Policy and Medicine

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.

 

Maine Set to Repeal Unfair Prescription Drug Prices Act and End PBM Discrimination

 
A recent article from the Sun Journal explained that Maine could soon shed a 2003 law designed to protect consumers from high drug costs and fraud perpetrated by pharmacy benefit managers (PBMs), the corporate middlemen between insurance providers and employers and pharmaceutical companies and wholesalers. Pharmacy benefit managers provide health insurance to process and pay prescription drug claims.

The controversial law, known as the Unfair Prescription Drug Practices Act, prevents PBMs from switching patients to more expensive drugs, while also protecting consumers from co-payments when the actual drug price is cheaper. If a pharmacy benefits manager makes a substitution in which the substitute drug costs more than the prescribed drug, the pharmacy benefits manager must disclose to the covered entity the cost of both drugs and any benefit or payment directly or indirectly accruing to the pharmacy benefits manager as a result of the substitution.

The pharmacy benefits manager must transfer in full to the covered entity any benefit or payment received in any form by the pharmacy benefits manager either as a result of a prescription drug substitution or as a result of the pharmacy benefits manager's substituting a lower-priced generic and therapeutically equivalent drug for a higher-priced prescribed drug. Under the 2003 law, PBMs are also required to pay independent pharmacies promptly and negotiate prices in good faith.

The law was adopted at the urging of former Maine Attorney General Steven Rowe. He believed providers in the largely unregulated industry should register with the state and disclose their dealings with pharmaceutical companies, including kickbacks to PBMs for promoting certain drugs, before doing business here.

The law was precipitated by a lawsuit against Medco Health Solutions, a PBM sued by Maine and 19 other states for violating consumer protection and mail fraud laws for "drug-switching," the practice of changing patients' drug prescriptions to similar drugs of therapeutic value but that pay the benefit managers higher rebates.

Medco, a New Jersey-based company, denied any wrongdoing but paid $29.3 million in a 2004 settlement. It also agreed to disclose the rebates it received from pharmaceutical companies. The pharmacy benefit managers industry has paid $371 million in damages over the past several years to several states for false claims, kickbacks and overcharging patients for generic drugs.

The PBM industry, which manages the pharmacy benefits of more than 95 percent of Americans with health insurance, has fought the Maine law for years and succeeded in temporarily delaying its implementation in 2004.

The 2003 Maine law was passed at a time when state legislatures around the country began focusing on PBMs as one way to peel back the curtain on prescription drug costs. By September 2009, 14 states plus the District of Columbia had enacted some type of direct state PBM regulation, according to the National Conference of State Legislatures, although Maine was the only state that imposed fiduciary-disclosure requirements on PBMs.

Repealing the Maine PBM Law

Last week however, the Maine legislature passed a bill to repeal the 2003 law. The Sun Journal noted that the “vote was prompted by industry lobbying over charges that transparency requirements had discouraged PBMs from doing business in the state, which was resulting in less competition and higher drug costs.”

In two votes that broke mostly along party lines, the Republican-controlled Legislature gave preliminary approval to repeal the law, arguing that it was unnecessary and increased patient drug costs. Rep. Meredith Strang Burgess, R-Cumberland, sponsored the bill that repeals the law. She said the Maine Attorney General's Office could handle oversight of the industry.

Several Democrats joined the Republican majority supporting LD 1116 in the House. The Senate vote, 21-14, broke along party lines with Sen. Richard Woodbury, U-Yarmouth, voting with the Democratic minority.

During Wednesday's debate in the House of Representatives, Strang Burgess said that while the protections and transparency in Maine law sounded like a good idea, the “additional regulation had discouraged pharmacy benefit managers from doing business here.” She said the result was less competition and higher drug prices.

Opponents said repealing the law would remove a host of protections for consumers and independent pharmacies. They also argue that the existing law prevents benefit managers from switching patients to more expensive drugs and protects them from co-payments when the actual drug price is cheaper. The law also requires benefit managers to promptly pay independent pharmacies and to negotiate drug prices in good faith.  They also note that 25 other states regulate PBMs.

Sharon Treat, a Maine legislator who heads the National Legislative Association on Prescription Drug Prices, claimed that the new bill “would replace the law with a minimalist registration provision with no teeth … under the guise of restoring ‘market-based competition.’  However, Treat asserted that the repeal really does the reverse: true competition in the marketplace is only possible when there is pricing transparency.”

