Life Science Compliance Update

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July 08, 2012

Massachusetts Passes Partial Repeal of The Pharmaceutical and Device Manufactures Code of Conduct – AKA “The Gift Ban”

Pharma talk
After four years of wrangling between the legislatures, the Commonwealth of Massachusetts house and senate overwhelmingly passed revisions to their 2008 Pharmaceutical and Device Manufacturer Code of Conduct (PCOC) as part of their 2013 $32.5 Billion Dollar State Budget.  Over the weekend Governor Deval Patrick signed the budget which  includes the partial repeal of the "gift ban". “This narrow change will afford health care providers some flexibility to be educated on new clinically relevant products and allow them to stay informed on advancements and medical devices that benefit patients and lower our health care costs,” Patrick wrote in a letter to life sciences industry organizations. 

The changes include allowing for payment of expenses for medical device training, meals for non-CME presentations at locations beyond hospitals, medical offices and training sites, elimination of state reporting for physicians that duplicates federal Sunshine Act reporting, and the addition of quarterly reports for the non-CME events by manufactures. 

We have followed closely over the past few years, efforts to overturn the Massachusetts Pharmaceutical and Medical Device Manufacturer Code of Conduct (PCOC), which was enacted in 2009.  The PCOC requires that manufacturers and distributors  of prescription drugs and medical devices adopt a Code of Conduct, establish a compliance program and  track and report payments or any items with a value of more than $50 related to sales and marketing activities made to any Massachusetts health care practitioner who is authorized to prescribe.

Reportable payments for  were  first published on the Massachusetts Department of Public Health’s  website in late November, 2010.  The Massachusetts reporting system is very similar to the Physician Payment Sunshine Act, enacted as part of the Accountable Care Act (“ACA”),  and thus is subject to pre-emption  under the Sunshine Act provisions now that the United States Supreme Court upheld the constitutionality of the ACA.  

Over the past three years, numerous efforts have been launched by the Massachusetts House and Senate to repeal the PCOC or strip it of various provisions that have hurt physician education and innovation. All prior repeal or amendment efforts were unsuccessful. 

At the end of June, however, the Massachusetts legislature finally enacted legislation that will modify some of the restrictions the law uniquely created and applied to Massachusetts physicians and other prescribers, which have had an adverse reaction on patients, healthcare professionals, and various industries in Massachusetts, such as food and hospitality.  The hotel and restaurant lobbies fought hard for achange of the absolute prohibition on the provision of meals to Massachusetts physicians at restaurants, hotels and convention centers by companies, arguing the Massachusetts law went beyond the tougher ethical standards under the most recent PhARMA and AdvaMed Codes and was hurting business.  Massachusetts House Speaker Robert A. DeLeo said some restaurants reported losing 20 percent of their sales after the ban passed three years ago.  “It is costing our state tens of millions of dollars in sales taxes, income taxes, meals taxes, and convention revenue,” says Dave Andelman of the Restaurant and Business Alliance.

The final legislation, which was signed Sunday July 8th by Massachusetts Govern Deval Patrick, will make several changes to the current statute, Massachusetts General Law Chapter 111N. 

  • First, the legislation allows the “payment for reasonable expenses necessary for technical training on the use of a medical device.”  This removes the requirement that the device must be “part of the vendor’s purchase contract for the device.”  As a result, physicians will have greater access to medical device education, which suffered significantly in the years that the PCOC was in place, as reported by an MIT study.   
  • Second, the legislation allows the provision of or payment for modest meals and refreshments in connection with non-CME (continuing medical education) educational presentations, without the same location limitations in the original law,  for the purpose of educating and informing health care practitioners about the benefits, risks and appropriate uses of prescription drugs or medical devices, disease states or other scientific information.   

