J. Mark Waxman Lawrence Vernaglia January 28, 2009

Massachusetts Legislation Concerning Proposed Pharmaceutical Gift Ban – Implications for Pharmaceutical, Biotech and Medical Device Manufacturers J. Mark Waxman Lawrence Vernaglia January 28, 2009

The Program • Introduction • The Background to the New Law – G.L. Ch.. 111N (S.2863) • Effective Dates and Implementation • Coverage and Definitions • The Key Provisions • The Proposed Regulations – December 11, 2008 • A Comparison with the Industry and Academic Guidelines • PhRMA • AdvaMed • Academia: AAMC and Stanford • The AMA

The Program • How does G.L. 111N Compare to other State Laws? • Vermont • California • Minnesota • The Federal Level: The Physician Payments Sunshine Act – Possible Pre-Emption • What’s Next?

Learning Objectives 1. Understand Massachusetts “gift ban” law and proposed regulations 2. Learn to follow the guidelines for hospitals, physicians, and other providers in dealing with PMDMC industry, sponsored CME and marketing efforts 3. Anticipate what will be expected in terms of compliance, and public disclosure requirements

The New Law • The Background • Large Pharma and Device Settlements • False Claims Act Recoveries • Off-Label Marketing Schemes • Kick-Back Claims • Adverse Publicity and Public Suspicions • Conflicts of Interest • Over prescribing and over utilization • JAMA Articles • Industry’s and Academia’s Own Positive Changes • PhRMA • AdvaMed • ACCME • Academia • Congressional Interest, Inquiries And Interactions

Effective Dates and Steps to implementation • “An Act to Promote Cost Containment, Transparency, and Efficiency in the Delivery of Quality Health Care,” Chapter 305 of the Acts of 2008 • Sen. No. 2863, Signed by Gov. Patrick on Aug. 10, 2008 • Comprehensive health legislative package • Creates G.L. 111N • Effective January 1, 2009

Effective Dates and Steps to implementation (cont.) • Proposed regulations published December 11, 2008 • Public hearings in Boston (1/9/09) and Worcester (1/12/09) • MA DPH informal guidance: no entity will be subject to sanction until regulations are final • Covered Companies must adopt and comply with Codes of Conduct and certify by July 1, 2009 • Disclosure reports July 1, 2010

Coverage and Definitions • Applies to practices conducted in Mass – regardless where manufacturer is headquartered. • “Participates in a Commonwealth Health Care Program” (Prop. Reg. has def’s) • Regulates marketing practices that are not otherwise illegal and adds in the Federal AKS (Prop. Reg. 105 CMR 970.008). • Requires disclosure of confidential business information. • Establishes reporting regime. • Mandates compliance programs. • Limitations on continuing education and other academic/professional presentations. • Financial penalties.

Coverage and Definitions Applicable to: • “Pharmaceutical or medical device manufacturing company” (PMDMCs) • What’s a medical device? • Biologics included • PMDMC “agents” • PMDMC “marketers”

Participating in a Commonwealth HealthCare Program • Does business with a State program • Directly or indirectly • Prop. Reg: Includes: MassHealth, GIC, Mass. State Employees Retirement Bd., and UMASS Correctional Health or the contractual medical provider for the Dept. of Corrections. • What’s left out? • Medicare • Private health plan efforts • Still unclear about what “indirectly.”

Coverage and Definitions Applicable to: • Physicians and other prescribers • Hospitals, nursing homes, pharmacists, and health benefit plan administrators.

Mandatory marketing code of conduct • Mass. DPH was to adopt • “based on” “applicable legal standards and incorporate principles of health care” • Shall be “no less restrictive” than PhRMA and AdvaMed Codes. • But as proposed, little reliance on PhaRMA or AdvaMed Codes

Mandatory marketing code of conduct Code “shall not allow” (Prop. Reg. 105 CMR 970.006) • Payment for meals for practitioners that are (a) part of entertainment or recreational event; (b) offered without an informational presentation made by “pharmaceutical marketing agent” or without the agent being present; (c) outside health care practitioner’s office or hospital setting; or (d) provided to practitioner’s spouse or other guest; • Hospital setting (under Prop. Regs.) includes specialized training facility • Certified to DPH • To approximate actual conditions

