patient health, physician training, and the Maryland economy by chilling innovation and communication in the healthcare community. In fact, research from the Massachusetts Institute of Technology (MIT) found that a similar payment restriction law had an extremely negative impact on medical innovation Massachusetts.


HB 818 could have a significant impact on continuing medical education (CME). If the legislation is adopted, many commercial supporters who support CME programs at hospitals, non-profits and medical professional organizations will discontinue sponsoring CME programs in Maryland to avoid the risk of non-compliance with ambiguous regulations created by HB 818. As a result, hospitals, academic medical centers, and healthcare institutions that are already strapped for cash and resources will face significant challenges finding ways to offer CME to their physicians, staff and faculty.

Moreover, HB 818 is unclear as to whether physicians would be able to participate in CME programs as speakers or as participants. For example, there is no indication whether a physician could attend a CME event and receive a meal in connection with the program because HB 818 only says that the payment for an educational program must be "used solely for a bona fide educational purpose." Under the current language, a physician accepting a meal at a CME event paid for by a sponsor would constitute a gift (since the payment for the meal was not a bona fide educational purpose).

In addition, it is unclear whether a physician who speaks at a commercial event would be permitted under HB 818. Specifically, the legislation allows payment to physicians for consulting, however not if the activity deals with marketing. Under this provision, it is likely that HB 818 would classify commercial speaking as a "marketing" activity. This definition could also be expanded to independent medical education.

Another real problem HB 818 poses for CME and CME stakeholders is the prohibition the legislation creates about the mentioning of specific products. This provision is problematic for medical education because if there are evidence-based recommendations for specific products as best in class, these need to be shared openly with audiences, otherwise education is academic and of no benefit to patients or payors. Under HB 818, physicians would be extremely limited or banned from discussing FDA approved labels and products that are found to be safe and effective.


One of the major problems with the proposed Maryland legislation is that it comes in response to the actions of one individual. While his incident was certainly unethical and deserving of punishment if he is indeed found guilty of what he has been accused of, incidents like these are extremely rare. Does that mean we should sacrifice the entire medical practice of physician-industry collaboration and innovation because of one rare incident? There will always be exceptions to the standard that laws and policies seek to find and eliminate.  State legislatures are filled with stories of inerrant members who take advantage of the system.  This has not prompted them to stop accepting political contributions.

The overwhelming majority of physicians in every state are highly trained professionals who strive to practice legal and ethical medicine each day. These individuals have sworn an oath to do no harm to patients, and by enacting laws that prevent physicians from information, training and education with industry, doctors will have to struggle to ensure they do not break this oath. 

Accordingly, at a time when medical innovation and discovery are facing tremendous obstacles in America, patients and consumers cannot afford HB 818, literally and financially. As recent reports have clearly document, America’s leadership in the medical field is declining and the number one problem facing medical innovation is our regulatory system. Maryland is strategically located outside of Washington, D.C., and with the FDA and CMS located within the state, and numerous other health agencies, institutions, and private firms, some of the world’s leading experts in all medical fields call Maryland home. As a result, enacting legislation in Maryland to create more obstacles for these individuals will only drive innovation and the best talent in the world out of Maryland to other states and countries.

You and your organizations are encouraged to attend the event this Thursday and provide input.

Maryland House of Delegates hearing on HB 818 on Thursday, 
March 3, 2011 at 1:00 p.m, 
Government Operations Subcommittee, Rm 240, House Office Bldg.

HB 818, The Manufacturers of Prescribed Products – Payments to Health Care Professionals – Prohibition

Members Maryland Government Operations and Health Committee

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