Regulatory Viewpoint

The statute states that its compliance requirements are applicable to medical device and pharmaceutical manufacturers that participate in a Massachusetts healthcare program (such as the Massachusetts Medicaid program) and employ a person to sell or market a drug or device in Massachusetts. However, the department did not include the first statutory prong requiring participation in a commonwealth healthcare program in its final regulations due to difficulty in defining that term.

Thus, given the regulatory omission of the first prong, any medical device or pharmaceutical manufacturer that merely employs or contracts with a person to sell or market a drug or device within Massachusetts is subject to the new requirements.

Further, in a blow to the medical device industry, the department broadened the statutory definition of “pharmaceutical and medical device manufacturing company” to include medical device distributors.
The statute’s definition of the term was limited to pharmaceutical drug distributors. The final regulations, however, explicitly include medical device distributors in the definition of “pharmaceutical and medical device manufacturing company.” The department explained that the statute’s lack of reference to medical device distributors was a “mere oversight” and that the law is generally intended to treat medical device and pharmaceutical manufacturers equally.

The final regulations require medical device and pharmaceutical manufacturers to adopt a marketing code of conduct that is consistent with the requirements and limitations set forth in the final regulations. Although not explicitly referenced in the final regulations, the statute requires that the marketing code of conduct provisions promulgated by the department be no less restrictive than the codes set forth by the Pharmaceutical Research and Manufacturers of America as well as the Advanced Medical Technology Association. Key marketing code of conduct provisions of the final regulations are set forth below.

1. Meals

The final regulations impose the following requirements and limitations related to meals provided to Massachusetts healthcare practitioners:

• Meals may not be provided or paid for if part of an entertainment or recreational event.

• Meals may not be offered without an information presentation made by a medical device marketing agent or without such an agent being present.

• Meals may not be offered, consumed or provided outside of the healthcare practitioner’s office or a hospital setting.

• Meals may not be provided to a healthcare practitioner’s spouse or other guest.

Furthermore, the final regulations specify that all meals must be “modest and occasional in nature.”

The final regulations prohibit medical device companies that sponsor CME, third party scientific or educational conferences and professional meetings from engaging in the following activities:

• Providing financial support for the costs of travel, lodging or other personal expenses of non-faculty healthcare practitioners attending any such event, either directly to the individuals participating in the event or indirectly to the event’s sponsor

• Providing funding to compensate for the time spent by healthcare practitioners participating at such events

• Providing payment for meals directly to a healthcare practitioner at such events, although a CME provider or conference or meeting organizer may, at its own discretion, apply any financial support provided by a medical device company for the event to provide meals for all participants

• Sponsoring or paying for CME that does not meet the Standards For Commercial Support as established by the Accreditation Council for Contin-uing Medical Education or equivalent commercial support standards of the relevant continuing education accrediting body

The final regulations set forth certain limited exceptions to the rules above, among which is an exception for payments made by the medical device company directly to the conference or meeting organizers.

3. Other Prohibited Payments

In addition to restrictions on meals and CME and related activities, the department also prohibits the following payments and activities:

• Entertainment or recreational items of any value, unless the healthcare practitioner is a salaried employee of the company

• Payments of any kind (including cash or cash equivalents, equity, “in kind,” or tangible “reminder” items) to healthcare practitioners, unless the payment represents compensation for “bona fide services”

• Any payments (including grants, scholarships, subsidies, supports, consulting contracts, or educational or practice-related items) in exchange for prescribing, disbursing, or using a company’s products or for a commitment to continue prescribing, disbursing, or using a company’s products

• Any other payment or remuneration that is prohibited under the Federal Anti-Kickback Statute or any similar Massachusetts anti-kickback laws

• Reasonable compensation and reimbursement of expenses for bona fide services, where such payments are set forth in or provided under a written agreement

• Reasonable reimbursement or payment for expenses necessary for technical training of healthcare practitioners on the use of a medical device so long as a written agreement is in place between the device company and the healthcare practitioner for the purchase of the device

• The provision of reasonable quantities of medical device demonstration and evaluation units to assess the appropriate use and functionality of the product and determine whether to use or recommend the device prospectively

• The dissemination of peer-review-ed academic, scientific or clinical articles

• Price concessions, such as rebates or discounts, “in the normal course

of business”

• The provision of information regarding product reimbursement or technical or other support intended to assist with product installation so long as the provision of such information does not run afoul of anti-kickback laws

• The provision of charitable donations that meet certain requirements specified in the final regulations

Additional exceptions are set forth in the final regulations

Medical device companies subject to the Massachusetts requirements must adopt and submit to the department a training program that is provided to “appropriate employees including, without limitation, all sales and marketing staff…” The training must ensure that personnel who act on behalf of the company and who visit health care practitioners have sufficient knowledge of (the marketing code of conduct, general science, and product-specific information to provide “accurate, up-to-date information consistent with the state law and FDA requirements.” These same individuals must also undergo regular assessments to ensure that they are in compliance with the marketing code of conduct and other relevant company policies.

Beginning July 1, companies subject to the law also must annually certify compliance with the Massachusetts final regulations (including the marketing code of conduct and the payment disclosure requirement discussed below) as well as adopt and submit to the department policies and procedures for investigating instances of non-compliance, taking corrective action in response to non-compliance, and reporting instances of non-compliance to the appropriate state authorities. Furthermore, beginning July 1, 2010, a company covered by the Massachusetts law must certify to the department that it has conducted an annual audit to monitor compliance with the final regulations.

A first of its kind for medical device companies, the Massachusetts law and final regulations require companies subject to the law to make annual disclosures of any fee, payment or other economic benefit with a value of at least $50 made to a “covered recipient” in connection with the company’s “sales and marketing activities.” The final regulations explicitly state that the $50 payment rule applies to separate events or transactions and does not require the aggregation of payments of less than $50 to the same health care practitioner.

The first report is due July 1, 2010, and must cover payments made between July 1 and Dec. 31, 2009. Thereafter, reports shall be due annually on July 1 and cover the prior calendar year.

The department will provide a reporting form and an electronic submission mechanism. Each annual submission must be accompanied by a $2,000 fee (with the first fee due on July 1, 2009, even though the first payment report is due one year from that date). The department explicitly rejected the request of some small medical device manufacturers to provide a “sliding scale” for the annual fee based on a company’s size.

Significantly, the annual payment report also must be accompanied by a certification that the report is true and accurate to the best of the company’s knowledge.

The statute specifies that all data disclosed to the department will be made publicly available on the de-partment’s Web site in an easy-to-search format.

The department, in turn, must report to the Massachusetts Attorney General any payment, entertainment, meals, travel, honorarium, subscription, advance, services, or anything of value provided in violation of the marketing code of conduct.

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Medical device companies that conduct sales and marketing activities in Massachusetts should consider whether it will be necessary to upgrade existing compliance systems to satisfy the marketing code of conduct and reporting requirements in a timely and accurate fashion.

In particular, companies may wish to consider conducting a gap analysis of existing policies and procedures in light of the code of conduct requirements as well as consider how to report relevant payments to the department in a systematic and accurate manner.

Companies also will need to continue to monitor developments on the federal legislative front, as it is very possible that the proposed federal disclosure law—commonly referred to as the Sunshine Act—will be enacted, at least in some form, later this year. There also are bills that have been pending in other states relating to medical device reporting and transparency. Close coordination with legal, compliance and IT departments will be necessary to ensure compliance with any federal and state law developments.