Life Sciences Legal Update : Life Sciences Lawyers & Attorneys : Reed Smith Law Firm : Healthcare, Food and Drug Law, Biotechnology, Privacy, Product Liability

The Texas bill—S.B. 151—specifically applies to “pharmaceutical manufacturing companies,” which is defined to include any entity that “produces, prepares, propagates, compounds, converts, or processes prescription drugs,” or that “packages, repackages, labels, relabels, or distributes prescription drugs.” Wholesale drug distributors and pharmacists are excluded from the reporting requirement.

Under the bill, the annual disclosure would include reporting the value, nature and purpose of any gift, fee, payment, subsidy or other economic benefit provided in connection with detailing, promotional, or marketing activities of the company to (1) physicians, (2) hospitals, (3) nursing homes, (4) pharmacists, (5) pharmacies, (6) health benefit plan administrators or (7) any other persons authorized to prescribe or dispense prescription drugs in Texas. (As drafted, the bill contains no minimum dollar thresholds for reporting as other state requirements do.) The report would also require disclosure of the name and address of each recipient. Similar to other state reporting laws, the Texas law would obligate companies to disclose annually the name and address of the individual responsible for the company’s compliance.

Information disclosed to the state under S.B. 151 as “trade secret information” would be kept confidential. Further, the state would keep confidential information relating to (1) free samples, (2) compensation and reimbursement in connection with clinical trials, (3) economic benefits, gifts, or other payments valued at less than $25, and (4) scholarship or support for a medical student, resident or fellow to attend a significant educational, scientific or policy-making conference. This latter provision differs from other state laws, which provide exemptions from reporting for these types of items. The Texas bill, in contrast, would not exempt these items from reporting; rather, it would simply keep disclosures related to these items confidential.

Penalties under S.B. 151 include a $10,000 fine for failure to file an annual report. If passed, the first annual report in Texas under the bill would be due June 30, 2010.

In Adkins v. Cytyc Corp, No. 4:07CV00053, 2008 WL 2680474 (W.D. Va. July 3, 2008), plaintiff brought suit against the manufacturer of a device called the NovaSure, used during a surgical procedure called endometrial ablation that was performed on plaintiff. In addition to the usual product liability claims, plaintiff pleaded a cause of action implicating direct actions of defendant’s representative (presumably a sales representative; the opinion describes the person simply as a “corporate representative”) during the surgery in mistakenly instructing the operating physician. Id. at 1. Because of an error in measuring the size her uterine wall, plaintiff suffered injuries during the ensuing ablation procedure.

Defendant moved to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, based upon the Supreme Court’s decision in Riegel v. Medtronic, 128 S. Ct. 999 (2008). Because the NovaSure device is a Class III medical device that received pre-market approval by FDA, the court dismissed with little fanfare all of plaintiff’s causes of action “that sound in negligence or breach of duty related to the design, manufacturing, and labeling of the NovaSure device.” Id. at 2. To allow plaintiff to proceed with her action “would impose requirements that differ from by the FDA on [the manufacturer].” Id.

But the preemption issue was not the end of the court’s analysis. Plaintiff also pleaded that “defendant’s corporate representative” had “a duty to ensure that the NovaSure device was operating correctly and that [the surgeon] followed the proper procedures when using the NovaSure device.” Id. (internal citation omitted). 

The court found that FDA did not regulate plaintiff’s agency theory of liability, and that preemption did not reach this claim. Describing such “localized situations,” id. at 3, as traditional matters for the common law, not FDA’s regulatory approval process, the court held that the agency claim “does not challenge the design, manufacture, and labeling of the NovaSure device so as to implicate Riegel preemption, but rather challenges negligence by a corporate agent acting as a de facto physician’s assistant during a surgical procedure.” Id.

