Policy and Medicine

States Becoming More Aggressive Prosecuting Off Label Promotion

For the last several years, we have reported extensively about the government settlements, investigations, and prosecutions of pharmaceutical and medical device companies for various fraud and abuse, FCPA and FDA violations.  Almost all of these cases has resulted in multi-billion dollar settlements, corporate integrity agreements and various other legal, regulatory and compliance obligations.   

Consequently, a growing concern and trend that companies are now facing are separate and parallel civil and criminal enforcement actions at the state level for the same or similar conduct companies settled with the federal government.  According to a recent article from the Wall Street Journal, “some U.S. states have become more aggressive in accusing drug makers of deceptive marketing, widening the potential liability for an industry that has shelled out billions of dollars to settle investigations led by the federal government.” 

“For state officials, a key appeal of these cases is that they generally don't have to prove that a drug maker's marketing caused any specific injuries or harm.  They need only convince a judge or jury that a drug's promotion was deceptive in some way.”  Moreover, “Plaintiffs’ law firms have been pitching new consumer-protection lawsuits to state attorneys general,” according to David Hart, an assistant attorney in charge of the financial fraud and consumer-protection section of the Oregon Justice Department.  “Some states have outsourced such litigation to outside counsel after issuing requests for proposals.  Houston-based law firm Bailey Perrin Bailey has served as outside counsel for some state,” reported WSJ. 

“More states feel empowered to bring these kinds of actions solo,” said Hart.  Oregon is one of the most pro-active states leading the state prosecutions.  In fact, Oregon is responsible for the oversight of the Consumer and Prescriber Education Grant Program, which funds groups to help reduce fraudulent marketing and other improper life-science related activities.  

Examples of Parallel State Consumer Protection Actions 

WSJ points out that GlaxoSmithKline (GSK), Sanofi, Bristol-Myers Squibb Co. and Teva Pharmaceutical Industries Ltd. are among the drug companies in the cross hairs of attorneys general of several states.  “A key legal weapon at the states' disposal: consumer-protection laws that have traditionally been used to go after abusive debt collectors or deceptive car sellers,” WSJ writes. 

Some allegations of consumer-law violations by drug makers have been resolved in multistate settlements—the size of which have grown steadily in recent years.  For example, in 2012, Johnson & Johnson agreed to pay $181 million to settle consumer-protection claims by 36 states and the District of Columbia to resolve allegations the company promoted the antipsychotic Risperdal for unapproved uses.  The company did not admit wrongdoing or violations of any law or regulation, saying it agreed to the pact to avoid further litigation. 

However, “some states have chosen to go it alone, a strategy that has resulted in hefty single-state awards and settlements in recent years,” the author writes.   

For instance, J&J is appealing an Arkansas’ judge’s $1.2 billion penalty assessed in 2012 after a jury found the company violated state consumer protection and Medicaid-fraud laws in its marketing of Risperdal.  The case was brought by the Arkansas attorney general.  The appeal is pending in the Arkansas Supreme Court.   

A unique aspect of this case was that a “portion of the Arkansas Risperdal penalty was calculated by applying a fixed amount to each of about 4,570 letters J&J sent to doctors in 2003 containing information about Risperdal’s safety.  The FDA concluded these letters didn't adequately convey the risk of elevated blood sugar associated with Risperdal.” 

A lawsuit with allegations similar to the Arkansas case resulted in a $258 judgment against J&J in 2010 in Louisiana.  The judgment was upheld by one appellate court and is pending before the Louisiana Supreme Court.  Additionally, J&J is appealing a $327 million penalty awarded by a state judge in 2011 in a Risperdal lawsuit.  The case is pending at the South Carolina Supreme Court, which heard arguments last month.   

A J&J spokeswoman noted that claims over Risperdal marketing brought by state officials in West Virginia and Pennsylvania were dismissed.  J&J last year also agreed to pay $158 million to settle a Texas lawsuit over Risperdal. 

Most recently, the Kentucky Attorney General also filed a lawsuit against J&J regarding its alleged illegal promotion of Risperdal, as reported by Pharmalot.

In February 2013, attorneys general in Kentucky and Maryland filed separate lawsuits against GSK in their respective state courts, alleging the company deceptively marketed the diabetes drug Avandia.  The suits say GSK “misrepresented the safety and efficacy of the drug, which has been linked to increased risk for heart attacks and strokes.”  And at least five other states, including Utah, continue to pursue similar lawsuits against GSK over Avandia. 

They chose to opt out of a 2012 settlement in which GSK agreed to pay $90 million to settle consumer-protection claims by 37 other states and the District of Columbia.  “In the case of Avandia, we opted out of the multistate because we felt we could obtain a better result by taking our own action,” said a spokeswoman for the Kentucky Office of the Attorney General.  One reason for opting out is that consumer-protection violations “have resulted in some eye-popping monetary judgments and settlements,” WSJ writes. 

Other pending state consumer-protection cases include: 

• Attorneys general of Mississippi and West Virginia sued Bristol-Myers and Sanofi, alleging the companies falsely and deceptively labeled and promoted the blood thinner Plavix to consumer and doctors.  The states allege the companies misleadingly marketed Plavix as more effective and safer than aspirin in treating patients at risk for strokes and related cardiovascular events. 

The suits also allege the companies knew or should have known since 2003 that Plavix can be less effective in a subgroup of patients who metabolize it poorly. The suits allege the companies failed to disclose that information in a timely manner because they wanted to preserve Plavix sales. 

BMS and Sanofi said they believe the state lawsuits over Plavix marketing have no merit, and the companies will defend themselves.  The companies said some of the attorneys who have filed the lawsuits on behalf of state attorneys general are also representing private plaintiffs in personal-injury lawsuits related to Plavix.  The lawsuit was moved to federal court and is still pending. 

• South Carolina sued Teva’s Cephalon unit in 2011, alleging it promoted drugs including wakefulness drug Provigil for unapproved uses.  Teva is seeking to dismiss the lawsuit, claiming in a court document that the attorney general's hiring of an outside law firm on a contingent-fee basis violates Teva's rights to due process under the U.S. and South Carolina constitutions.  The contingent-fee arrangement allows for the outside law firm to be paid a percentage of any monetary settlement or judgment, on a sliding scale. The South Carolina attorney general's office said Teva's request to dismiss the lawsuit has no merit. 

Response From Industry 

“The industry and its defense lawyers say the state allegations of deceptive marketing amount to overreach because there has been little evidence that patients have been harmed by the alleged conduct,” WSJ writes.   

For example, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed a document supporting J&J in its appeal of the Arkansas Risperdal verdict and penalties, “arguing that the state court improperly interpreted an alleged violation of federal prescription-label standards as a violation of a state Medicaid-fraud law.” “Imposing state-law penalties on manufacturers for alleged violations of [federal drug law] raises serious legal and constitutional questions,” said PhRMA. 

“I don't think the states should be looking to punish statements about pharmaceutical marketing unless they can prove that somebody was actually injured as a result of relying on the statements,” said Kenneth J. Wilbur, an attorney with Drinker Biddle who has defended drug makers including J&J in the state litigation.  Wilbur said the “First Amendment’s free-speech protections should restrict the ability of states to broadly construe consumer-protection statutes against drug marketing.” 

Industry defense lawyers also have argued that “federal law authorizing the FDA to regulate drugs should pre-empt state laws concerning the marketing of approved drugs whose safety and efficacy have been reviewed by the FDA.”

Physician Payment Sunshine: DC Transparency Report, State Transparency Law Updates

ScienceDaily recently reported physician and hospital payments from pharmaceutical companies for the District of Columbia in 2011.  The data was reported by researchers at the George Washington University School of Public Health and Health Services (SPHHS), which found that pharmaceutical companies spent nearly $84 million marketing pharmaceuticals in the DC, slightly less than 2010.   

