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May 20, 2013

Physician Payment Sunshine Act: Washington Legal Foundation Comments Question the Constitutionality of Reporting for Reprints and Textbooks

Medical TextbooksReprints
The Washington Legal Foundation (WLF) submitted comments to the Centers for Medicare & Medicaid Services (CMS) regarding the final rule on the Physician Payment Sunshine Act.  Specifically, WLF made extensive comments about CMS’ failure to “include medical textbooks within the definition of ‘educational materials that directly benefit patients,’” raising several issues under the First Amendment.   

The WLF is a public interest law and policy center with members and supporters in all 50 States, including many patients and physicians who seek unfettered access to truthful information about well-recognized medical treatments.  WLF has devoted substantial resources over the years to promoting the free speech rights of the business community, appearing before numerous federal courts in cases raising First Amendment issues.  In fact, WLF played a critical role in the Sorrell v. IMS Health Inc. and United States v. Caronia cases. 


On February 8, 2013, CMS announced its determination that medical textbooks do not fall within the statutory exclusion for “educational materials” and thus that gifts of medical textbooks are reportable under the Act. 

WLF noted that numerous commenter’s urged CMS to determine that medical textbooks fall within the statutory exclusion and that a number of individuals and textbook publishers have contacted CMS to argue that:  

(1)  CMS’s interpretation of the educational materials exclusion is based on a misunderstanding of congressional intent;

(2)  CMS’s classification of medical textbooks under the Act is inconsistent with its classification of other educational materials;

(3)  medical textbooks are impartial and important sources of medical information for doctors and thus are essential for optimal patient care; and

(4)  if medical textbooks are deemed reportable under the Act, patient care will suffer because most drug companies will cease providing textbooks as gifts and most doctors will become unwilling to accept such gifts. 

WLF agreed with these concerns but also focused on an additional issue: applying the reporting requirements to medical textbooks would constitute a serious infringement on the First Amendment rights of pharmaceutical companies to disseminate medical texts and the First Amendment rights of doctors to receive such information.  

“Both groups have strong reason to believe that they will be subject to harassment and/or investigation if forced to report such speech activity to CMS, with the result that their speech will be chilled considerably,” WLF writes.  The U.S. Supreme Court has repeatedly held that disclosure requirements of this sort are subject to “exacting scrutiny” and can pass muster under the First Amendment only if shown to serve important government interests that outweigh the burdens they impose on speakers.  

WLF has seen no indication that CMS has given any consideration to the First Amendment implication of its interpretation of the Act’s educational materials exclusion.  For example, there is no indication that CMS is even aware that the Food and Drug Administration (FDA), as a result of its ill-considered attempts in the 1990s to restrict manufacturer dissemination of medical textbooks, is subject to a permanent federal court injunction that imposes strict limits on any such restrictions. See Washington Legal Found. v. Friedman, 13 F. Supp. 2d 51, 73-74 (D.D.C. 1998) (“WLF I”), appeal dism’d, 202 F.3d 331 (D.C.Cir. 2000) (“WLF III”). 

While WLF has no objections to CMS’s decision to begin enforcement of other portions of the Act’s reporting requirements effective August 1, 2013, WLF urges CMS to “delay any decision to apply the reporting requirements to medical textbooks until it has had an opportunity to examine the First Amendment implications of such a decision.”  Specifically, they urge CMS to “investigate whether such a decision would (as many observers have predicted) result in a significant reduction in manufacturer dissemination of medical textbooks; if so, then CMS’s policy almost surely could not withstand First Amendment scrutiny.”   

Otherwise, WLF warned that CMS will likely find itself the target of a First Amendment lawsuit by affected parties.  Below is a brief summary of the comments WLF submitted. 

The Distribution of Medical Textbooks Is Speech Protected by the First Amendment 

After giving some background on the PhRMA Code of Interactions with Healthcare Professionals, WLF noted that many of the payments reportable under the Sunshine Act, such as meals, travel, etc., have no communicative component, and thus do not implicate First Amendment concerns.  On the other hand, “a gift of a medical textbook clearly does implicate such concerns; the sole purpose of disseminating a textbook is to convey the ideas contained therein, and it possesses value solely by virtue of the value of those ideas.” 

Citing Sorrell, WLF recognized that the “U.S. Supreme Court has explicitly held that the speech of pharmaceutical companies to doctors – even speech designed solely for the purpose of selling a product – is entitled to First Amendment protection.”  WLF emphasized that “federal courts have repeatedly rejected federal government arguments that the First Amendment is inapplicable to its regulation of the expressive activity of a drug company because (the government asserts) its regulation focuses on the company’s commercial conduct, not its speech.  

For example, in rejecting that government argument raised in response to WLF’s challenge to FDA restrictions on dissemination of medical textbooks to doctors, a federal district court stated: 

[T]he activities at issue in this case are only “conduct” to the extent that moving one’s lips is “conduct,” or to the extent that affixing a stamp and distributing information through the mails is “conduct.” . . . This court is hard-pressed to believe that the agency is seriously contending that “promotion” of an activity is conduct and not speech, or that “promotion” is entitled to no First Amendment protection. 