Several independent pharmacies testified against the repeal bill in the public hearing. Repeal proponents included the PBM industry and the Maine Merchants Association, which said the current law hamstrung employers attempting to negotiate contracts with PBMs.

Sen. Margaret Craven, D-Lewiston, attempted to introduce an amendment that would prohibit public or quasi-municipal agencies from contracting with a PBM if the company had committed fraud or had been penalized $500,000 by a state or federal agency within the previous three years of the contract.

Craven said she couldn't imagine why other senators would want the state or another public agency to contract with a PBM that had been fined for misconduct. Craven's amendment was tabled by Republican leaders.

The current repeal bill was backed by Medco, the company involved in the 2004 lawsuit, CVS Caremark and the Pharmaceutical Care Management Association. The PCMA represents the largest PBMs, including Medco, CVS, AdvancePCS and Express Scripts. Medco has also spent more than $8,500 through April lobbying several bills, including LD 1116. The bill was also lobbied by Express Scripts, which spent $2,000 over that same period.

Mark Merritt, CEO of PCMA asserted that, “repealing the PBM law would lower prescription drug costs for Maine’s consumers and payers.”

Vermont SB 104 Proposes Additional Changes in "Gift" Ban Rules

 
Almost two years ago, the Vermont Legislature passed (S. 48)—a gift ban and disclosure law which includes all marketing activities for healthcare providers in the state.  At the time, the law basically outlawed Vermont physicians from participation in promotional events and dinner meetings, including product theaters and consulting.  It also required reporting of payments to physicians and health care providers or institutions on just about everything else (i.e. food, travel, education, etc.).    

One year later, the Vermont Senate passed a major health care reform bill, which included provisions about disclosure and gifts from drug and device companies. The Vermont health care reform bill, SB 88, contained specific provisions that amended Vermont's existing gift ban law, Vt. Stat. Ann. tit. 18, § 4631a ("§ 4631a"), and disclosure law, Vt. Stat. Ann. tit. 18, § 4632 ("§ 4632").

An article analyzing the changes, published by the law firm Epstein, Becker and Green, noted that significant changes from S.B. 88 included provisions that “require 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." The first report is due by April 1, 2012, for the reporting period of January 1, 2011, through December 31, 2011.

Now, just one year after the last change, the Vermont Legislature has again proposed to make changes to the gift ban and disclosure laws.  The changes to the law are underlined in the bill.

Consequently, the consistent changes made to the gift ban and disclosure law over the past few years demonstrate that the Vermont Legislature had little idea of what they were doing when they first created the law.  For a legislative body to have to amend a law each year not only creates doubt in the legitimacy of the legislation in the first place, it also creates unpredictability and uncertainty for healthcare stakeholders residing in Vermont. 

The various changes to the bill demonstrates the Vermont Legislature’s inability to consider viewpoints from various stakeholders affected by the legislation, presumably because the changes made since the original legislation came only after various groups complained of the burdens and negative impacts the law had on their companies or institutions.  Nevertheless, most of the requirements and substantive provisions with respect to the gift ban and disclosure remain unchanged and the proposed changes make sense for many constituencies.  Below is a summary of some of the changes.

S.104

This bill proposes to make minor and clarifying changes to laws prohibiting most gifts from manufacturers of prescribed products and requiring disclosure of permitted gifts and allowable expenditures. The bill would: 

-       Specifically authorize manufacturers to conduct blind market research studies and would require related disclosures;

-       Exempt from the scope of the gift ban and disclosure laws manufacturers who sell particular categories of over-the-counter products;

-       Extend the period for which a manufacturer may lend a medical device from 90 days to120 days and exempt the loans from disclosure if they result in a sale or lease after issuance of a certificate of need;

-       Exempt from disclosure prescription drugs provided through a manufacturer’s patient assistance program;

-       Exempt manufacturers from disclosing the provision of nonprescription products if they do not have any other required disclosures to make; and 

-       Change the reporting period for required disclosures from the fiscal year to the calendar year and pro rate the related reporting fee

Specifically, the proposed bill added to the category of “allowable expenditure,”

-       “Other research paid at fair market value, as long as the manufacturer on behalf of which the survey or other research is conducted is unaware of the identity of the health care provider receiving expenditures related to the research”

In addition, the proposed bill clarifies that prescription drugs provided through a manufacturer’s patient assistance program are not classified as a “sample,” and drugs given through such programs are not prohibited or classified as “gifts.”