DC publishes their annual reports through a separate webpage hosted through it's Department of Health, dedicated to Prescription Drug Marketing Costs.  Here's the 2011 report, which for some reason was not published until early March 2013.

The 2012 report was published in July of last year.  The reports date back to 2007.  In 2010, 132 pharmaceutical companies reported spending a total of $85.4 million on marketing activities in the DC, including $57.6 million on employee and contractor expenses, $21.0 million on gifts and payments, and $6.8 million on advertising.  Physicians received 76% of the gifts given by pharmaceutical companies, and these gifts accounted for 39% of the total value of all gifts.

This included an outlay of nearly $19 million (22%) for gifts given to physicians, hospitals and other health care providers.  The gift category is deceiving, however, because it includes “grants, speaker’s fees and food.”   

The reporting of such payments will soon be the national standard once the Physician Payment Sunshine Act goes into effect on August 1, 2013.  In response to this law, physicians are concerned about the impact this transparency will have on their practice and career.  For example, David Caraway, MD, PhD, of St. Mary's Regional Medical Center in Huntington, W.Va, said that his colleagues will not work with industry or receive payments, even for ones as small as $250 a year.  While that “is not an impactful financial incentive to that physician, … it’s a disincentive for innovation and for collaboration.” 

Speaking to MedPage Today, Caraway cautioned that if the Sunshine Act rules paint physicians with a negative brush, “it will have the effect of killing innovation and research.”  Policymakers and regulators must consider when crafting these plans what objective they are trying to achieve, said Guy Chisolm, PhD, director of the Cleveland Clinic's Innovation Management and Conflict of Interest Program.  

For instance, how much less biased is a physician who receives $5,000 from a company compared with one who receives $10,000?  “There really aren't any data to show that bias is less at that level and not the other”" he said.  “Maybe it is, but there are no data there.”  Moreover, there are significant firewalls and physician-industry policies to regulate such relationships and prevent undue influence, conflicts of interest, or bias.  For example, a recent survey of almost 2,000 members of the American Society of Clinical Oncology (ASCO) showed that 93% reported familiarity with the ASCO conflict of interest (COI) policy. 

The annual DC report notes that 12 physicians in the District received gifts (including consulting payments) that totaled more than $100,000 apiece that one year alone.  The report found that a small number of companies -- 23 out of 158 -- reported marketing expenditures of more than $1 million apiece.  “That is an astonishing amount of money being spent on marketing prescription pharmaceuticals in the District,” said Wood. 

Hospitals, clinics and other organizations received gifts totaling $9.7 million, and individuals received $9.2 million. Some nurses and pharmacists received gifts in 2011 but most of the pharmaceutical company largesse, nearly 82 percent went to doctors. Most gifts to doctors were described by the pharmaceutical companies as speaking fees and were paid in the form of cash or checks, the report said. 

“There is nothing inherently wrong with such gifts,” said Susan F. Wood, PhD, lead researcher and an associate professor of health policy and of environmental and occupational health at SPHHS.  “However, this report draws attention to the amount being spent on marketing pharmaceuticals and raises questions about whether some heavily marketed pharmaceuticals may be prescribed more extensively than is appropriate.” 

The report fulfills the requirement of a 2004 law in the District of Columbia that requires all pharmaceutical companies to file annual reports describing their prescription-pharmaceutical marketing activities in the District.  The AccessRx Act also requires analysis of these reports to determine how pharmaceutical marketing may affect healthcare services in the District. 

In fact, a previous study by Wood and her colleagues showed that pharmaceutical companies making antipsychotic pharmaceuticals gave a disproportionate amount of gifts and payments to District psychiatrists who treat Medicaid patients. Close ties between the pharmaceutical companies and psychiatrists might have led to inappropriate prescribing for Medicaid patients, and particularly for children, according to D.C. Council Member David Catania, who held a hearing on the issue last November.  Other findings of the report include: 

• Out of nearly 3,400 physicians in the District who received at least one food gift, 444 received ten or more meals from pharmaceutical companies during 2011 and 33 physicians got 52 or more of these food gifts.  This finding suggests some physicians are dining with pharmaceutical reps on a weekly basis.
• The top ten professional organizations (representing health professionals in a specific specialty or demographic group) received a total of $3.5 million, with half of those gifts valued at $20,000 or more.
• The top ten Disease-Specific Organizations based in the District received $2.1 million in gifts such as cash or checks from pharmaceutical companies. These organizations often represent and advise patients, and the concern is that large gifts could sway such groups to favor or recommend the company's products, the report said. 

The report, which was commissioned by the Department of Health (DOH) in the District of Columbia, recognized the implementation of the Sunshine Act, and noted that DC could publicly release the names of all gift recipients sometime after September 2014. 

Other State Transparency Law Updates 

A recent blog post from R-Squared also noted several developments regarding payment transparency laws in several states.  We previously noted changes to the transparency laws in Minnesota and Massachusetts.  In addition to these changes, the post noted that Vermont recently proposed a bill that would narrow the scope of individuals that trigger reporting and leave room for the Attorney General to exclude items of nominal value from reporting and the gift ban.  

Specifically, the bill modifies the definition of “health care professional” to no longer include “an officer, employee, agent, or contractor ... who is acting in the course and scope of employment, of an agency, or of a contract related to or supportive of the provision of health care to individuals.”  In addition, the bill modifies definition of “health care provider” to expressly exclude a hospital employee, other than a purchasing agent, without the authority to prescribe or recommend prescribed products. 

Furthermore, the bill expressly carves out as a not-banned gift “items of nominal value” that the Attorney General defines by rule, and “items of nominal value” as defined by the Attorney General are also removed from the disclosure requirements. The effective date if the bill becomes law is July 1, 2013. 

The post also noted that Connecticut, which currently only requires pharmaceutical and medical device manufacturing companies to adopt and implement a compliance code, has now “proposed a disclosure requirement, but it appears the bill only applies to “pharmaceutical manufacturing companies” and “pharmaceutical marketing companies” and not medical device companies.  In addition, there would be a $10 minimum threshold. 

For a comprehensive list of State Actions Relating to Transparency and Disclosure of Health Charges and Provider Payments, the National Conference of State Legislatures has a great webpage with numerous resources.  

Ultimately, “Industry has to be part of the conversation and has to be part of the education process,” said Ryan Hohman, managing director of policy and public affairs at the patient advocacy group Friends of Cancer Research.  “Like it or not, successful innovation requires commercial entities to be involved, and successful education of physicians will require all experts to be educating each other.”

Prescription Drug Marketing Costs - Access Rx

In Light of National Physician Payment Sunshine Act Final Rule: Minnesota to Propose to Drop State Reporting and Retain Gift Ban

In light of CMS releasing the Final Rule for the Physician Payment Sunshine Act, the Minnesota Board of Pharmacy recently announced that it will be amending its annual disclosure requirements regarding payments drug and device manufacturers make to physicians and other healthcare professionals or entities.   

As we noted several years ago,  Minnesota Statutes Section 151.47, requires drug wholesalers (including manufacturers) to “file with the board an annual report, in a form and on the date prescribed by the board, identifying all payments, honoraria, reimbursement or other compensation authorized under section 151.461, clauses (3) to (5), paid to practitioners in Minnesota during the preceding calendar year”.  Another section of the law prohibit manufacturers and wholesale drug distributors from providing “gifts” to practitioners, including physicians.   

Taking into consideration the upcoming Sunshine Act regulations, which preempt any state law that requires a manufacturer to disclose the type of information covered by the Sunshine Act, the Board of Pharmacy determined that it will “not require wholesalers and manufacturers to report any data for calendar year 2012” because the “vast majority of data that is reported under Minnesota law is information covered by the Sunshine Act.”  

