On Dec. 10, 2008, the Massachusetts Department of Public Health (the “Department”) released proposed regulations that would impose aggressive restrictions on pharmaceutical and medical device manufacturers’ sales and marketing activities that exceed similar restrictions in other jurisdictions.1 The proposed regulations—intended to implement section 14 of the Massachusetts Act to Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Health Care (the “Act”)2—would also require companies to file annual disclosures of all fees, payments and economic benefits paid to health care professionals that total $50 or more.  

If the Department finalizes these regulations as proposed, Massachusetts will join the ranks of seven other jurisdictions that have issued similar requirements. Currently, California and Nevada both require manufacturers to adhere to restrictions on marketing activities, and the District of Columbia, Maine, Minnesota, Vermont and West Virginia all mandate periodic disclosures of payments and other economic benefits to health care professionals. Massachusetts, however, will be the most aggressive of all jurisdictions in several regards. First, Massachusetts will be the only state to include both a marketing code of conduct that is specifically enumerated in detail in the regulations, and annual financial disclosure obligations. Other jurisdictions require adherence to a marketing code or disclosure, but not both. Second, Massachusetts will be the first state to require financial disclosure from medical device companies. Financial disclosure requirements in other states currently only apply to pharmaceutical companies. Third, Massachusetts will become the first state to require disclosure of free drug samples and the provision of medical equipment to health care providers for demonstration and evaluation purposes.  

Stakeholders interested in submitting comments to the proposed regulations can provide in-person testimony during one of two public hearings to be held Jan. 9, 2009 and Jan. 12, 2009 in Boston and Worcester, Mass., respectively. In addition, electronic testimony can be submitted to the Department’s Office of the General Counsel by 5 p.m. Jan. 19, 2009. Comments presented at the Department’s public hearings or electronically will be considered in developing final regulations as part of the state’s formal notice and comment process. Final regulations are expected to be released in February or March 2009.  

I. MARKETING CODE OF CONDUCT

A. Overview

As noted above, the proposed regulations contain a marketing code of conduct (“Marketing Code”)3 that would restrict the nature and extent of pharmaceutical and medical device companies’ interactions with health care practitioners in Massachusetts. Pursuant to the Act, the Department was charged with creating a Marketing Code that would be “no less restrictive than the most recent version[s]” of the PhRMA Code on Interactions with Healthcare Professionals (the “PhRMA Code”) and the AdvaMed Code of Ethics on Interactions with Health Care Professionals (the “AdvaMed Code”). In a memorandum summarizing the proposed regulations, the Department notes that despite this statutory mandate, it developed the Marketing Code with an eye toward accounting for differences between the drug and device industries. The Department has stated that its intent was to recognize the difference between the two industries and not to subject medical device manufacturers to standards absent from both the Act and the AdvaMed Code; however, it does not appear that the Department has harmonized the distinctions between the PhRMA and AdvaMed Codes in all instances.  

Several sections of the proposed Marketing Code do account for differences in the PhRMA and AdvaMed Codes. For example, the proposed Marketing Code would obligate pharmaceutical companies—not medical device companies—to separate continuing medical education (“CME”) grant-making functions from sales and marketing functions. This is a requirement of the revised PhRMA Code but not a requirement of the current AdvaMed Code. Further with respect to CME, pharmaceutical companies—not medical device companies—would be prohibited from providing advice or guidance to the CME provider on content or faculty selection, even if asked by the CME provider. Again, this is a requirement of the revised PhRMA Code but not the current AdvaMed Code.  

In other areas, the proposed Massachusetts Marketing Code attempts to account for differences in how the pharmaceutical and medical device industries do business. For example, the Act indicates that meals provided to health care practitioners would have to be furnished in either the office or hospital setting, and must be accompanied by informational presentations. This requirement aligns with recent revisions to the PhRMA Code, but it does not account for the fact that demonstrations or informational presentations by medical device companies may involve large, immobile equipment and may not be practical in the office or hospital setting. Accordingly, the Department would expand the definition of “hospital setting” to include both hospitals and academic medical centers, as well as pharmaceutical or medical device specialized training facilities designed to approximate the conditions of a surgical suite or clinical laboratory. This expansion of “hospital setting,” if proposed as finalized, would provide medical device companies additional flexibility to provide meals to health care professionals in conjunction with informational presentations not in the office or in an actual hospital setting.  