With respect to reporting and disclosure, reports would not be due April 1 of each year, instead of October 1 for the preceding calendar year (not fiscal year).  The change in reporting would also require manufacturers to report the amount of rebates and discounts provided to “health care providers.”

The bill is moving through the legislature and should be voted on by the full state house and senate sometime before summer.

Ultimately, as the federal government begins to prepare making rules to implement the Sunshine Physician Payment Act contained within the Affordable Care Act (ACA), it would benefit health care providers and stakeholders in Vermont to urge their legislature to adopt standards of disclosure and reporting similar to the ACA requirements.  This would create a sense of predictability and uniformity with the federal requirements.  Otherwise, Vermont’s “legislate and then let’s see if it works approach” will only continue to scare health care providers and industry out of the state.

Governor Patrick to Reconsider Massachusetts Code of Conduct

 
A recent article discussed the approach Massachusetts Governor Deval Patrick has taken for engaging business and economic development in his state. The article illustrated his and the state's “choppy history with business development.” For example, Evergreen Solar Inc., a solar-panel manufacturer that the Patrick administration promised $58 million in state aid, decided to shift manufacturing jobs to China and close a new plant at Devens.

Spokeswoman Kimberly Haberlin noted that Governor Patrick and many other members of his administration are engaging in a number of meetings designed to “bring more jobs, more business investment, and more tourism dollars home to the commonwealth.”

However, the article noted that the Governor seems to be sending “mixed messages” to various industries about bringing business to Massachusetts. For example, in 2008, Patrick pushed through a $1 billion Life Sciences Initiative aimed at boosting the Massachusetts biotechnology industry. “He quickly jetted off for San Diego to attend the annual Biotechnology Industry Organization (BIO) conference and promote the new law.”

But he, “then-House Speaker Salvatore DiMasi, and Senate President Therese Murray received a rocky reception because of a separate health care cost-control bill pushed by Murray and later signed into law by Patrick.” The bill, known as the Massachusetts Code of Conduct, “included a ban on gifts of any kind from pharmaceutical manufacturers to doctors, their family members, or their employees.

“That prompted the strange juxtaposition of Patrick arriving at the conference to participate in an industry panel discussion, and shortly be named BIO's "Governor of the Year," while BIO leaders were still cleaning their ink-stained hands after writing letters complaining to members of his delegation.”

BIO itself said to DiMasi "the gift-ban provision threatens research and treatment for patients in the commonwealth.” And GlaxoSmithKline accused the Massachusetts political establishment of harboring "a strong anti-biopharmaceutical streak."

Consequently, the article noted how last fall, “Patrick made two fresh points on the subject during his re-election campaign. He said the ban was never intended to extend to the state's medical device industry, and thus should be narrowed.”

He also said the “state pharmaceutical ban itself was ripe for repeal or modification, since the Obama administration's federal health care overhaul included superseding language.” According to a spokesman, "the Department of Public Health, which oversees these regulations, is 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 taken." A study done by MIT showed that the Code of Conduct is having significantly negative effects on patient care and medical innovation.

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 the Sunshine Act set to take place in 2013, the reporting requirements under the code will be 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.

Maryland “Gift Ban”: HB 818 Manufacturers of Prescribed Products - Payments to Health Care Professionals – Committee Hearing

 
Last week, the Maryland House of Delegates Government Operations Subcommittee held a hearing on HB 818, known as the Manufacturers of Prescribed Products – Payments to Health Care Professionals – Prohibition. As introduced, the purpose of the legislation is to prohibit a manufacturer of prescribed products from offering or giving a gift to a health care professional. We previously provided a summary and analysis of the bill.

Consequently, at the hearing, the overwhelming majority of members from the public spoke against the legislation. Below is a list of those who testified on HB 818, including a brief summary of their testimony. To view the hearing on HB 818 click here. Testimony begins at 5:18:22, that is right 5 hours and 18 minutes into the hearing.