The Board will also be asking that the Minnesota Legislature repeal the annual disclosure requirement during the 2013 session.  The Board will not be asking the Minnesota Legislature to repeal the partial gift ban and reiterated that the ban remains in effect.

Physician Payment Sunshine: Vermont Offers Reporting Amnesty Until October 1st, Also Revises Regulation One More Time

Over the past few years, we have covered closely the evolving transparency laws in the state of Vermont, regarding physician-industry relationships and payments. 

The Vermont Attorney General’s Office recently announced an offer of amnesty, expiring October 1, 2012, to manufacturers of medical devices and biologics who failed to comply with reporting obligations under the Prescribed Products Gift Ban and Disclosure Law (“Gift Ban and Disclosure Law”).  Accordingly, under certain conditions, the Attorney General will not seek penalties on manufacturers who failed to comply with reporting requirements under the Gift Ban and Disclosure Law.   

The announcement first came back in July, when Vermont Assistant Attorney General for the Public Protection Division, Kate Whelley McCabe, gave a presentation at CBI’s annual Aggregate Spend and Sunshine Conference.   

The Attorney General anticipates, however, that it will require manufacturers to disclose “some aggregate information related to the [unreported] activity” at a later date.  The offer of amnesty is limited to the following circumstances:   

• The manufacturer’s obligations under the Gift Ban and Disclosure Law began on or after July 1, 2009.
• The manufacturer failed to report required information for FY10 (7/1/09-6/30/10), FY11 (7/1/10-6/30/11), or 2011 (7/1/11-12/31/11).
• The manufacturer’s potential penalties are only for failure to report required information. The amnesty is not applicable to back-payment of registration fees or violating other provisions of Gift Ban and Disclosure Law. Thus, a manufacturer will not be forgiven for   failing to pay registration fees or providing banned items or payments to relevant entities. 

The Attorney General may also execute an Assurance of Discontinuance to ensure the manufacturer’s future compliance with the Gift Ban and Disclosure Law.  This is essentially an agreement by the Attorney General not to take action against a manufacturer in exchange for an assurance of future compliance with the Gift Ban and Disclosure Law.  

Manufacturers seeking to benefit from this offer must email prescribedproducts@atg.state.vt.us the following information on or before October 1, 2012:  

• Manufacturer name.
• Reporting period(s) for which the manufacturer failed to report.
• Name, physical address, email address and phone number of person with whom the Office should communicate about the unreported activity. 

Other Changes to Vermont Regulations 

McCabe presented several slides about the changes to the Vermont regulations.  Highlights include:

• Prescription eyewear no longer prescribed product
• Medical food and infant formula permissible and must be reported with samples
• OTC products other than OTC drugs, nonprescription medical devices, nonprescription durable medical equipment, medical food and infant formula no longer permissible
• Report distribution of all product with samples, including:
  • OTC products
  • Product donated to free clinics
  • Reporting a pharmacy as recipient no longer permissible
  • Combination product defined by reference to federal law
  • Change in ID number for Green Mountain Care Board Member 

She also gave insight into how the Vermont law will be preempted by the federal Sunshine law.  Specifically, for 2012, Vermont preempted from requiring disclosure of: 

• allowable expenditures and permitted gifts which would have been reported to federal government under “Sunshine”
• Allowable expenditures and permitted gifts valued at under $10, unless aggregate to recipient over $100 

Not preempted:

• Gift ban and samples reporting
• Except as noted above, allowable expenditures and permitted gifts not required to be reported to federal government 

McCabe’s presentation indicated that the short term impact will be that in 2012, the Attorney General’s office will accept voluntary reporting of preempted disclosures.  She noted that manufacturers should indicate on the compliance officer form whether they intend to submit data that would also have been submitted to the federal government.  She noted that in the long term, “the utility of disclosed information may decrease because of gaps caused by partial preemption.”  Nevertheless, she noted that there is “no appetite in Vermont legislature for repealing the law.” 

Interestingly a recent study published in the Journal of Pharmacy Practice found that a “high proportion of Vermont providers are unaware of the current law.”  Moreover, at “least a quarter disagreed with banning small gifts and meals.” 

Massachusetts House Votes for Third Year in a Row to Repeal the “Gift Ban”

The Massachusetts State House, for the third year in a row, voted to repeal the controversial Massachusetts Pharmaceutical and Medical Device Manufacturer Code of Conduct(PCOC).  As reported by Pharmalot, the latest effort goes beyond the previous two tries: “the House also agreed to repeal a disclosure rule that requires all financial arrangements between drug and device makers with prescribers is posted on a website maintained by the state Department of Public Health.”   

Dr. Charles Birbara, a Worcester rheumatologist, is in favor of lifting the ban, because it is better for his patients and gives them more options." Dr. Birbara told GoLocalWorcester, "The insurance company often times controls what we prescribe by virtue of what's on their formula. There are many people that don’t take prescribed medicine, because they can’t afford it. These co-pays can get very pricey. The coupons really help out the patient."  

According to MA Rep. Jason Lewis, who is working to stop the amendment from passing, those on the other side of the issue have their reasons.  “We want to make sure they have the best interest of patients. There are opponents who say that that argument is well and good, but it’s hurting the pharmaceutical industry in Massachusetts,” he said. 

Speaker of the Massachusetts State House, Robert A. DeLeo is also opposed to the ban. 

Background 

In 2010, Massachusetts Governor Deval Patrick made a point during his reelection campaign that the PCOC “was never intended to extend to the state's medical device industry,” and “goes beyond” the code that the pharmaceutical industry uses to police itself,” “and thus should be narrowed.”  

“I think that was not its intent,” he said during an October 2010 forum in front of an audience of biotech advocates. “Aligning it with Pharma is a priority of mine.”  

Patrick added that the PCOC was “ripe for repeal or modification, since the Obama administration's federal health care overhaul included superseding language.”  As a result, a spokesman from the Department of Public Health, which oversees these regulations, said the agency was currently reviewing the ways in which Massachusetts regulations are impacted by federal law in order to determine whether there are any additional steps that need to be take. 

Additionally, the Massachusetts State Assembly voted overwhelmingly 128-22 to repeal the PCOC in late April, 2011 during its annual budget debate, but the proposal was dropped during negotiations with the Senate. 

Despite strong signals that Gov. Deval Patrick, the House and the Senate would support peeling back parts of a three-year-old ban on gifts from pharmaceutical companies to doctors – a policy that critics say is strangling the restaurant business and killing jobs – 2011 came to a close without action.

However, the article noted that “efforts to dismantle components of the ban are poised to reemerge in 2012 and received the fresh backing of a panel of lawmakers” at the end of December, potentially teeing up the issue for consideration during debate on a major health care system overhaul eyed for next year. 

Specifically, a move by the Committee on Public Health to give a favorable recommendation to the proposal came at a time when most lawmakers had cleared out of the capitol for an extended holiday recess. The pre-Christmas activity angered consumer advocates who argue that any attempt to weaken the so-called gift ban would encourage doctors to prescribe costlier medications, drive up health care costs, and infringe upon safeguards intended to ensure that patient interests prevail over business relationships. 

Most recently, House leaders have been calling for a repeal of the gift ban according to a recent article from the Boston Herald, mostly because lawmakers believe that the federal law—Physician Payment Sunshine Act—will preempt majority of Massachusetts law.  Until CMS proposes the final regulations and the Supreme Court decides whether the entire Affordable Care Act stays or goes, it is unlikely that Massachusetts will repeal the gift ban.  The proposed House bill would keep the state reporting requirements, some of which exceed those required under the Sunshine Act.