Mandatory marketing code of conduct Code “shall not allow” • Entertainment or recreational items of any value (e.g. tickets to theater/sporting events, sporting equipment, or leisure or vacation trips) to any health care practitioner who is not a salaried employee of the company; • Sponsorship or payment for CME that doesn’t meet ACCME Standards For Commercial Support, or directly to a health care practitioner (Prop. Reg. 105 CMR 970.007)

Mandatory marketing code of conduct Code “shall not allow” • Cost of travel, lodging, other personal expenses of non-faculty practitioners attending CME, third-party scientific or educational conference, or professional meetings, directly “or indirectly to the event’s sponsor” • funding to compensate for the time of practitioners participating in CME, third-party scientific or educational conferences, or professional mtg

Mandatory marketing code of conduct Code “shall not allow” • Payment for meals directly at CME, third-party scientific or educational conferences, or professional meetings • Exception: Meals for all participants from financial support to CME provider or organizer (Prop. Reg. 105 CMR 970.007(1)(c)) • payments in cash or cash equivalents to practitioners “either directly or indirectly, except as compensation for bona fideservices” • Ban extends to “complimentary items” (Prop. Reg. 105 CMR 970.008(1)(6))

Mandatory marketing code of conduct Prop. Reg. includes broad limitation: Code “shall not allow” • “payments of any kind including cash or cash equivalents, equity, “in kind” or tangible items including any “complimentary” items such as pens, coffee mugs, gift cards, etc. to health care practitioners either directly or indirectly, except as compensation for bona fide services” (Prop. Reg. 105 CMR 970.008(1)(b))

Mandatory marketing code of conduct “Bona fide services”? (cont.) • consulting services, research, participation on advisory boards, collaboration with 501(c)(3) organizations dedicated to the promotion of health and the prevention of disease, presentations at company-sponsored training including U.S. Food and Drug Administration (“FDA”) required education and training involved in producing safe and effective medical devices, • Expressly includes “licensing IP” in a written agreement based on FMV. (Prop. Reg. 105 CMR 970 CMR 970.004 ¶2)

Mandatory marketing code of conduct “Bona fide services”? (cont.) Requires specific written agreement with FMV characterized by: • legitimate need for the consulting service; • connection between the competence/expertise of consultant and purpose of arrangement; • number of healthcare professionals retained not greater than reasonably necessary; • maintains records concerning arrangement; • makes appropriate use of services provided by consultants; and • Venue/circumstances of meeting with consultants conducive to consulting services and activities related to services are primary focus of the meeting. (Prop. Reg. 105 CMR 970 CMR 970.004 ¶2)

Mandatory marketing code of conduct Code “shall not allow” • grants, scholarships, subsidies, support, consulting contracts, or educational or practice related items to practitioner • in exchange for prescribing prescription drugs, biologics or medical devices • or using medical devices or commitment to continue prescribing or using • Acts prohibited by Federal AKS (42 U.S.C. §1320a-7b)

Mandatory marketing code of conduct Code “shall allow” • the provision, distribution, dissemination or receipt of peer reviewed academic, scientific or clinical information • Advertising in journals • Prescription drug samples for patients • Comp for “substantial professional or consulting services” of practitioner in connection with genuine research project or clinical trial (written agreement required. Prop. Reg. 105 CMR 970.008(2)) • “Genuine Research Project” – Generalizable knowledge, freely published results of significant interest or value • IRB approval not required unless applicable clinical trial

Mandatory marketing code of conduct Code “shall allow” • Reasonable expenses for technical training on medical device if part of vendor’s purchase contract for device. • Price concessions such as rebates or discounts in the ordinary course of business (Prop. Reg. 105 CMR 970.008(2) • Provision of reimbursement information • Drugs in qualifying patient assistance programs (OIG Advisory Opinion No. 06-03)

Pharm Data Confidentiality Rule(Prop. Reg. 105 CMR 970.005(2)) • Pharmaceutical co. that uses “non-patient identified prescriber data” [no def.] • to “facilitate communications” with health care practitioners must: a. maintain data as confidential; b. develop policies regarding data use; c. educate employees and agents about policies; d. maintain internal contact person to handle inquiries; e. identify disciplinary actions for misuse; and f. comply with practitioner requests not to make prescriber data available to sales reps.