Testimony

Maryland Delegate Nicholaus Kipke (R-Anne Arundel County) 

Mr. Kipke, the sponsor and author of the bill, spoke in favor of the legislation. He called for the creation of a strong firewall because prescription drug use in Maryland has increased over the past 10 years. Of course, he failed to realize that healthcare and patient outcomes, life expectancy, and treatments of other disease have significantly improved for Maryland patients over that time as well.

His testimony focused on the incident at St. Joseph’s hospital, which was his clear motivation for the legislation. He talked about thought leaders and consultants who go out and talk to doctors over meals. He chided industry codes for them being voluntary.

Consequently, Mr. Kipke was asked what the difference between politicians getting payments from industry in the form of political contributions to candidates and doctors receiving “gifts” or payments for services. He struggled to find how there was an ethical difference in these kind of payments. Mentioned that there was rules by members of legislature. He also struggled to answer whether HB 818 will slow down access of physicians to information from companies. He did however admit, that HB 818 will most likely slow down access. 

Delora Sanchez, Nicki McCann, and Julie Gottlieb – Johns Hopkins

John Hopkins offered its support of HB 818 but with specified amendments, which they provided to the committee. The panel talked said JHU’s 2009 policy on interactions with industry was similar to HB 818, but emphasized that HB 818 must ensure appropriate interactions between industry-physician, including education.

The amendments offered focused on the fact that accredited continuing medical education (CME) has adequate oversight, and that there is a need to modify the provision in HB 818 that calls for more than one presenter. The panel also recognized that industry support of CME is welcomed and necessary and not an issue because accredited providers adhere to strict standards of commercial support, which prohibit marketing and promoting products.

Moreover, JHU asserted its concerns that HB 818 could be interpreted so broadly to eliminate HCPs taking part in these activities to recommend treatments. This is problematic because doctors need to be able to educate physicians that a given disease can be treated with a specific class of medicine that is supported by evidence, and practice. JHU also emphasized the need to allow training for devices, and noted that a written agreement should be with the institution who purchases the devices, not the HCP.

Wendy Kronmiller – Assistant Secretary Regulatory Affairs/Maryland Division of Regulatory Affairs, Department of Health and Mental Hygiene

MDMH supported the bill because of concerns about overutilization and overpayments of drugs and patient harm. They clarified that they did not want to thwart medical progress by enacting HB 818 and put Maryland behind other states in conferences and medical events. The testimony clarified that the Sunshine Act in the Affordable Care Act is only a disclosure registry, rather than a ban, and they were not sure whether this would be good enough for Maryland, since consumers may not use it. 

Howard Fienberg - Marketing Research Associates (FWA)

Marketing Research Associates supported HB 818 with an amendment that the legislation excludes survey research because there needs to be incentives to encourage people to participate in bona fide surveys. He noted that marketing research, doesn’t influence participants or get them to do something.

Dan Bellingham – HDMA Health Distribution Management Association

Noted that there are 12 companies that operate in MD, and that the association opposes the bill because of its inclusion of wholesalers. He clarified that wholesalers only take the product from producer to hospital, pharmacy, office, etc. Wholesalers don’t push one product over another. No marketing on products, only services, in wholesaling. He recognized that in Minnesota, Massachusetts, Vermont, and the Sunshine Act, wholesalers were specifically excluded.

 

Jay Schwartz - MedChi (opposed/amendments)

MedChi was opposed to the bill, and emphasized that the bill was poorly written and sloppy. MedChi noted that the legislation would negatively impact accredited CME by preventing meals. Mr. Schwartz noted the hypocrisy in this portion since government meetings sponsored by pharmaceutical companies could have such meals. In addition, he emphasized the positive value pharmaceutical companies provides to hundreds of thousands of medical programs in Maryland that doctors participate in. He gave the example of an ophthalmology program, supported by industry, that examined delegates and their staff in the capitol just a few weeks before the hearing. In the end, he emphasized that there should not be a ban on giving education and industry support to groups, because these are good programs. He asked the committee to look at MedChi’s guidelines on gifts to physicians, that were approved in 1992. He acknowledged that these physician-industry relations are extremely complicated, and a more nuanced approach similar to the 8 page policy from AMA is necessary.

Michael Altus

Mr. Altus, a medical writer, supported the bill because through his experience working for pharma, his concerns and experience about ghostwriting caused him to worry about gifts. He emphasized the fact that companies have their own policies about employees giving and receiving gifts, and that there is no such thing as a “free lunch.”