Enacted in 2009, the PCOC or “gift ban” has been a controversial piece of legislation that has had significant impacts on the pharmaceutical and medical device industry in Massachusetts.  The ban prohibits pharmaceutical companies and medical device manufacturers from providing “entertainment or recreational items of any value,” such as sports tickets; cash payments; “complimentary items” such as pens, mugs or gift cards; grants and scholarships in exchange for a promise to prescribe certain drugs or use certain devices; or any other prohibited “kickback.”

In addition, drug and device companies may only provide meals to doctors inside the hospitals or offices where they work, a fact that proponents say prevents lavish spending on expensive dinners and alcohol as a means to peddle influence. The policy also requires drug and medical device companies to annually disclose “any fee, payment, subsidy or other economic benefit with a value of at least $50” provided to doctors, hospitals, nursing home workers, insurers or other “health care practitioners.”

Payments for 2009 were then published on the states website in late November, 2010.   The payments for 2010 were published just this week.

The legislation also requires manufacturers to adopt a set marketing code of conduct to help ensure that health care providers were making choices about prescription drugs for their patients based on therapeutic benefits and cost-effectiveness. This code had a number of provisions governing the types and nature of interactions industry could have with physicians.  The Code of was subsequently adopted by the Massachusetts Department of Public Health (DPH).  

Discussion

Those who support repealing the PCOC maintain that the regulation has severely affected medical innovation and collaboration, and thus decreased the quality of training and education health professionals receive, also decreasing the quality of patient care.  In fact, a study done by MIT showed that the Code of Conduct is having significantly negative effects on patient care and medical innovation.  And one article noted how the gift ban is having a negative effect on primary care physicians in Massachusetts because it is cutting off opportunities for clinicians to gather new scientific information and exchange real-world clinical information. Additionally, the gift ban has resulted in companies withdrawing funding for fellowships, professorships, and other faculty positions and departments in Massachusetts.

Moreover, medical device companies noted the significant burden the legislation placed on them considering the fact that many physicians needed to work directly with industry to learn how to use certain medical devices.

As noted by the Boston Herald, The bill backed by the Public Health Committee (H 1507) would eliminate the disclosure requirement. The proposal also repeals a prohibition on pharmaceutical companies providing meals to doctors outside of a “hospital setting,” so long as the meals are part of an event that is “primarily educational in nature.” 

Backers of eliminating restrictions on meals say they have harmed the restaurant and convention industries, particularly in Boston, which has a high concentration of hospitals and pharmaceutical companies that surround the North End, a popular restaurant district. For example, pharmaceutical and device companies have been “curtailing sales, marketing and training activities in Massachusetts” in order to comply with the new rules, and “some outside companies are avoiding Massachusetts altogether.” 

State Rep. John Mahoney told GoLocalWorcester the restaurant ban is hurting business in the Bay State. "We are the only state that doesn’t allow doctors to have dinner with pharma companies. I don’t think doctors are being swayed by a free meal. People who own restaurants are getting hurt by this. Companies are going to other states to work around this law. They are holding events and dinners in neighboring states." 

In fact, an article in the Boston Globe noted how the new laws have resulted in “fewer jobs related to training, medical device sales and clinical trials.”  They also argue that doctors would not be improperly influenced by a meal and could gain valuable insight into advancements in medical devices or cutting-edge drugs. 

“I think we should be looking at ways of modifying this. It’s, in my opinion, way too restrictive. I think it’s negatively impacting our convention industry,” said Rep. Vincent Pedone (D-Worcester), lead sponsor of the legislation. “This is what some of the proponents of modest change wanted to see. I’m trying to find a compromise between repealing the whole gift ban and making it more workable.” 

Pedone said he’s supportive of the pharmaceutical industry’s own code of conduct. “The pharmaceutical industry has come a long way in a short time with this. If we can adopt just what their code is, which I think is the standard across the country for states, we would be in much better shape,” he said. 

Efforts to relax the gift ban have gained popularity in the House, which has passed complete repeals for two straight sessions. But they’ve stalled in the Senate, where Senate President Therese Murray led the drive to implement the gift ban in 2008 legislation. Last year, however, senators nearly deadlocked on a plan to permit pharmaceutical and medical device companies to buy dinners for doctors, voting 19-18 to preserve the ban. 

The Boston Herald noted that, “it is unclear how eight freshmen in the Senate will affect the outcome, although four of five new senators who served in the House voted to repeal the gift ban law as state representatives.” 

Sen. Susan Fargo (D-Lincoln), co-chair of the committee, said she is opposed to efforts to weaken the gift ban, describing even an incremental change as “the nose of the camel getting under the tent.” Fargo said she hopes the proposal is “fully debated” on the floors of the House and Senate.  “At the time that the gift ban was passed – and the Senate strongly endorsed it – pharmaceutical companies were spending far more on marketing and advertising than they were on research and development,” she said. 

Asked about the House’s repeated votes to repeal the gift ban altogether, Fargo said, “Sometimes the House and the Senate simply have philosophical differences about legislation.” She added that she has no reason to believe the Senate has changed its attitude about the ban. Fargo also said she hoped efforts to whittle down the ban are debated apart from omnibus health care reform legislation planned for next year.

“The core issue of payment reform is big enough and important enough that it should stand alone,” she said. 

Deirdre Cummings, legislative director of the consumer group MassPIRG, said she hopes the House waits until its members return from a seven-week recess before considering efforts to weaken the gift ban.  “The concern from the consumer end is that the pharmaceutical industry are setting up these meetings and they’re really only marketing the most expensive, brand name prescription drugs,” said Cummings. “The impact of that marketing is also significant. It leads to higher prescribing. That’s the concern from the consumer end.” 

Restaurant industry officials, however, say amending the gift ban to permit educational meals at local restaurants would provide an immediate economic jolt to the hospitality industry and lure drug conventions to Massachusetts. Dave Andelman, CEO of Phantom Gourmet, said the ban failed to prevent deep-pocketed drug companies from flooding consumers with advertisements but has created an impediment for smaller companies hoping to break into the market. 

“Pfizer can wrap the whole T in advertising but these generic companies can’t take a doctor to dinner. It’s silly. It should be changed, and it should be changed now,” he said. “I have every reason to believe that it can change. We’ve been approaching every senator and making our case, and without naming names, even some senators that I thought really wouldn’t give us the time of day had to admit that all the arguments I’m making to you now make a lot of sense.” 

Conclusion 

As one recent article from the Boston Business Journal noted, it is “insulting to our physicians, some of the best minds in the country, to think they can be bought for a mug or a yogurt.”  The author correctly recognized that “Much of the money flowing to our health care institutions [from industry] goes toward things like fellowships in the orthopedics department at Massachusetts General Hospital or a diabetes clinical trial at Beth Israel Deaconess Medical Center.  It also goes towards training for heart surgeons on the newest stent procedures and to safety studies on rare disease drugs developed by Genzyme Corp. 

Ultimately, with more and more companies picking up and leaving Massachusetts, and new businesses and other industries deciding to set up their offices in other states, it is becoming clearer to some that the Code of Conduct must go. With 8 new Senators in the Massachussetts Senators, this may provide the needed difference to repeal the PCOC, especially given that the Sunshine Act regulations are now out, making the reporting requirements under the code unnecessary and duplicative. Accordingly, Governor Patrick would be doing a service to the patients, health care practitioners, and entrepreneurs of Massachusetts by urging his legislature to repeal the Code of Conduct. 

It is unlikely that Massachusetts will repeal this law until the U.S. Supreme Court decides whether the Affordable Care Act is constitutional, and whether the Sunshine Act will stand or be stricken.  But the effort to repeal the current law in Massachusetts is sincere and it is important for states to note, that despite the “claims” of cost savings there is no evidence of that for the bay state, thus the repeal effort.

