Physician Payments Disclosure and Aggregate Spend:

Physician Payments Disclosure and Aggregate Spend: Navigating Conflicting and Unclear State Laws and Regulations A Guide for Device Manufacturers October 26, 2010 Colin J. Zick Foley Hoag LLP czick@foleyhoag.com (617) 832-1275 2010 Foley Hoag LLP. All Rights Reserved. 1

How You Spend Your Marketing Dollars Is A National Law Enforcement Issue Suits Allege Medical-Device Makers Paid Physicians to Use Their Products in Off-Label Applications: Earlier this year, in an article called Surgical-Device Firms Walk Fine Line, the Wall Street Journal reported that former employees of certain medical-devicemakers allege in lawsuits unsealed in a Texas federal court that the companies paid kickbacks to heart surgeons to get the doctors to use their products in an off-label application: to treat atrial fibrillation. The suits name at least four companies whose products are among those used in surgery to treat the heart condition, including AtriCure, Medtronic, St. Jude Medical, and Boston Scientific. The companies are accused of taking part in a "'fraudulent marketing and inducement campaign,' involving kickbacks to doctors and hospitals," which "resulted in excessive charges to the Medicare insurance program." The cases against Boston Scientific, Medtronic, and AtriCure also allege that these companies marketed surgical ablation equipment as a treatment for atrial fibrillation even though it was not approved by the Food and Drug Administration to treat that condition. 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 2

Anti-Kickback Statute Applies only in situations where payment is provided by government health care program. The federal anti-kickback statute prohibits remuneration to induce referrals. Generally, the difficulty in determining potential liability lies in distinguishing between remuneration intended to induce referrals and remuneration paid to the referral source in return for legitimate services and in appropriate amounts. 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 3

Device Manufacturer and Hospitals Pay Nearly $4 Million to Resolve Fraud Claim St. Jude Medical Inc., a heart device manufacturer and two hospitals paid the United States $3,898,300 to resolve false claim allegations. The Justice Department alleged that St. Jude paid illegal kickbacks to two hospitals to secure heart-device business. The kickbacks included alleged rebates that were "retroactive" and paid based on a hospital s previous purchases of St. Jude heart-device equipment and rebates that St. Jude paid for purchases of heart-device equipment sold by its competitors to induce purchases of similar equipment from St. Jude in the future. 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 4

RELEVANT MARKETING CODES FOR DEVICES OIG Compliance Guidance: Compliance Program Guidance for Pharmaceutical Manufacturers, issued by the Department of Health and Human Services Office of Inspector General, 68 Fed. Reg. 23731 (May 5, 2003) Primary Trade Association Code: AdvaMed Code of Ethics on Interactions with Healthcare Professionals 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 5

OIG S REQUIREMENTS Implementing written policies and procedures; Designating a compliance officer and compliance committee; Conducting effective training and education; Developing effective lines of communication; Conducting internal monitoring and auditing; Enforcing standards through well-publicized disciplinary guidelines; and Responding promptly to detected problems and undertaking corrective action. 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 6

A Number of States Have Enacted Gift Limits and Reporting States with such provisions for device manufacturers include: Massachusetts California Vermont Key elements of these statutes: Gift limits and prohibitions Individual and aggregate reporting obligations Other states require compliance plans: California Nevada Connecticut 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 7

The Newest Law: Connecticut Public Act No. 10-117 On or before January 1, 2011, each pharmaceutical or medical device manufacturing company shall adopt and implement a code that is consistent with, and minimally contains all of the requirements prescribed in, the [PhRMA] "Code on Interaction with Healthcare Professionals" or AdvaMed's "Code of Ethics on Interactions with Health Care Professionals" as such codes were in effect on January 1, 2010. Each pharmaceutical or medical device manufacturing company shall adopt a comprehensive compliance program in accordance with the guidelines provided in the "Compliance Program Guidance for Pharmaceutical Manufacturers" dated April, 2003 and issued [HHS OIG]. 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 9

Massachusetts: Perhaps the Most Challenging U.S. Regulatory Environment The Massachusetts rules went into effect July 1, 2009 Massachusetts is probably the most challenging regulatory environment in the U.S. because: The AG has had a difficult year, and drug and device companies may seem like an easy target. Massachusetts has a significant number of doctors who are in key product markets Massachusetts rules are so strict: one of the broadest definitions of sales and marketing of any state Massachusetts prohibits certain payments to providers by pharmaceutical and medical device manufacturers Massachusetts is one of the few states to make disclosure of data part of the public record 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 10

Who are the Covered Health Care Practitioners under Massachusetts law? Health Care Practitioners (HCPs) covered by the regulations include those who: Prescribe prescription drugs for any person; and Are licensed to provide health care in Massachusetts (also partnerships or corporations comprised of such persons or their agents). Does not include full-time company employees or board members who are not HCPs. Does not include hospitals. 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 11

MA Code of Conduct Meals and Gifts Prohibits payments to HCPs for meals that are: Part of an entertainment event Offered without an informational presentation made by a marketing agent, or without the agent being present Outside of the HCP s office or hospital setting Hospital, academic medical center, or specialized training facility Provided to the HCP s spouse or other guest Prohibits gifts to HCPs including: Providing or paying for entertainment or recreation items of any value to any nonemployee HCP Payments in cash or cash equivalents except as compensation for services Expressly prohibits complimentary items such as pens, coffee mugs, gift cards, etc. Grants, scholarships, contracts or practice items in exchange for prescribing drugs or using medical devices 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 12

MA Code of Conduct Prohibited Continuing Ed Payments Sponsorship of continuing ed seminars not accredited or meeting those standards Cost of travel, lodging or other personal expenses of non-faculty at conferences and meetings Funding for time spent by HCPs for participation in conferences Exception for reasonable compensation or reimbursement to a HCP serving as a speaker or providing actual substantive services Direct payment for meals at conferences Allows general financial support to conference provider or organizer 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 13

MA Code of Conduct What It Allows Provision of peer reviewed academic, scientific or clinical information Advertising in peer reviewed academic, scientific or clinical journals Limited free use of devices for use by and education of patients Compensation for professional consulting services in connection with research and clinical trials Expenses for technical training of a medical device, including travel and lodging, if part of a purchase contract Price concessions, including rebates and discounts 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 14

MA Disclosure Requirements Requires covered companies employing marketers to disclose annually the: Value, Nature, Purpose, and Recipient of any fee, payment, subsidy, or other economic benefit with a value of at least $50 which a manufacturer provides, directly or through its agents to any covered recipient Broader than just HCPs: person authorized to prescribe, dispense or purchase prescription drugs or medical devices in the Commonwealth, including a hospital, nursing home, pharmacist, health benefit plan administrator, or a health care practitioner Employees are excluded in connection with sales and marketing activities 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 15

Questions Left Unanswered By the MA Regulations Meals are prohibited, but what about drinks at a bar? Can the president of my company have lunch with a primary investigator to talk about the study the PI is conducting on our product? How do we determine who is a HCP? Do we have to research every doctor we come into contact with? 2008 2010 Foley Hoag LLP. All Rights Reserved. Presentation Title 16