WLF further asserted that the “First Amendment provides particularly strong protection to the speech at issue here because all concede that medical textbooks are truthful and (because they are prepared by reputable, independent medical publishers) are unbiased.”  Moreover, citing FDA’s 1996 guidance document on dissemination of textbooks, FDA observed that “[t]hese tests typically discuss a wide range of medical diagnoses and treatments, including drug product utilization, surgical techniques, and other medical topics, and are often useful to clinicians in the practice of medicine.”  Accordingly, WLF maintained that “any federal regulations that inhibit distribution of medical textbooks are subject to First Amendment scrutiny.” 

“CMS should be aware that the federal courts struck down FDA’s Textbook Guidance on First Amendment grounds and permanently enjoined its enforcement.  The district court later clarified that its injunction applied not only to the Textbook Guidance itself but also to any subsequent documents that purported to adopt the policies of that document.” 

Moreover, while the Sunshine Act’s intent is to bring transparency to certain payments or transfers of value that may amount to kickbacks or other inappropriate relationships or conflicts of interest, WLF recognized that medical textbooks do not pose such risk.  Specifically, WLF cited to FDA’s limited definition of what it deemed to constitute a medical textbook, as follows:  

“The reference text should not have been written, edited excerpted, or published specifically for, or at the request of a drug, device, or biologic firm, unless the text was prepared in a manner that results in a balanced presentation of the subject matter,” and “The content of the reference text should not have been reviewed, edited or significantly influenced by a drug, device, or biologic firm, or agent thereof, unless the text was prepared in a manner that results in a balanced presentation of the subject matter.” 

Although CMS Is Not Banning Speech, It Is Substantially Burdening Speech, and Such Burdens Are Subject to First Amendment Constraints 

Although the Act’s reporting requirement includes an explicit exemption for “educational materials that directly benefit patients,” 42 U.S.C. § 1320a-7h(e)(10(B)(iii), WLF noted that “CMS has interpreted that exemption as being inapplicable to medical textbooks.”  While the disclosure requirement does not “flatly prohibit any speech” and manufacturers may still “freely distribute medical textbooks ,” WLF recognized that “courts have repeatedly held that mandatory disclosure of expressive activity imposes a burden on the expressive activity and thus is subject to First Amendment constraints.” 

In fact, WLF maintained that the “First Amendment scrutiny is at its highest when, as here, the speech is truthful and seeks to convey information that is of significant public interest – in this case, information critical to the effective delivery of medical care.”  Although drug manufacturers are commercial entities, WLF argued that “there is no plausible basis for asserting that their distribution of medical textbooks constitutes “commercial speech” – a category of speech that is entitled to a lessened (but still substantial) degree of First Amendment protection.”   

“Moreover, the public importance of the information conveyed in a medical textbook is not reduced simply because a doctor receives the textbook as a gift from a drug company rather than by purchasing it with his own funds” (citing various Supreme Court cases).  

WLF then outlined the standard Courts use to determine the constitutionality of a disclosure requirement, which balances (on the one hand) the burdens that the requirement imposes on speakers, against (on the other hand) the government interests allegedly served by the requirement.  Specifically, quoting the Supreme Court: 

We have repeatedly found that compelled disclosure, in itself, can seriously infringe on privacy of association and belief guaranteed by the First Amendment. As a result, we have closely scrutinized disclosure requirements. . . . To survive this scrutiny, significant encroachments “cannot be justified by a mere showing of some legitimate government interest.” Instead, there must be a “relevant correlation” or “substantial relation” between the governmental interest and the information required to be disclosed, and the government interest “must survive exacting scrutiny.” That is, the strength of the governmental interest must reflect the seriousness of the actual burden on First Amendment rights. 

Based on this legal balancing, WLF argued that “the disclosure requirement will severely burden the First Amendment right of drug and device companies to disseminate medical textbooks – even to the point of causing all such dissemination to cease,” and that there is no “substantial government interest that would be served by applying the Act’s disclosure requirement to medical textbooks.” 

The Disclosure Requirement Imposes a Substantial Burden on the Right to Speak by Distributing Medical Textbooks 

WLF noted that the Sunshine Act will require manufacturers to keep track of every medical textbook they disseminate, because every textbook has a retail value that exceeds the Act’s $10 threshold, and they will have to track such textbooks for the $100 annual aggregate purpose.  Doctors will also have to keep detailed records regarding any textbook they are given, so that they can be in a position, if necessary, to dispute HHS reports regarding gifts they have received.  This, as the American Medical Association (AMA) noted in its comments on the proposed Sunshine rule, would impose a significant time and resource burden on physicians that CMS “greatly underestimated.”  Manufacturers, of course, will face significant penalties—up to $1.15 million per year—for failing to make required reports. 