Physician Payment Sunshine: Vermont Prescribed Products Gift Ban and Disclosure Law 9th Report - Shows Increase in Payments to Vermont HCP’s

Vermont’s Prescribed Products Gift Ban and Disclosure law bans most gifts to Vermont health care providers and requires manufacturers of prescribed products - including pharmaceuticals, biological products and medical devices - to disclose expenditures deemed appropriate by the legislature—similar to Physician Payment Sunshine Act (only stricter).  Consequently, Vermont recently released its ninth report on such payments for fiscal year 2011. 

Vermont’s Prescribed Product Disclosure Law, 18 V.S.A. §§ 4631a, 4632, requires manufacturers to file these disclosures with the Vermont Attorney General’s Office by October 1, 2011, and requires the Vermont Attorney General to issue a report about the disclosures by April 1, 2012.  

Like the FY10 Report, this report reflects the substantial amendments made to Vermont’s law in 2009.  Among other changes, the amendments largely prohibit manufacturers from giving gifts to health care providers and require reporting by manufacturers of biologics and medical devices as well as reporting by pharmaceutical manufacturers, which has been mandated since 2002.  The amendments also require clinical trial and research expenditures to be reported.  Further, the amendments eliminated the trade secrets exemption to public disclosure. 

The expanded definition of manufacturer and the new requirement that clinical trial and research expenditures be reported, means that the FY10 and FY11 reporting captures a wider range of the dollars spent on health care than in prior years.  Thus, comparison with prior years’ exclusively pharmaceutical and exclusively marketing-related data is difficult.  Moreover, both the ban on gifts and the elimination of trade secret protection may have caused manufacturers to decrease the amount of money they spent on marketing products to Vermont health care providers. Notably, the ban includes food, which accounted for over 27% of FY08. 

The report, released in late March, is based on disclosures for the fiscal year July 1, 2010, through June 30, 2011 (FY11). Starting in April, 2012, the law also requires manufacturers to disclose the distribution of free samples and of vouchers and co-pay cards that enable an individual to receive a prescription product for free or at a discount. A report on those expenditures will be published in the fall. 

In the twelve months before July 1, 2011, 154 manufacturers of pharmaceuticals, biologics, and medical devices spent approximately $5.6 million in direct payments to Vermont doctors, hospitals, universities and others.  That figure represents an overall spending increase of 17% from the $4.8 million reported the previous fiscal year.

excluding payments made on clinical trials and research puts FY11 expenditures at approximately 2.2 million dollars, a figure at the low end of prior reported levels of pharmaceutical marketing expenditures, which ranged from approximately 1.8 million dollars in FY10 to roughly 4 million dollars in FY04. 

Expenditures on pharmaceutical products accounted for approximately 4 million of the 5.6 million dollar total, and were made by 64 manufacturers.  Thus, 42% of the manufacturers accounted for 70% of expenditures.  Expenditures for pharmaceuticals also dominated the percent of total dollars reported (77% as compared with 20% for medical devices and 3% for biologics).  However, more than half of the total number of expenditures were for medical devices (53% as compared with 43% for pharmaceuticals and 4% for biologics). 

Only 14 manufacturers had expenditures greater than $100,000, and 116 manufacturers had expenditures of less than $20,000. The maximum single expenditure was $400,000, with the next highest at approximately $130,000 and $100,000.  In particular, the amount spent on pharmaceutical marketing ($2.2 million) is about 22% higher than the $1.8 million reported in the previous fiscal year.  In FY11, 

• Approximately 42% of the $5.6 million in expenditures were for clinical trials and research.
• Doctors received 23% of the expenditures,
• 12% went to professional, educational, or patient organizations
• 5% to academic institutions; and
• 12% of the expenditures went to all health care providers combined for educational materials. 

Approximately $676,000 of FY11 expenditures took the form of educational materials. This represents a 26% increase from the FY10 level of $535,000. However, as a proportion of total expenditures, educational materials rose only slightly from 11% in FY10 to 12% in FY11. 

Providers receiving $3,000 or more rose from 44 in FY10 to 56 in FY11, a total increase of approximately 27%. The total dollars received by this group rose from approximately $740,000 to over 1.3 million. 

In FY11, nurses (Registered Nurses and Advance Practice Registered Nurses) who received $3,000 or more each received a total of roughly $57,000, a slight (8%) increase from the FY10 level of $53,000. Expenditures to Advance Practice Registered Nurses who received $3,000 or more rose approximately 35% from about $32,000 in FY10 to about $43,000 in FY11, while expenditures to Registered Nurses receiving $3,000 or more dropped 34% from approximately $21,000 in FY10 to nearly $14,000 in FY11. 

Of the 50 products with the greatest expenditures (over $28,000), drugs for treating Type 2 or Type 1 & 2 diabetes garnered the greatest amount of expenditures, as they had in FY10.  Multiple sclerosis was the second highest indication.  Expenditures for both indications were up significantly from last year. 

Of the 50 products associated with over $28,000 in expenditures in FY11, 74% were pharmaceutical products, 24% were medical devices, and 2% were biologics. The ten products with the highest expenditures were all pharmaceutical products, and accounted for about one-third of overall spending.

The five manufacturers with the highest total expenditures to Vermont health care providers, institutions and organizations during FY11 were: 

• Abbot Laboratories
• Novartis Pharmaceuticals
• GlaxoSmithKline
• Eli Lilly
• Medtronic  

Of these, Eli Lilly was in the top five manufacturers for all four of the previous fiscal years, Novartis Pharmaceuticals for three of the last four fiscal years, and GlaxoSmithKline for two of the prior three fiscal years. Abbot Laboratories and Medtronic appear in the top five for the first time in FY11, and also represent the first manufacturers ranked in the top five to have reported expenditures other than solely pharmaceutical expenditures. 

The percentage of payments reported by the top five manufacturers, as compared with the total amount of expenditures reported, continued to drop in FY11 to 39%. In FY09 and FY10, the top five manufacturers were responsible for 47% of total expenditures, which represented a decrease from prior levels of 52% (FY08) and 56% (FY07).

 

Draft Guide to Vermont’s Prescribed Products Gift Ban and Disclosure Law 2012:Update Round 2 - A Guide to Confusion

The “legality principle” is the fundamental legal ideal that requires all law to be clear, ascertainable and non-retrospective.  The legality principle posits that laws must give fair warnings to citizens of the nature of the conduct declared to constitute a criminal or civil offense.  There are several cornerstones associated with the legality principle. 

First, laws must be promulgated in a democratic way.  Second, those laws enacted must be publicized so that the public and citizens are aware of them.  Third, laws must be clear and comprehensible; they cannot be vague or ambiguous.  Fourth, laws must impose achievable (non-impossible) limits on conduct).  Fifth, laws and rules must not be changed too often.  Finally, laws and rules must be enforced in a regular and consistent manner.  

If laws, legislation, regulations, and public policy do not follow the legality principle, a number of negative effects would be imposed on citizens as well as businesses and industry.  Without the predictability and consistency of laws that are reasonable and understandable, citizens and industries cannot conduct their lives and businesses in a predictable, efficient and effective manner. 

Consequently, the State of Vermont seems to have forgotten this century old legal principle when it comes to their Prescribed Products Gift Ban and Disclosure Law.  Specifically, over the past three years, Vermont has regularly changed, amended, and added new provisions to its disclosure law, making it extremely difficult for providers and stakeholders to know exactly how to comply with the law, forcing many to change their compliance systems each year. 

In fact, Vermont recently announced an update to the Draft Guide to Vermont’s Prescribed Products Gift Ban and Disclosure Law for 2012 and making numerous changes, (This is not to be confused with the Draft Guide for the combined Vermont's Prescribed Products Gift Ban and Disclosure law for 2012 issued June 2011) which will likely cause significant problems for providers and healthcare stakeholders within the state of Vermont.  It is possible that Vermont is considering such changes in light of the recent Supreme Court decision, IMS v. Sorrell, which struck down Vermont’s data-mining ban that was created by the state as a way to attempt rising healthcare costs. 

