Beginning July 1, 2009, pharmaceutical and medical device companies selling or marketing prescription drugs or medical devices to healthcare professionals licensed by the Commonwealth of Massachusetts must comply with the most stringent set of compliance-based, state-level laws to date, including a state-authored code of conduct. The regulations operate in three primary areas: establishing a code of conduct for product marketing by pharmaceutical and medical device companies; requiring these companies to train their employees regarding the regulations, to identify a compliance officer to the Commonwealth, and to report information to the Department of Public Health; and requiring company disclosure of financial interactions between the companies and certain healthcare providers.

The regulations were developed pursuant to Chapter 111N, a component of Chapter 305, an Act to Promote Cost Containment, Transparency and Efficacy in the Delivery of Quality Healthcare, which was signed into law by Gov. Deval Patrick in August 2008 and became effective January 1, 2009. Since August 2008, the Massachusetts Department of Public Health has been working on implementing regulations, which has included seeking comments and feedback from the public and industry on proposed regulations.

Massachusetts received comments on the draft regulations from a host of interests, including consumer advocacy groups, individual consumers, healthcare professionals, industry trade groups, charitable organizations, and pharmacy benefit managers and purchasers of drugs, devices, and biologics. While the final regulations were scaled back to accommodate some positions put forth by these groups, the final requirements remain stringent.

In promulgating these rules, Massachusetts joins six other states and the District of Columbia in establishing obligations surrounding the marketing activities of pharmaceutical and/or medical device companies. California and Nevada mandate certain compliance requirements for both industries, but without disclosure obligations for medical device companies. Minnesota has prescribed government and public disclosure requirements for the pharmaceutical companies. Maine, Vermont, West Virginia, and the District of Columbia have also mandated disclosure to the government of certain information, although the requirements only affect the pharmaceutical industry. However, Massachusetts openly acknowledges that it believes its regulations are the strongest and most comprehensive in the nation to date, stating, “Massachusetts is the only state to require financial reporting by both pharmaceutical and medical device companies and to establish a state-authored marketing code of conduct restricting certain payment to healthcare practitioners.”

As provided in the final regulations, the intent of the regulations regarding “Pharmaceutical and Medical Device Manufacturer Conduct,” (105 CMR 970.000) is “to benefit patients, enhance the practice of medicine, and ensure that the relationship between pharmaceutical or medical device manufacturers and healthcare practitioners not interfere with the independent judgment of healthcare practitioners.” To that end, by July 1, a company covered by the regulations must adopt a marketing code of conduct consistent with standards established by Massachusetts, adopt and provide to the Commonwealth a description of the company’s training program for educating sales and marketing staff about the code of conduct, certify to the Department of Public Health that the company complies with the Massachusetts code of conduct regulations to the best of the company’s knowledge, information, and belief, adopt and provide to the Commonwealth a copy of the company’s policies and procedures for investigating, correcting, and reporting on non-compliance with the code of conduct, and identify a compliance officer to the Department. The company must also certify to the Department that it has conducted annual audits to monitor compliance with the required code of conduct annually starting July 1, 2010.

Pharmaceutical and medical device companies that employ or contract with a “pharmaceutical or medical device manufacturing agent” to sell or market prescription drugs or medical devices in the Commonwealth of Massachusetts to Massachusetts-licensed healthcare practitioners are subject to the regulations and must conform to the code of conduct requirements. A pharmaceutical or medical device manufacturing agent is defined as an employee or agent who “engages in detailing, promotional activities or other marketing of prescription drugs, biologics, or medical devices in the commonwealth to any physician, hospital, nursing home, pharmacist, health benefits plan administrator, other healthcare practitioner or person authorized to prescribe, dispense or purchase prescription drugs, biologics or medical devices.”

The marketing code of conduct sets forth the minimum standards for interactions between the industries of interest and healthcare providers, a term that specifically excludes hospitals and both full-time employees and individuals serving as board members of pharmaceutical or medical device manufacturers.