As a result, WLF maintained that this provision will cause a “significant reduction in speech,” as “Manufacturers will be able to reduce compliance costs and potential fines by reducing the number of medical textbooks they disseminate.”  Moreover, doctors will reduce compliance costs by declining to accept medical texts and will also decline such texts to avoid inclusion of their names on public lists of doctors who are accused of being on the “payroll” of pharmaceutical companies. 

“While many doctors wish to receive the information contained in medical textbooks, their willingness to exercise their First Amendment rights to receive such information is greatly tempered by an unwillingness to expose themselves to the potential harassment and censure that can accompany inclusion on lists of doctors who received payments from drug or device companies,” WLF wrote.  For example, doctors will “quickly forgo receipt of [medical textbooks] if they conclude that accepting the information will lead to any amount of harassment” 

In addition, WLF argued that the legislative history of the Sunshine Act “confirms that Congress required disclosure not so that patients could use the information as part of a careful evaluation of which doctors to use, but to discourage doctors from accepting gifts that lack an educational purpose.”  Further, “[t]here is little evidence that Congress intended to single out textbook dissemination and other expressive activities for special disapprobation, but the effect of the Act (as interpreted by CMS) is to burden this expressive activity to such an extent that much of the activity will cease,” WLF wrote. 

WLF emphasized further that the burdens on speech “are also particularly onerous because the Act is being applied to speech whose truthfulness CMS does not contest.”  Additionally, WLF recognized that the “burdens that CMS is imposing on speech rights are also subject to special scrutiny” because “Anyone other than a drug or device company is free to distribute medical textbooks to doctors without being burdened by the Act’s reporting requirements. Only the speech of drug and device companies is subjected to special disapprobation.”  The Supreme Court has repeatedly subjected such “speaker-based restrictions” to heightened First Amendment scrutiny (citing Sorrell).   

Application of the Act to Medical Textbooks Does Not Serve Any Substantial Government Interests 

WLF explained that the principal government interest served by the Act is the “prevention of corruption.”  CMS, which provides billions of dollars each year to reimburse the costs of medical devices and prescription drugs, “has a strong interest in ensuring that a doctor prescribes use of medical products only when their use is indicated, and not because the doctor has been bribed to write such a prescription.”  By requiring drug companies to report to HHS gifts they make to doctors, “the federal government can ascertain which doctors are receiving inordinately large gifts and thus can more easily ascertain whether a doctor’s prescription-writing practices have been corrupted.” 

They argued that the “likelihood that a gift of a medical textbook could corrupt a doctor’s prescribing practices is negligible,” noting that even the most expensive medical textbooks supplied by drug companies to doctors cost only a small fraction compared to travel or research.  This is important, as WLF noted, because the Supreme Court has generally limited disclosure for purposes of deterring corruption for “large” expenditures that legitimately could be viewed as having the potential to corrupt. 

WLF notes that it is “ironic that CMS has interpreted the Act as prohibiting dissemination of a medical text only if it has real medical value. A book has value only to the extent that the book contains valuable information. Thus, a drug company sales representative need not report that, during one of his sales visit to the doctor’s office, he has left off a copy of a promotional brochure regarding one of his company’s drugs or a Harlequin romance novel, because no doctor – or anyone else – would value the material as exceeding the Act’s $10 reporting threshold.” 

“It is only because doctors and their patients can actually make use of information contained in bona fide medical textbooks that doctors (and the market in general) assign a sufficiently large value to the textbooks to render them reportable. Yet, CMS has produced no evidence – and WLF is not aware of any – that the modest value of a single copy of a medical textbook is sufficient to tempt a doctor to adopt corrupt prescribing practices.” 

Moreover, WLF notes that other than “an interest in preventing fraud, the Act serves no legitimate government interest.  Congress never attempted to justify the Act based on its informational value – that is, that patients might use the information contained in HHS reports in deciding which doctor to choose.” 

CMS Can Avoid First Amendment Difficulties by Construing the Act as Inapplicable to Medical Textbooks 

WLF next maintained that there is no language in the Act that can be construed as a “clear indication” that Congress intended to require that medical textbooks be included in the reporting requirement.  Although the Act requires that “payments or other transfers of value” from drug companies to doctors be included in annual reports submitted to HHS, it explicitly excludes from the reporting requirement “educational materials that directly benefit patients or are intended for patient use.” 

By all accounts, medical textbooks supplied by drug companies to doctors “directly benefit patients” – doctors regularly use information gleaned from the textbooks in their treatment of patients, and they often show the textbooks to patients while explaining treatment options. At the very least, therefore, there is a plausible statutory basis for exempting medical textbooks from the Act’s reporting requirement. By adopting that construction of the Act, courts could avoid the serious constitutional questions that they would otherwise be required to confront. 

WLF argued that “because the only value of information contained in a medical textbook derives from a doctor’s ability to use that information in treating patients, the relationship between a medical textbook and benefits to patients is far closer – and thus is the sort of educational material that most people would consider to be of “direct” benefit to patients.”  Thus, CMS’ interpretation was not the most natural reading of “directly benefits patients”, particularly in light of evidence that patients derive numerous benefits from the medical textbooks disseminated to doctors.

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