Vermont’s Prescribed Products Gift Ban and Disclosure Law was first enacted in 2001 and became effective in June, 2002.  It was amended several times thereafter (see below for specifics).   On June 8, 2009, Vermont Governor Jim Douglas signed into law Act No. 59, which amended Vermont's existing pharmaceutical marketing disclosure law.  The Act, which went into effect July 1, 2009, included a ban on certain gifts to health care providers and expands reporting requirements to medical device and biological product manufacturers. 

2012 Proposed Changes 

The proposed changes to the Vermont disclosure law for 2012 are extensive, as evidenced by a conference call held this week, which lasted for almost two hours.  There were many questions asked by providers, and it was clear that there was a tremendous amount of confusion from stakeholders who are trying to comply with the regulations.  Many callers asked questions about recording payments in 2011, which the staff would subsequently answer.  

However, they would then instruct callers of changes to the substance of these questions which will be enacted in 2012, making the call extremely confusing.  One participant described these new requirements as “impossible.”  

First, the proposed drafted noted that, “Effective January 1, 2012, some of Vermont’s disclosure requirements will be preempted by federal law. In short, while the gift ban and samples reporting will not be affected, Vermont will no longer be able to require manufacturers to disclose those allowable expenditures and permitted gifts which must also be reported to the federal government under the Physician Payments Sunshine Provision (§ 6002) of the Patient Protection and Affordable Care Act (Pub. L. No. 11-148).” 

“The federal law is narrower than Vermont’s law in several ways, however; for example, only physicians and teaching hospitals are covered recipients under the federal law. Therefore, manufacturers must take care to make all nonpreempted disclosures regarding allowable expenditures and permitted gifts.” 

“The federal law does not prohibit manufacturers from making duplicative disclosures to states, it simply prohibits the states from requiring duplicative disclosures. At this time, the Office will accept such duplicative disclosures.” 

Reports need to be in the name of the Holding Company and distributors count as manufactures.  There will be no delay or grace period for mergers and acquisitions.  Alliance companies need to report separately based on who wrote the check.

If the state decides to audit a company, they will ask for records about how booklets, patient materials, and pamphlets were distributed by sales reps and to which doctors as well as the fair market value of the brochures.   

Reporting must be done online and uploaded into the state computer system.  In addition, Vermont is coming up with more regulations on Medical Foods.  Samples have to be in reasonable quantities, but no definition as to what constitutes a reasonable quantity – state said they are leaving that up to manufacturers.  

Vermont is no longer requiring reporting of drugs or devices used in clinical trials.  If a manufacturer provides food to a medical office, the food has to be attributed to the physicians in the office even if office staff eats the food.  Combination products must also be reported. 

Donations of prescribed product to free clinics should not be included in the Samples Access database or Samples Disclosures Form, but must be reported with disclosures of allowable expenditures and permitted gifts. 

Front-Office Staff: All permitted gifts and allowable expenditures made to an individual must be allocated to a prescriber or prescribers, even when the immediate recipient is front office staff. When there is only one prescriber in a practice, the expenditure or gift should be attributed to her. In cases in which there is more than one prescriber in a practice, however, the gift or expenditure must be allocated among the prescribers to which it is relevant. For example, if the permitted gift of a reasonable quantity of over the counter anti-inflammatory medication is handed out at a training which includes front office staff of a practice that includes three orthopedic surgeons, that gift would properly be divided between the three surgeons, but should not be attributed to any psychiatrists in the practice. 

Free Distribution to Patients: The provision of reasonable quantities of an over-the-counter drug, non-prescription medical device, or item of non-prescription durable medical equipment provided to a HCP for free distribution to patients and the provision of free drugs, medical devices, biological products, or medical equipment or supplies to a free clinic are permitted gifts. 

2011 Changes 

On May 26, 2011, Vermont for the third time amended the law on the disclosure and “gift ban” requirements applicable to manufacturers (and certain distributors) of prescription drugs, biological products and medical devices (“prescribed products”). Accordingly, on July 1, 2011 (unless otherwise noted), a number of significant changes went into effect, including: 

• Reporting is moved to a calendar year; reports are due to the Attorney General by April 1; there will be a transition six-month reporting period and $250 fee for July 1, 2011 through December 31, 2011.
• Manufacturers whose prescribed products are only certain Class I medical devices do not fall within the law. 18 V.S.A. § 4631a(a)(9).
• Research, such as marketing research or surveys, which does not fall within the allowable expenditures for clinical trials and scientific research, §§ 4631a(a)(1)(C) and (D), is banned. § 4631a(c).
• Patient assistance programs (PAPs) are not within the definition of “sample,” § 4631a(a)(13), are a permitted gift, § 4631s(b)(2)(I), and need not be reported. § 4632(a)(1)(A)(vii).
• Expenses for manufacturers’ employees health care are allowed, § 4631a(a)(1)(G), and need not be reported. § 4632(a)(1)(A)(iv).
• Delayed reporting for clinical trials is extended to four years (similar to the federal “Sunshine” law) for new uses of an FDA-approved prescribed product. § 4632(a)(1)(A)(iii).
• Trial period for loans of medical devices is extended to 120 days (up from 90 days), and need not be reported in all circumstances. § 4631a(b)(2)(B); § 4632(a)(1)(A)(vi).
• Effective January 1, 2012, over-the-counter drugs and medical devices permitted by § 4631a(b)(2)(A) are to be reported; the Attorney General will not disclose the identity of individual recipients to the public. § 4632(a)(1)(B).
• Members of the Green Mountain Care board, established as part of Vermont’s health care reform package, are treated similarly to health care providers for purposes of the gift ban and reporting. §§ 4631a(a)(5) and (b)(1); § 4632(a)(1) 

In light of these new requirements, the Vermont Office of the Attorney General has stated that it will not require reporting of distributions through PAPs for past years, including FY 2011 (due Oct. 1, 2011), even though the statutory provision eliminating PAP reporting does not go into effect until July 1, 2011. 

2010 Changes 

In 2010, Vermont enacted Senate Bill 88, which again amended Vermont's existing gift ban and disclosure law.  Significantly, S.B. 88 requires manufacturers of pharmaceuticals, medical devices and biological products to report annually to the Vermont Office of the Attorney General certain information related to "free samples of prescribed products provided to health care providers during the preceding calendar year." 

"Sample" is defined as "a unit of a prescription drug, biological product, or medical device that is not intended to be sold and is intended to promote the sale of the drug, product, or device," including starter packs and coupons or vouchers that allow an individual to receive a prescribed product for free or at a discounted price. The first report is due by April 1, 2012, for the reporting period of January 1, 2011, through December 31, 2011. 

S.B. 88 was the first state law relevant to drug and device transparency to be enacted since the enactment of the Patient Protection and Affordable Care Act ("PPACA") on March 23, 2010.  PPACA includes several transparency provisions applicable to manufacturers, including Section 6002, also known as the Physician Payment Sunshine Act. 

Key Changes  

S.B. 88 expanded the definition of "allowable expenditure" to include the following items: 

• Payment by a manufacturer to the sponsor of a significant conference or seminar used at the sponsor's discretion to provide meals and other food for all conference participants.
• Payment of a health care professional's reasonable interview expenses in connection with a bona fide employment opportunity with the manufacturer.  

S.B. 88 also amended several other key definitions to provide additional detail or clarity, including the following changes: 

• "Health care professional" is limited specifically to include someone "who regularly practices in this state."
• "Health care provider" excludes a "hospital foundation that is organized as a nonprofit entity separate from a hospital."
• "Prescribed product" includes "a compound drug or drugs" and limits the definition to products that are "for human use."  