While the Massachusetts code of conduct incorporates parts of the voluntary codes established by pharmaceutical and medical device industry groups – the Pharmaceutical Research and Manufacturers of America (PhRMA) Code on Interactions with Healthcare Professionals and the Advanced Medical Technology Association (AdvaMed) Code of Ethics on Interactions with Healthcare Professionals, respectively – the regulations contain additional restrictions on interactions, including bans on some activities and limitations on others. In general, the code of conduct prohibits the pro-vision of entertainment or recreation activities and complimentary items by members of the industries to healthcare professionals, and places strict limitations on meals provided by industry to healthcare professionals licensed by Massachusetts. Notably:

Meals: Companies may not provide or pay for meals for healthcare professionals: that are part of an entertainment or recreational event; that are not accompanied by an information presentation by the pharmaceutical or medical device company’s agent; that are not conducted in the practitioner’s office or a hospital setting, which includes hospitals, academic medical centers, or pharmaceutical or medical device company training facilities; and that include a healthcare practitioner’s spouse or other guest. In addition, any meals must be modest and occasional in nature.

Entertainment and Recreation: Companies are prohibited from providing entertainment or recreational items of any value to any healthcare practitioner who is not also a salaried employee of that company.

Complimentary Items: Companies are prohibited from providing healthcare practitioners, either directly or indirectly, with any kind of payment, including cash or cash equivalents, equity, or tangible items, including “complimentary” items (e.g., pens, coffee mugs, gift cards), except where such payment is compensation for bona fide services. “Bona fide services” include an arrangement for services such as research, advisory board participation, and presentations at company-sponsored education and training, provided the arrangement is formalized in a written agreement, is specific to the services to be provided, is based on the fair market value of the services, and characterized by certain additional factors.

Other Payments: Companies are prohibited from providing healthcare practitioners with any grants, scholarships, subsidies, support, consulting contracts, or educational or practice-related items in exchange for prescribing, disbursing, or using prescription drugs, biologics or medical devices or for a commitment to continue prescribing, disbursing, or using prescription drugs, biologics or medical devices.

Continuing Medical Education (CME), Third-Party Scientific or Educational Conferences, or Professional Meetings: Companies are prohibited from providing financial support to cover or offset the travel or lodging costs, or other personal expenses of non-faculty healthcare practitioners attending a CME event, third-party scientific or educational conference or professional meeting and compensating for time spent by practitioners participating in any such event. Companies may not directly pay for practitioner meals at these events, although a CME provider or conference organizer may decide of its own volition to apply any financial support given by these companies to provide meals for all event participants. Additionally, any sponsorship of CME must meet the Accreditation Council for Continuing Medical Education (ACCME) Standards For Commercial Support, or the equivalent standards for commercial support maintained by the relevant continuing education accrediting body. Moreover, each company must separate its CME grant-making functions from its sales and marketing functions and must not provide advice or guidance to the CME provider regarding the content or faculty for company-funded CME.

While these items and additional restrictions or prohibitions specified in the regulations are onerous, several activities by pharmaceutical and medical device companies are specifically permitted under the code of conduct. These include the dissemination of peer-reviewed information, advertising, sampling, provision of reasonable quantities of demonstration or evaluation units, payment for technical training and bona fide services (as described briefly above), price concessions provided in the ordinary course of business, reimbursement information, patient assistance programs, and charitable contributions. Each of these “permissible activities” is listed in the regulation and may be subject additional structural or functional limitations. Regardless of their enumerated status, each should be conducted in consideration of the overarching requirements of the code of conduct.

A year after implementation of the regulations, companies will be required to disclose to the Department of Public Health, on an ongoing annual basis, certain information regarding payments made by companies in connection with sales and marketing activities of at least $50 provided to any covered recipient, including healthcare practitioners, pharmacists, and hospitals. Beginning July 1, 2010, companies must report the value, nature, purpose, and recipient of the payment in a disclosure report. The annual disclosure report includes a $2,000 fee (first paid July 1, 2009) to support administration of the program. Failure to comport with the regulations carries enforcement penalties. The Commonwealth is authorized to punish knowing and willful violations of the regulations with a fine of not more than $5,000 for each transaction, occurrence, or event.

Gary C. Messplay is a partner in the Washington, D.C. office of Hunton & Williams LLP, where he is co-chair of the law firm’s Food and Drug Practice. Colleen Heisey is an attorney in the firm’s Food and Drug Practice.