Other provisions of the proposed Marketing Code include the following:  

  • No Kickbacks. Grants, scholarships, subsidies, consulting arrangements, or other items of value could not be furnished to health care practitioners in exchange for prescribing, disbursing, or using prescription drugs, biologics or medical devices, or for a commitment to continue doing so in the future.
  • Meals. Meals would have to be modest and occasional, provided in connection with an informational presentation and provided in the health care professional’s office or in the hospital setting. (As noted above, the term “hospital setting” would be expanded to include a company’s specialized training facility.)
  • Entertainment. Entertainment or recreational items of any value (e.g., theater tickets, sports equipment, trips, etc.) would be strictly prohibited.
  • Reminder Items. “Complimentary” items such as pens, coffee mugs, gift cards or calendars would be generally prohibited.
  • CME. Funding for CME could only be provided for events that meet the Standards for Commercial Support of the Accreditation Council for CME (“ACCME”) or equivalent standards. Further, a company could not pay for the cost of travel, lodging, attendance or other personal expenses of non-faculty health care professionals, nor could a company make direct payments for meals at a CME event.
  • Consulting Arrangements. Companies could continue to pay reasonable compensation for bona fide consulting services. Consulting arrangements would have to be specified in written agreements, and there would have to be an identified, legitimate need for the consulting services, among other requirements.
  • Training Expenses. Medical device manufacturers could reimburse health care professionals for reasonable expenses necessary for technical training on a medical device, so long as the terms of the reimbursement were subject to a written purchase agreement for the device.
  • Price Concessions. Price concessions, such as discounts and rebates, would be permissible.
  • Reimbursement Assistance. Companies could provide technical assistance concerning reimbursement information (e.g., identifying appropriate coverage, coding, or billing information).  

A chart attached to the end of this Client Alert provides an expanded and detailed summary of the proposed Marketing Code.  

B. Application

The Marketing Code as proposed would apply to any “pharmaceutical or medical device manufacturing company” that “employs a person to sell or market prescription drugs, biologics or medical devices” in Massachusetts. A “pharmaceutical or medical device manufacturing company” is defined as any entity that:  

  • Participates in a “commonwealth health care program”4 and is engaged in the production, preparation, propagation, compounding, conversion or processing of prescription drugs, biologics or medical devices; or drugs, biologics or medical devices.5
  • Is engaged in the packaging, repackaging, labeling, relabeling or distribution of prescription ??drugs, biologics or medical devices.5

Accordingly, to the extent that a company fits within this definition and also engaged a person to sell or market a product in Massachusetts (e.g., sales representatives or other agents who promoted or otherwise attempted to market or sell the product), the company would be required to comply with the Marketing Code.  

Companies subject to the Marketing Code would also be required to implement a training program on the Marketing Code. Specifically, the proposed regulations would require each company to which the Marketing Code applied to ensure that all representatives who “visit” health care professionals had “sufficient knowledge” of the Marketing Code, “general science” and product-specific information. In other words, a sales representative should be able to provide health care professionals with the most accurate, up-to-date information on the product he or she was selling. Further, any such training program would be required to include regular assessments of employees or agents to ensure that they complied with the Marketing Code and with internal company policies.6  

C. Key Dates for Adopting the Marketing Code

By July 1, 2009, the proposed Massachusetts regulations would require pharmaceutical and medical device manufacturers to:  

  • Adopt and comply with the Marketing Code; ??  
  • Adopt and submit to the Department a description of its training program; ??  
  • Certify compliance with the Marketing Code; ??  
  • Adopt and submit to the Department policies and procedures for investigating non-compliance, taking corrective action in response to non-compliance, and reporting instances of non-compliance to appropriate state authorities; and  
  • Submit to the Department the name, title, address, telephone number and e-mail address of the compliance officer responsible for operating, monitoring, and enforcing the Marketing Code of Conduct.7  

On or before July 1, 2010—and on or before July 1 of each year thereafter—a company would also be required under the proposed regulations to certify that it had completed an annual audit of compliance with the Marketing Code.  