Marta Harding – AdvaMed

On behalf of AdvaMed, Ms. Harding noted that 25 members of AdvaMed are based in Maryland, and three attended and testified at the hearing. She noted how these companies have thousands of employees in the state. While AdvaMed understands and shares the concerns of bill, Ms. Harding noted that AdvaMed has taken aggressive steps to address to address these issues, including a strict and aggressive code of conduct. Accordingly, she asserted that HB 818 will have negative unintended consequences that will stifle appropriate interactions with doctors and industry, which promote innovation and patient safety.

Chris White – General Counsel for AdvaMed

Mr. White discussed his leadership in helping create the AdvaMed Code of Ethics. He noted how devices demand close physician-industry interaction and that most companies are small, with 50 employees or less, but that many of these bring many breakthrough technologies. He discussed one example, an orthopedic hip, which is highly personalized and requires over 300 instruments. He noted that these devices are supported by physician intervention and collaboration, and that devices serve as an extension of a surgeons hands. As a result, he acknowledged that a highly interactive relationship between physicians and industry is what fuels ongoing advances in medical technology and that training physicians on to use these devices is critical for patients safety

He also noted that HB 818 is negative because it would prohibit demonstration devices, which allow doctors to show patients what treatment/device they would get. Finally, he also emphasized that the Sunshine Act and anti-kickback statutes are sufficient to address the concerns of HB 818.

Kevin Tibido – Vapotherm

Speaking on behalf of a small company, Mr. Tibido’s testimony focused on the administrative burden of complying with HB 818. He too recognized that the AdvaMed Code and federal regulations are adequate. He discussed how his company makes a respiratory device that replaces more complex/expensive technologies. Staff of his company go into offices and hospital and meet with physicians, nurses, and therapists, to make sure they broadly know how their technology works, how to save patients from more evasive procedures, and how to operate the devices safely. Finally, he recognized that meals provided for these training sessions are not unethical because often, HCPs have no time other than lunch to be educated.

Richard Hewitt – VP of CSI Medical

Also from a small medical company in its early stage with 20 employees, Mr. Hewitt discussed his company’s approved device that helps treat cancer. The device is FDA approve and has been used in over 6,000 treatments, in over 80 AMCs, and has been written about in 15 articles in 9 peer reviewed journals. Now that the product has taken off, his company wants to grow and add employees and tax base in Maryland, but he noted that the key thing to growth is robust physician interaction during testing, development. Without high frequency interaction with nurses andphysicians, he noted that his company would fail. And he clarified that these interactions were luxurious or glamorous, but rather coffee and bad food purchased not to induce, but to stay alive.

He recognized that devices help fill unmet needs of patients and that doctors need much more training for medical devices. He noted that a problem with HB 818 is that it would prohibit a company from having a researcher in surgery because it would only be one educator from one company. Without this training, someone would be hurt or die. Accordingly, he stated that Maryland needs to remain competitive to attract genius and capital, and should be making business easier not harder.

Michael Radford – WL Gore and Associates

Mr. Radford echoed concerns about HB 818, and noted that his company’s 23 plants and 2300 employees would be impacted because of the costs and administrative burdens to implement the legislation. He emphasized the importance of device companies interacting with doctors for initial development, training and feedback.

Renee Wensky – CEO Tech Council of Maryland

Representing the biotechnology trade association, Ms. Wensky opposed HB 818 because it is unnecessary, duplicative, and will harm Maryland as a leader in innovation/medicine. She noted how BIO already has a wide array of regulations and agencies overseeing its ethical concrerns, and that HB 818 will just add more regulation and infrastructure cost with little return. It would also put small companies at a competitive disadvantage, and will restrict their ability to research. She also noted that HB 818 would make it difficult for Maryland to attract and retain companies.

John Murphy – BIO

BIO oppose the bill and echoed Ms. Wensky’s comments, noting that small companies will be impacted most directly because compliance costs are difficult to overcome for small companies, and such legislation is unnecessary because these companies already deal with federal regulations.

Tom Sullivan – Rockpointe, Inc. 6:23:40

I talked about the impact HB 818 will have on CME in Maryland. I discussed a wounded warrior program that my company produced, where physicians were educated to treat pain from soldiers, that would be prohibited because it was supported by industry.