S.B. 88 also includes several additional items that a manufacturer may provide to a health care provider, including: 

• In addition to samples, "reasonable quantities" of over-the-counter ("OTC") drugs and nonprescription medical devices or durable medical equipment.
• Free prescription drugs, OTC drugs, medical devices, biological products, medical equipment, medical supplies and financial donations to a "free clinic."
• Free prescription drugs to, or on behalf of, an individual through a manufacturer's patient assistance program.
• Grants for fellowship salary support, if an academic institution or hospital applies for the grant and selects the recipient without any further demands or limitations on the use of the funds from the manufacturer. The fellowship may not be named for a manufacturer and no individual fellowship may be attributed to a particular manufacturer or product.
• Coffee, snacks and refreshments at a conference or seminar booth.  

S.B. 88 also excluded the following additional items provided by manufacturers to health care providers from the reporting requirements: 

• Payment of a health care professional's reasonable interview expenses in connection with a bona fide employment opportunity with the manufacturer.
• Coffee, snacks and refreshments at a conference or seminar booth.
• Any allowable expenditure or gift to a nonprofit hospital foundation under § 4631a.  

Manufacturers also must now report annually the following information related to samples of prescribed products during the preceding calendar year: 

• Name of the product.
• Recipient.
• Number of units.
• Dosage.  

The law was further amended to state that the Vermont Office of the Attorney General may contract with academic researchers to provide the reported data for analysis and aggregated public reporting. The manufacturer data provided to the academic researchers by the Vermont Office of the Attorney General will be subject to confidentiality provisions and may not include the names or license numbers of individual recipients. Any public report of such data may not include information that allows for the identification of individual recipients or monetary value of the samples provided to a specific recipient. 

Samples reported in accordance with Section 6604 of PPACA do not need to be reported under if, by January 1, 2011, the Vermont Office of the Attorney General determines that the U.S. Department of Health and Human Services will collect and report state-specific and recipient-specific information related to manufacturer distribution of free samples.  

2009 Changes 

The 2009 Act required pharmaceutical manufacturers to file annual disclosures by November 1, 2009, for the reporting period July 1, 2008, to June 30, 2009, as required by the FY09 Law. Pharmaceutical manufacturers, as well as biological product and medical device manufacturers, filed their first reports by October 1, 2010, for the period January 1, 2010, to June 30, 2010. 

The Act broadened the scope of the previous law to include manufacturers of medical devices and biological products.  In expanding the scope of the law, the Vermont legislature specifically noted fraud and abuse enforcement actions by the federal government against device manufacturers and concluded that there is "little or no difference in the marketing of biological products and prescription drugs. 

Ban on "Gifts"  

As of July 1, 2009, manufacturers are prohibited from providing "anything of value to a health care provider for free," unless otherwise permitted by the Act. "Health care provider" is defined broadly to include a health care professional, hospital, nursing home, pharmacist, health benefit plan administrator, or "any other person authorized to dispense or purchase for distribution prescribed products" in Vermont.  The Vermont Attorney General released guidance that, among other things, provides that the ban applies to health care providers that "regularly practice in Vermont," regardless of whether the item of value is provided within or outside the state. 

Banned "gifts" include "any payment, food, entertainment, travel, subscription, advance or service."  However, the Act enumerates several permissible gifts and "allowable expenditures."  The Act further divides the permissible gifts and allowable expenditures into items that do not need to be reported and items that do need to be reported beginning with the 2010 reporting period. 

Permitted Gifts; No Reporting

• Free samples of prescription drugs intended for distribution to patients. This also includes vouchers and discount coupons for samples;
• Labels and package inserts approved by the federal Food and Drug Administration ("FDA");
• Rebates and discounts provided "in the normal course of business."  

Permitted Gifts; Reporting Required 

• Short-term loans of medical devices for evaluation purposes;
• Reasonable amounts of medical device evaluation or demonstration units;
• Peer-reviewed academic, scientific, or clinical articles for professional or patient education purposes.
• Educational items that serve a genuine educational function and are for the benefit of patients;
• Scholarships and other support for medical students, residents, and fellows to attend significant educational, scientific, or policy-making meetings if the recipient is selected by the association;
• Gifts to academic institutions or professional, educational or patient organizations.  

Allowable Expenditures; No Reporting 

• Royalties and licensing fees paid to health care professionals with ownership rights.  

Allowable Expenditures; Reporting Required  

• Payments to sponsors of a "significant educational, medical, scientific, or policy-making conference or seminar," provided that no payment is made directly to a health care provider, the funds are used for bona fide educational purposes, and the content is not controlled by a manufacturer;
• Honoraria and expenses for faculty at a significant educational, medical, scientific, or policy-making conference, provided that there is an explicit agreement with the health care professional and the content of any presentation is determined by the health care professional;
• Direct salary and expenses for the conduct and review of "bona fide clinical trials" and research projects;
• Reasonable expenses for the technical training of health care professionals on the use of medical devices if the expenses are reasonable and set out in a written agreement;
• Other fees, payments, subsidies, or economic benefits provided by a manufacturer at fair market value.

 

Reporting Obligations 

Beginning in 2010, all manufacturers were required to identify by name and address the individual responsible for the manufacturer's compliance with the Act by July 1^st each year.  Manufacturers also must file annual reports detailing allowable expenditures and permissible gifts provided to health care professionals and providers and pay an annual filing fee of $500.  For each payment reported by the manufacturer, the manufacturer must provide the value, nature, purpose, recipient information including state license number, and the prescribed product(s) being marketed. 

The Vermont Attorney General is authorized by the Act to seek injunctive relief and to impose a civil penalty of not more than $10,000 per violation for failing to comply with the Act.  Each failure to disclose is a separate violation.

 

Public Disclosure  

The Act required the Vermont Attorney General to make all disclosed data publicly available on a searchable Web site.  All information reported under the Act was made public. 

The Act allows manufacturers to delay reporting payments for bona fide clinical trials. Specifically, manufacturers must report expenditures for bona fide clinical trials after the earlier of: (1) the date of the approval or clearance of the prescribed product by the FDA; or (2) two calendar years after the date the payment was made. However, manufacturers must identify minimum information to the Attorney General regarding the clinical trial, including the name, start date and Web link to the clinical trial registration on the national clinical trials registry. A contract for a clinical trial entered into on or after July 1, 2009, may not contain a confidentiality clause that violates the Act.

 

West Virginia Governor Withdrew Rule for Prescription Drug Advertising Expense Reporting

According to the West Virginia State Register, Governor Earl Ray Tomblin of West Virginia withdrew the rule for Prescription Drug Advertising Expense Reporting late last month, as reported by the Charleston Gazzette.

Tomblin spokeswoman Kimberly Osborne said the rule, which went into effect in 2010, was withdrawn over concerns it had changed the filing requirements for drug manufacturers from the original 2006 rule.  "It would have changed filing requirements that prescription drug companies would have had to abide by," Osborne said Monday.

In March 2004, West Virginia enacted the West Virginia Pharmaceutical Availability and Affordability Act (the “Act”), W. Va. Code § 5A-3C-1 et seq., with the purpose of addressing the rising cost of prescription drugs.  The, Prescription Drug Advertising Expense Reporting, requires that:

Every drug manufacturer, pharmaceutical manufacturer, and labeler of prescription drugs dispensed in this state, or to a consumer in this state via mail, who employs, directs or utilizes marketing representatives in this state must complete and file with the Governors Office of Health Enhancement and Lifestyle Planning (GOHELP), the form contained in Appendix A of this rule, disclosing the reporting entity's expenditures for advertising prescription drugs to consumers in this state for the previous calendar year in full. Beginning on or before April 1, 2010, and by the first of April thereafter, the reporting entity shall annually complete and file with GOHELP the form contained in Appendix A of this rule, disclosing advertising expenses for the previous calendar year in full.