II. FINANCIAL DISCLOSURE REQUIREMENTS

A. Overview  

In addition to the marketing restrictions described above, the proposed regulations would require pharmaceutical and medical device companies to file annual reports disclosing all payments or items of value worth $50 or more provided to health care practitioners. More specifically, any pharmaceutical or medical device manufacturing company that employed a person to sell or market a drug or device in Massachusetts would be required to submit an annual report (on a standardized form developed by the Department) detailing:  

  • The value, nature, purpose and particular recipient of ??  
  • Any fee, payment, subsidy or other economic benefit with a value of at least $50??  
  • Paid directly or through its agents??  
  • To any “covered recipient” (any person in Massachusetts authorized to prescribe, dispense, or purchase prescription drugs or medical devices, including physicians, hospitals, nursing homes, pharmacists, health benefit plan administrators, wholesalers or “health care practitioners”)9  
  • In connection with the company’s “sales and marketing activities.”??10  

Whether a payment would be disclosable, therefore, would turn in part on whether it had been made in connection with “sales and marketing activities.” This term, however, would be defined very broadly to include:  

  • Advertising, promotion or other activities intended to influence sales or market share; to influence or evaluate the prescribing behavior of an individual health care professional; or to evaluate the effectiveness of a company’s detailing sales force  
  • Product education and training
  • The provision of any fee, payment, subsidy or other economic benefit with a value of at least $50 ??for any purpose (other than compensation for professional or consulting services in connection with a genuine research project or clinical trial)11  

In guidance documents posted to its website, the Department further states that the term would include advertisements, sales pitches, customer satisfaction studies and promotional messages for communication to both consumers and health care professionals. The Department also specifies that the term would be intended to include product samples, demonstration units, rebates, discounts, royalties, and licensing fees.12  

In short, therefore, the Department’s financial disclosure requirements would be the most sweeping state disclosure requirements in the country. The proposed financial disclosure requirements, in essence, mandate reporting of all payments of $50 or more in any form to any Massachusetts health care provider with only one exception—payments for consulting services in connection with research or clinical trials. This would include reporting free samples and product evaluation units. In addition, although not explicit in the regulations, the Department’s public website states that discounts and rebates offered on products would also need to be disclosed.13 Other jurisdictions’ disclosure obligations contain at least a handful of exceptions (e.g., scholarships to attend medical conferences, free samples, drug rebates and discounts, etc.). None of these exceptions is listed in either the Act or the proposed regulations.  

Further as to the sweeping nature of the Department’s financial disclosure requirements, the Act indicates that the Department will post on its website all data disclosed by pharmaceutical and medical device companies. According to guidance documents posted to the Department’s website, this would include identifying the particular recipient of any economic benefit or payment from a company.14  

B. Filings

Under the proposed regulations, companies would be required to start tracking payments to health care practitioners July 1, 2009. The proposed regulations would require companies to file the first annual disclosure reports on or before July 1, 2010. The 2010 disclosure report would cover the period of July 1, 2009 through Dec. 31, 2009. Starting July 1, 2011, annual disclosures would cover the previous calendar year (Jan. 1-Dec. 31, 2010). Reports would be filed on a form to be developed by the state, by a $2,000 filing fee, and a certification as to the truth and accuracy of the report.15  

III. PENALTIES

Under the proposed regulations, any violation of the Marketing Code or the financial disclosure requirements would be punishable by a fine of $5,000 for each transaction, occurrence or event. The penalties section of the proposed regulations is also clear that pharmaceutical and medical device companies would be subject to a duty of good faith compliance and, further, that companies could not retaliate in any way against an employee, agent or HCP who has “taken any action in furtherance of enforcement” of the regulations.16  

IV. CONCLUSION

The proposed Massachusetts regulations signify a new trend in state compliance obligations. As noted above, once it finalizes its regulations, Massachusetts will become the eighth jurisdiction in the United States to mandate some type of restrictions on pharmaceutical and medical device companies’ sales and marketing activities and/or some form of financial disclosure. With several other states also considering similar legislation, it is unclear whether the unique nature of the Massachusetts regulatory scheme—i.e., dual marketing and reporting requirements—will become the model for future state laws in this area. The future of federal legislation proposed by Sen. Charles Grassley (R-Iowa) that would require drug and device companies to disclose financial relationships with health care professionals is also unclear, including whether or to what extent such legislation would preempt the various state reporting requirements. If so, this could serve to create a uniform, national approach to both tracking and reporting these payments. Finally, with the impending release of a revised AdvaMed Code, it is also unclear whether Massachusetts will continue to refine its Marketing Code and its financial disclosure requirements.  

Regardless, restrictions on sales and marketing activity have become a reality for the pharmaceutical and medical device industries, and tracking payments to health care professionals is becoming the norm. Companies should consider taking steps now to ensure that they will be able to comply with any final regulations, specifically requirements to track payments to health care professionals in both Massachusetts and elsewhere.

Please click here to view Summary of the Proposed Massachusetts Marketing Code