I emphasized that HB 818 will jeopardizes patient care by having a chilling effect on the necessary exchange of new treatments, including FDA mandated education. I also noted that the bill would imperil medical education/training and that hospitals and institutions will discontinue CME programs to avoid violating the law. This will kill the market for CME programs, especially when meals would not be allowed. I echoed others in noting that HB 818 is also duplicative because of existing federal laws, such as AMA, ACCME, HHS OIG.

A family practitioners, who is the director of treatment for methadone clinic echoed my comments, and noted the importance of CME events to gain intelligence and improve care for patients. He noted how CME programs supported by industry are crucial because it allows him to interact with colleagues, ask questions, ask speakers how to treat problem patients, and permits 1 on 1 dialogues with speakers and peers.

Lee Gresser, MD, Medical Director Methadone Clinic

Dr. Gresser former President of the Maryland Association of Family Physicians noted that the intent may be good but his concern is the bills negitive effect on continuing medical education.   He was surprised at the Hopkins support given their collaboration on events such as PriMed.    He loves the interaction with colleagues and with speakers on important issues provided in dinner meetings.  Brought up that physicians have discernment and discussed the high integrity of the pharma and device companies.  There are 27,000 physicians in Maryland and only one ran into trouble, wants proactive not re-active legislation.

Patty Camorrata

Ms. Camorrata has 12 years working in CME, and noted how CME providers collaborate with universities, societies, and other groups to look at disease state. Then, they conduct literature research, talk to leaders in areas, and create education plans based on research. She noted how CME improves performance and providers are very involved in metrics and measuring learning to identify gaps in education. She noted that learning requires repetitive activities and that if it does not happen, learning goes back to base level. She concluded by noting that if Maryland gives up local/regional meetings, we will give up repetitive opportunity for learning, which will directly impact patients in Maryland.

Marjorie Powell –PhRMA

Ms. Powell noted how 20 companies in Maryland are working on rare diseases that affect 200,000 people or less. She noted that these 20 companies in Maryland are doing research or have an application at FDA to market a treatment for one or more rare diseases. Consequently, under HB 818, if they wanted to hire professor from JHU to talk to researchers about the research that that academic physician did on a rare disease to help provide background on disease to their researchers, they could not because it would be a “gift.”

If company got FDA approval to market for a rare disease, they could not pay the physician at JHU who ran the clinical trial, to talk to physicians around Maryland about how to use that drug to treat that rare disease, or even how to identify the symptoms of the rare disease within their patients because this would also be a “gift.”

Ms. Powell noted the critical need to tell HCPs about drugs once they are approved, how to use that product, what appropriate indications are, and when you can and cannot use it. She recognized that that FDA often requires training and education for drugs that have benefits/risks for patients.

She also emphasized that PhRMA believes there shouldn’t be gifts to encourage prescriptions, and how federal laws and anti-kickback laws already address this issue.

Gary Reno – Aisi Inc.

As a biopharmaceutical company, with 50 employees in Baltimore, Mr. Reno noted how his company makes products for treatments for brain tumors. He asserted that the federal laws are adequate enough not to need HB 818, and that if passed, the bill would have negative consequences for patients in Maryland.

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

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

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

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

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

Maryland Gift Ban

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

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

Maryland House of Delegates hearing on HB 818 

Thursday, March 3, 2011 at 1:00 p.m

Government Operations Subcommittee, Rm 240, 

House Office Bldg. Anapolis, MD 

Summary of HB 818 – Prohibited Payments to Health Care Providers

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

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

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

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

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

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

PhRMA Statement Opposing HB 818

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

HB 818 could have a negative impact on patient health. 

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

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

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

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

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

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

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

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

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

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

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

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

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

Discussion

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

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

For CME

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

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

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

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

Conclusion

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

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

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

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

Maryland House of Delegates hearing on HB 818 on Thursday, 

March 3, 2011 at 1:00 p.m, 

Government Operations Subcommittee, Rm 240, House Office Bldg.

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

Members Maryland Government Operations and Health Committee

Vermont Disclosure Law: Samples Added to Reporting Requirements and Re-Instates Allowing Coffee for Conference Participants

Last month, the Vermont Senate passed a major health care reform bill, which included provisions about disclosure and gifts from drug and device companies. The health care reform bill, S.88, which was strongly supported by a voice vote, contained specific provisions that amended Vermont's existing gift ban law, Vt. Stat. Ann. tit. 18, § 4631a ("§ 4631a"), and disclosure law, Vt. Stat. Ann. tit. 18, § 4632 ("§ 4632").