Pharm Conflict of Interest Rule (Prop. Reg. 105 CMR 970.005(3)) • Pharm co’s must require health care practitioner who is: • member of committee that sets formularies or develops clinical guidelines and also • serves as speaker or commercial consultant for the company • to disclose to committee the nature and existence of relationship. • Continue for at least two years beyond term of speaker/consultant deal.

Mandatory Compliance Program PMDMC that employs a person to sell or market in MA must: • Adopt/comply with the Code • Training program for all sales and marketing staff on (w/o lim) the Code • Annual audits to monitor compliance with the Code • Adopt policies/procedures for investigating noncompliance with Code; take corrective action • Mandatory reporting of noncompliance to “the appropriate state authorities” • Identify compliance officer for operating and monitoring the Code

Section 5 Reports (Structural) PMDMC that employs a person to sell/market “prescription drugs or medical devices” in MA annually submit to DPH: • Description of its training program • Description of its investigation policies • Compliance officer contact info • Certification that it has conducted its annual audit and is in compliance with the marketing code of conduct.

Section 6 Reports (Substantive) • PMDMC that employs person to sell/market “drug, medicine, chemical, device or appliance” in Mass shall disclose to DPH: • the value, • nature, • purpose and • particular recipient • of any fee, payment, subsidy or other economic benefit with a value of at least $50, which the company provides, directly or through its agents, • to any physician, hospital, nursing home, pharmacist, health benefit plan administrator, health care practitioner or other person in the commonwealth authorized to prescribe, dispense, or purchase prescription drugs or medical devices in the commonwealth.

Disclosure of Fees - Proposed Regulatory Limitations • Proposed Reg adds new limitation: “in connection with the company’s sales and marketing activities.” • Important limitation for many “covered recipients,” like hospitals (Prop. Reg. 105 CMR 970.004 ¶21)

Disclosure of Fees - Proposed Regulatory Limitations (cont.) “in connection with the company’s sales and marketing activities” also includes as def: Any fee, payment, subsidy or other economic benefit ($50+) to practitionerfor any purpose other than“reasonable compensation for substantial professional or consulting services in connection with a genuine research project or clinical trial.” (Prop. Reg. 105 CMR 970.004 ¶21) • An important interpretation for protecting research and clinical trial information. • At 1/9/09 DPH hearing, Sen’s Montigny and Moore spoke in opposition to this interpretation.

Disclosure of Fees - Proposed Regulatory Limitations (cont.) to practitionerfor any purpose other than“reasonable compensation for substantial professional or consulting services in connection with a genuine research project or clinical trial.” (Prop. Reg. 105 CMR 970.004 ¶21) • Note that def of “clinical trial” requires (1) human subjects and (2) FDA or IRB approval. • Unclear of broader def of “genuine research project” can encompass animal studies, early-stage work and collaborations.

Section 6 Reports (Substantive) • “All disclosed data” (likely from Section 6 Reports not Section 5 Reports) • publicly available and • easily searchable on its website. • DPH has not provided further detail on website content or search capacity.

Enforcement • No PMDMC or agent may “knowingly and willfully” violate the Code. • $5,000 fine for each transaction, occurrence or event in viol of Ch. 111N • Collateral consequences of violations? • Enforced by DPH, AG, DAs • DPH to report to AG any payment, entertainment, meals, travel, honorarium, subscription, advance, services or anything of value provided in violation of the market [sic.] code of conduct. • DPH Prop. Reg.: no PMDMC or other person may retaliate

Areas of uncertainty • Who’s really covered? • Different sections of 111N apply to different types of industry players • Application to multi-corporate entities? • Separate R&D vs. sales entities • Marketer “or any other person” . . . • DPH Proposed Regs perpetuate confusing dual status • “Participates in a Commonwealth health care program” still imprecise, regs only name the programs. • Medical Device Companies • Software?

Areas of uncertainty • What types of sponsorships are acceptable in Mass? • Conference where meals/reception paid for by other vendors? • What about ed programs that can’t be done in the office/hospital? (medical device training facilities – Philips, Hologic, Smith & Nephew Endo) • Addressed in the Proposed Regs.