To meet this new requirement, the non-CME presentations must “occur in a venue and manner conducive to informational communication” and must be in compliance with all other requirements.  The Massachusetts Department of Public Health (DPH) is charged with issuing rules to define what constitutes “modest meals and refreshments” under the amended law.  As the Massachusetts DPH once again goes through a rulemaking process under Chapter 111N this will be a good opportunity for CME providers, industry, and affected stakeholders in Massachusetts to submit comments and suggestions to the agency on what should qualify as “modest” and other elements of a permissible non-CME company run educational event with food and refreshments provided to attendees.    

In addition to these requirements, manufacturers must also meet several conditions before providing modest meals and refreshments at non-CME events.  First, companies must file quarterly reports detailing all non-CME educational presentations at which such meals or refreshments are provided.  Reports must include: 

  1. The location of the non-CME presentation;
  2. A description of any pharmaceutical products, medical devices or other products discussed at such presentation; and
  3. The total amount expended on such presentation and an estimate of the amount expended per participant, factoring any meals, refreshments or other items of economic value provided at such presentation.  

DPH may require payment of a fee, to be determined by the agency in the forthcoming regulations, to pay the costs of administering these new requirements.  

Importantly for manufacturers and distributors subject to the Massachusetts reporting system, the Massachusetts legislature through this amendment to the law has instructed DPH to no longer require reporting by manufacturers and distributors of information that has already been disclosed under the federal Sunshine Act.  This follows the federal pre-emption provisions under the Sunshine Act and will please many manufacturers who are concerned about dual reporting requirements for states that have transparency laws.  DPH will be able to obtain such information from the federal Sunshine database, nevertheless, so companies must still plan to expand and modify their tracking and reporting systems for the much broader scope of reporting that will be due under the Sunshine Act, once final regulations are issued by the Centers for Medicare and Medicaid Services (“CMS”). CMS postponed the tracking requirements  until January 1, 2013.  

Finally, the amended legislation requires DPH to make data filed by companies in annual reports publicly available more quickly and in an easily searchable format on its website no later than 90 days. 

The state budget also includes modification to the Massachusetts anti-kickback statute that had previously prohibited the provision of coupons and vouchers for prescription medications to be used by Massachusetts residence. The prohibition has been lifted as long as the coupon or voucher is not for a medication that is available in a generic equivalent form and does not favor any particular retail pharmacies. 

There was opposition to this change a group of “consumer advocates” including Healthcare for All, the National Physicians Alliance, Community Catylist, and AARP sent letters to the legislature and governor asking for him to veto this section,  but a stronger group of small businesses and restaurants, life science companies and patient groups including the Association of Clinical Researchers and Educators advocated for the partial repeal and finally succeeded. 

Discussion 

Massachusetts should be applauded for taking a step in the right direction to encourage more physician-industry collaboration and remove unnecessary and duplicative burdens that will hinder medical progress and only hurt patients. Bill Mandell, a health law attorney at Pierce & Mandell, P.C. in Boston, notes “the modifications to Chapter 111N [the Gift Ban Law] just passed keeps intake the mandate on companies to adopt and follow a Code of Conduct but aligns Massachusetts with general industry ethical standards in effect nationally on non-CME events with food; the new law will thus end the outlier treatment of Massachusetts physicians, restaurants, hotels, convention centers without totally gutting the basic requirements established under the original 2006 law intended to protect Massachusetts consumers from increasing health care costs.”       

While critics believe the PCOC should remain intact, these concerns are misguided, particularly for educating healthcare providers, as numerous studies have shown that commercial support does not create bias.  Moreover, critics who claim that meals influence doctors to prescribe brand name drugs forget that over 75% of medicines prescribed are generics, and that educational programs exist to educate healthcare professionals about new breakthroughs, data, clinical trials, and treatments.  

In addition, parts of the Massachusetts gift ban still remains intact, which should provide critics with security, particularly since the Sunshine Act contains no such provision.  Ultimately, as DeLeo recognized, the gift ban as originally enacted was “an overreaction.”  Now, “it’s time to correct the situation.”  Times have changed.  Transparency is now the norm and companies have embraced this and are geared toward Sunshine.  With healthcare reform moving forward, physicians need truthful and accurate scientific education and manufacturers are in the best position to provide this information. 

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