According to a recent article from the firm Epstein, Becker and Green, significant changes from S.B. 88 to these provisions “require 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." The first report is due by April 1, 2012, for the reporting period of January 1, 2011, through December 31, 2011.

"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.

Key Changes to § 4631a

Additional changes to § 4631 include a ban on manufacturers from providing "anything of value to a health care provider for free" unless the item is an "allowable expenditure" or otherwise permitted by § 4631a. S.B. 88 expands 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; and
• 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 amends several other key definitions in § 4631a 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."

Section 4631a has been amended by S.B. 88 to include several additional items that a manufacturer may provide to a health care provider. Specifically, manufacturers may provide the following:

• 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.

Key Changes to § 4632

Manufacturers will have to report annually to the Vermont Office of the Attorney General related to gifts and payments provided to health care providers. S.B. 88 amends § 4632 to exclude from reporting the following additional items provided by manufacturers to health care providers:

• 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.

Once this data is collected, the amended Section 4632 allows the Vermont Office of the Attorney General to contract with academic researchers to provide the reported data for analysis and aggregated public reporting. This data will not include the names or license numbers of individual recipients, and will not include information that allows for the identification of individual recipients or monetary value of the samples provided to a specific recipient.

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, then samples will not need to be reported under § 4632.

Impact of S.B. 88

The new reporting requirements under PPACA reporting provisions related to certain gifts, payments and samples provided to health care providers will pose significant burdens on company’s staff, time and resources. Also difficult for companies will be the need for them to coordinate and analyze for purposes of preemption of those reporting requirements with current state transparency laws as well as any laws that may emerge. Accordingly, as more states continue to enact their own transparency laws, companies will face significant challenges. In Vermont, for example:

• Manufacturers will have to update policies, procedures, systems and training to address the amended requirements of § 4631a and § 4632. For example, systems should be updated to distinguish between allowable expenditures and gifts provided to a hospital, which may be reportable, and those provided to a hospital foundation, which are not reportable.
• It is unclear whether gifts and payments to health care professionals that are licensed in Vermont but who do not "regularly practice" in the state will be reportable, since the term is undefined. Prior to S.B. 88's amendment, such expenditures were reportable.
• A determination for what is reportable may still be unclear and a determination will not be made until, or just shortly before, January 1, 2011—the same date that manufacturers must begin collecting such data.
• It is likely that manufacturers that provide coupons and/or vouchers will need to update policies, procedures and systems to track these items. Training regarding this tracking process also will need to be provided to field representatives and other relevant employees.
• Manufacturers should review and update contracts with vendors that distribute samples or adjudicate coupons and vouchers on behalf of the manufacturer to ensure that the manufacturer obtains the necessary information for reporting purposes in the form and format required by the manufacturer. The contract also should include the right to audit for compliance with these contractual obligations.
• Manufacturers should be aware that reported data related to samples may be made public. Although this data will not identify the individual recipient or indicate the monetary value of samples that any individual recipient receives, public data may include the quantity of samples, coupons and vouchers provided by a manufacturer for a specific product.
• Manufacturers should note that the failure to disclose the information required by § 4632 may result in civil penalties up to $10,000 per violation. Each failure to disclose constitutes a separate violation.

As 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, the goal of S.B. 88, to provide more transparency, will be burdensome for companies since provisions in PPACA cover almost all the same reporting requirements. At a time when companies should be investing in more technology, innovation, research and development and clinical trials to help prepare for the influx of 30 million people into our health care system, policymakers must work together with companies to achieve the best success at implementing reform.  

Many of the changes help to reduce the unforeseen consequences of the previous law (Signs on exhibit booths which read physicians from Vermont please don’t drink the coffee, only in Vermont would a state feel that they have the power to restrict consumption of water and coffee.  With the addition of reporting samples these additional requirements will be burdensome and already covered in the Sunshine Provisions of PPACA.

Accordingly, clarification from Congress is needed in a timely manner to address the implementation of the Sunshine Act and federal reporting requirements so that companies are not faced with spending significant resources, time and staff preparing state and federal reports that will be duplicative.