Recently however, “Rules for enforcing a 2004 state law requiring pharmaceutical companies to disclose spending on advertising and marketing of brand-name drugs in the state have been withdrawn by Gov.-elect Earl Ray Tomblin's administration -- raising concerns among advocates of the sunshine law.”

Background

Under the Prescription Drug Advertising Expense Reporting law, the reporting entity must disclose all expenditures for advertising and direct promotion of prescription drugs dispensed in this state, including:

 

• The total amount the reporting entity spent for advertising and direct promotion of prescription drugs to consumers, prescribers, pharmacies and patient support or advocacy groups within the State of West Virginia;
• The total number of West Virginia prescribers to whom the reporting entity provided, directly or indirectly, gifts, grants or payments of any kind in excess of one hundred dollars ($100.00) for the purpose of advertising prescription drugs. Annual payments which cumulatively total more than the amount shown on the reporting form shall be reported in increments of two thousand five hundred dollars ($2,500.00) until all payments of any kind to prescribers have been reported; and
• Direct-to-consumer advertising which is directed at, received by or intended to be received by consumers in this state, the form of the advertising and the total amount expended for such advertising.

 

The reporting entity may, but is not required to, disclose:

 

• Free samples of prescription drugs distributed to patients;
• Payments of reasonable compensation and reimbursement of expenses in connection with a bona-fide clinical trial; and
• Scholarships or other support for medical students, , residents and fellows selected by a national, regional or specialty medical or other professional association to attend significant educational, scientific or policy-making conferences sponsored by such association.

As explained by the Charleston Gazzette, “Under state law, agencies adopt rules spelling how they will carry out legislative mandates. Under the rule-making review process, those rules have to be formally approved by the Legislature before they go into effect.”

The 2010 rule made two changes to the 2006 rule, allowing for electronic filing of reports and clarifying that the reports are to be filed with GOHELP, rather than with the now-defunct office of the state Pharmaceutical Advocate.

Sen. Dan Foster, D-Kanawha, a physician and a key legislative advocate for the pharmaceutical spending disclosures, said Monday he was concerned that the rule had been withdrawn, particularly since there had been little or no advance notice to legislators.  "There seems to be a lack of transparency about how this was done," he said.

"I don't think that they talked to anybody in the House about this," said Foster. "[House Health and Human Resources Chairman] Don Perdue and I were very much involved in the initial legislation in 2004."

Osborne said the rule also was withdrawn to allow the next director of GOHELP to have input in any rule changes.  "We withdrew it because we want to have input from whoever becomes director," she said.  Martha Walker retired as GOHELP director July 31, and a successor has yet to be appointed.

There have been three financial disclosure reports published since the rule went into effect.  The first, by the Pharmaceutical Advocate and covering the last six months of 2007, disclosed that pharmaceutical companies had spent more than $16 million in direct-to-consumer advertising and for nearly 15,000 "gifts, grants or payments" to state physicians, ranging in amounts from $50 to $52,000.

The next report for calendar year 2008, showed more than $33.2 million in expenditures, including nearly 16,000 gifts, grants or payments. Four physicians received payments in excess of $100,000, according to the report.

The most recent report, for calendar year 2009, cited total spending of $28.6 million, of which $7.7 million was on direct-to-consumer advertising.  That report, the first prepared by GOHELP, was two pages long and did not provide a breakdown of payments to providers by payment categories.

District of Columbia Board of Pharmacy Revises Disclosure Policy

 
Following lobbying by The Council of American Survey Research Organizations (CASRO), the District of Columbia’s Board of Pharmacy has agreed to revise its regulations, which previously demanded the disclosure of payments made to physicians in exchange for participating in market research.

D.C.’s AccessRX Act of 2004 requires pharmaceutical manufacturers to report all payments made in connection with marketing. While the act did not specifically apply to payments made to healthcare practitioners in return for participating in market research surveys, D.C.’s Board of Pharmacy extended the ruling to include the disclosure of these payments.

According to a recent press release, CASRO met with the D.C. Board of Pharmacy's Executive Director and the full Board several times during the past six months to argue that market research payments to physicians for their participation in research are separate from direct marketing and should not be subject to the reporting requirement.

As a result, the Board of Pharmacy agreed to alter the AccessRX Act to include the wording that:

• Market research must be conducted by an independent survey research organization;
• That the pharma client must not know the identity of the practitioners who participate in research; and
• That the payments are determined and made directly by the survey research organization.

This decision follows the repeal of a similar law last month by the state of Maine, as well as the recent reform in Vermont of a law relating to ‘prescriber-identifiable’ data. In June, the Marketing Research Association (MRA) secured an amendment to the Colorado Pharmaceutical Transparency Act, exempting payments for healthcare practitioners who participate in MR projects from a more general ban.

CASRO is continuing to monitor and respond to similar legislation in other states, but hopes that the new federal law will ‘stifle’ state legislation on the issue.

The industry body explained in a statement: ‘So long as the identity of the physician respondent is blinded to the manufacturer, payments made to physicians as compensation for participation in market research are now not reportable under the Sunshine Payment Act, D.C.’s AccessRx Act and under Minnesota’s similar statute.’

Massachusetts, which has considered repealing its own physician payment reporting statute several times, also exempts market research payments when the research is conducted in a double blind fashion.

Maine Repeals Three Laws Hostile to Pharmaceutical Industry

 
Shortly after the United States Supreme Court invalidated a Vermont law, which attempted to ban pharmaceutical companies from data mining, the state of Maine repealed three laws related to the reporting of marketing costs, price reporting, and the disclosure of clinical trials by manufacturers and labelers of prescription drugs dispensed in Maine. 

The bill to repeal the three Maine laws was titled, “An Act to Make Certain Prescription Drug Disclosure Laws Consistent with Federal Law.”  An explanation of the repealed laws was given by the FDA Law Blog.

One repealed law, Me. Rev. Stat. Ann. tit. 22, § 2698-A, required manufacturers and labelers that employed or used marketing representatives in Maine to submit an annual report of certain marketing costs, including, but not limited to, (1) expenses associated with food, entertainment, gifts valued at more than $25, trips, and travel in connection with all licensed health care professionals and entities, and (2) costs associated with advertising, marketing, and promotion of prescription drugs as they pertained to Maine residents (unless the costs were for a regional or the national market). 

The Maine legislature also repealed the $1,000 annual fee that was associated with the marketing report.  Note that the repeal does not affect the annual report and fee for CY 2010 that were due July 1, 2011.  The Maine reporting requirement was similar to marketing reporting laws in the District of Columbia and West Virginia.  Massachusetts and Vermont also have reporting requirements for marketing practices, though these laws extend to both pharmaceutical and medical device manufacturers. 

Another rescinded law, Me. Rev. Stat. Ann. tit. 22, § 2698-B, required disclosure, on a quarterly basis, of the average manufacturer price and best price for all drugs subject to the Medicaid Drug Rebate Program. 

Finally, Me. Rev. Stat. Ann. tit. 22, § 2700-A was amended to revoke the requirement that manufacturers and labelers of prescription drugs post information on clinical trials that they conducted or sponsored on a publicly accessible website.  Such information included a summary of the purpose of the clinical trial, the dates during which the trial has taken place, and the results of the clinical trial (including potential or actual adverse effects of the drug). 

Manufacturers of prescription drugs that are provided through MaineCare (Maine’s Medicaid program) were required to pay an annual fee of $1,000, in part, for the posting of clinical trial results and the monitoring of adverse event reports.  Because this fee also was used to fund the state’s academic detailing program, the Maine legislature amended the bill to cut the annual fee to $500 beginning April 1, 2012. 

The repeal provisions are effective September 28, 2011, 90 days after the Maine legislature adjourned on June 29, 2011. 

Consequently, it will be interesting to see whether other states follow Maine’s example and how they interpret the IMS v. Sorrell opinion.