Areas of uncertainty • Proposed Reg limitation on disclosable fees: “in connection with the company’s sales and marketing activities” • Does definition swallow itself? Or can you harmonize? • Purchase of assets • Prop. Reg. “licensing” of IP

Areas of uncertainty • Rebates and discounts • Prop. Reg. distinguishes from impermissible payments, maybe also from disclosable fees. Could be interpreted to exclude. • FAQs and public statements disagree. • What activities outside of Massachusetts are covered?

Areas of uncertainty • How do you estimate the value of a product sample, when PDMA prohibits sale? Is it a value to the HCP? Is the value Zero? • How do you value/report value of an evaluation unit if never purchased?

Areas of uncertainty • Travel and lodging for bona fide employees or consultants? • What is minimum level of detail in Section 6 Reports? • What protections for trade secrets other confidential information? (Prop. Reg. approach)

How does it stand up to other laws and policies? • PhRMA • AdvaMed – Announced update December 18, 2008 • Academia • The States • Vermont • California • Minnesota

PhRMA-Pharmaceutical Research and Manufacturers of America • Code of Interactions with HealthCare Professionals • Updated Code takes effect January, 2009 • The operative principle: “...a healthcare professional’s care of patients should be based, and should be perceived as being based, solely as each patient’s medical needs and the healthcare professional’s medical knowledge and experience.”

Key Provisions • Informational Presentations • Prohibition on Entertainment and Recreation • Support of CME • Consultants • Speaker Programs and Training Meetings • Formulary or Clinical Practice Guideline Committees • Scholarships and Educational Funds • Prohibition on Non-Educational and Practice-Related Items • Educational Items • Prescriber Data • Independence and Decision Making • Training and Conduct of Company Representatives

PhRMA vs. Mass. Law • Meals • Sponsorship of programs not meeting ACCME standards

AdvaMed-Advanced Medical Technology Association • Code of Ethics Adopted effective January 1, 2004 • Added FAQ’s: April 15, 2005 • “[T]o facilitate Members’ ethical interactions with those individuals or entities that purchase, lease, recommend use, arrange for purchase or lease of, or prescribe Members’ medical technology products in the United States.” • New Update effective July 1, 2009

Areas Covered - • Member-Sponsored Product Training and Education • Supporting Third party Educational Conferences • Sales and Promotional Meetings • Arrangements With Consultants • Gifts • Provision of Reimbursement and Other Economic Information • Grants and Other Charitable Donations

AdvaMed’s revised Code (12/18/08) • Voluntary listing of companies that certify their adoption of AdvaMed Code. • Prohibition on Entertainment and Recreation to non-employed HCPs. • Prohibition on gifts, including all non-educational branded promotional items (even of minimal value). • Allow royalty arrangements for substantial contributions that improve medical technologies. • Evaluation and Demonstration Products may provide no-charge products to educate HCPs and patients on new/improved medical technologies. • Provision of objective reimbursement, coverage and health economics information to HCPs. • Updates on consulting agreements, company-conducted training and education, and research and educational grants.

AdvaMed vs. Mass. Law • “Healthcare practitioner”(§1) vs. “Healthcare professionals” (FAQ 2) • “recommend” • “arrange” for purchase or lease • Gifts • Reimbursement Support Programs • No Mass. Law analogy

ACCME • Standards for Commercial Support • Tools for Implementation • Implementation Tools • Accreditation Policies • Essential Areas and Their Elements

The Standards • Independence • Resolution of Personal Conflicts of Interest • Appropriate Use of Commercial Support • Appropriate Management of Associated Commercial Promotion • Content and Format Without Commercial Bias • Disclosure Relevant To Potential Commercial Bias

Academia • The AAMC Report: Report of the AAMC Task Force On Industry Funding of Medical Education (June, 2008) • Focus on industry funding of education • Addresses the broad spectrum of service providers • Focus on self-regulation and staged approach to manage, or when appropriate, prohibit academic-industry interaction

Academia • Recommendations • Gifts to individuals • Central management • “Alternative ways” to manage sample distribution to protect professionalism • Site access by Pharmaceutical/Device Reps • Restricted to non-patient care and non-public • By appointment or invitation only • Not present during patient care without consent • Student interaction under faculty supervision

J. Mark Waxman Lawrence Vernaglia January 28, 2009