However, plaintiff’s complaint failed to adequately plead, under Bell Atlantic Corp. V. Twombley, 127 S.Ct. 1955 (2007), facts to explain what defendant’s representative did or failed to do as part of his alleged duty. Further, the complaint did not specify whether plaintiff’s alleged injuries were caused by a failure of the NovaSure device or by a treatment error induced by instructions from the corporate representative. Therefore, under Twombley, the complaint fell short and, as a result, the court dismissed the complaint without prejudice and granted plaintiff leave to re-plead only on her agency theory of recovery. Id. (Query whether plaintiff will in fact state an actionable claim if she re-pleads, as some courts have rejected attempts to impose liability on non-physicians for failing to control a physician’s delivery of medical services for policy reasons. See, e.g., Kernke v. The Menninger Clinic, 173 F. Supp. 2d 1117 (D. Kan. 2001) (physician running clinical trial, not clinical trial sponsor, owed study participants duty to provide adequate medical care and duty to obtain informed consent); McKee v. American Home Prods. Corp., 113 Wash. 2d 701, 716 (1989) (non-physician without patient’s medical history not qualified to determine propriety of treatment, as that would require non-physician to improperly interfere with physician-patient relationship, where physician might have sound medical reasons for what appears to be a non-standard treatment); Cottam v. CVS Pharmacy, 436 Mass. 316, 321 (2002)(same)).  

That the majority of this decision is devoted to the issue of whether plaintiff stated a claim against defendant’s corporate representative demonstrates the strength of the Riegeldecision in cases involving PMA-approved devices – as does the court’s willingness to grant a preemption dismissal on a Rule 12(b)(6) motion. Also of significance is the court’s application of Twombley to product liability claims, which all product liability defendants should consider when analyzing whether a plaintiff’s complaint uses mere labels, conclusions, or simply a formulaic recitation of the elements of a cause of action.

Use the following links to read the court's Memorandum Opinion, the original Order, and its Amended Order.

I.          SUMMARY OF REVISIONS TO THE PHRMA CODE

Revisions to the PhRMA Code include:

• Reminder Items/Practice-Related Items. As mentioned above, the revised Code explicitly prohibits practice-related items of minimal value, such as pens, notepads, mugs or similar “reminder” items that are branded with the company’s name or logo. Whereas the original Code permitted companies to provide HCPs and their staff with branded reminder items, the revised Code allows only practice-related items that relate to a patient’s disease or are intended to educate the patient about treatment. Accordingly, educational items such as textbooks, subscriptions to relevant scientific journals or copies of clinical treatment guidelines are permitted, as are anatomical models, informational sheets and brochures, patient self-assessment and tracking tools or written materials that inform patients about adherence to medicine regimens, healthy lifestyle choices or the availability of patient assistance programs (all capped at a $100 value). In addition, unlike the original PhRMA Code, the revised Code states it is inappropriate for companies to offer HCPs medical equipment such as stethoscopes since the equipment is primarily designed for patient treatment and not for education.
   
• Meals. The updated Code restricts sales representatives or their direct supervisors from taking an HCP and/or his or her staff to a meal at a restaurant. Sales representatives may continue to host meals accompanied by informational sessions in an office or hospital setting; however, off-site meals are no longer allowed. As with the original Code, take-out meals or “dine and dash” programs continue to be prohibited. Note, however, that this revision does not impact the ability of an individual acting on behalf of a company who is not a sales representative or direct supervisor from providing an off-site or restaurant meal.
   
• Entertainment and Recreation. The revised Code prohibits manufacturers from providing entertainment or recreational items to HCPs, including tickets to the theater or sporting events, sporting equipment, or leisure or vacation trips, even if provided in connection with an HCP’s engagement as a speaker or consultant or whether the entertainment or recreation is secondary to an educational purpose. (The original Code permitted entertainment or recreation for HCPs where the HCPs provided legitimate consulting, advisory board or speaker training services.)
   
• Consultants and Speakers. The revised Code’s provisions on consultants and speakers remain substantially unchanged. However, the revised Code does add that compensation and reimbursement of expenses should be based on fair market value and, as noted above, that recreational or entertainment events cannot be provided to consultants or speakers in connection with their respective events.
   
• Continuing Medical Education (“CME”). The guidelines for funding CME remain predominately unchanged. However, the revised Code explicitly recommends that companies separate grant-making functions from sales and marketing functions and follow the standards for commercial support of CME established by the Accreditation Council for Continuing Medical Education or other accrediting bodies. 
   
• Adherence to the Code. The PhRMA Code now contemplates that companies may decide to publicly announce their support of the Code and complete an annual certification (signed by the CEO and/or Chief Compliance Officer) that they have appropriate policies and procedures. The PhRMA website will identify those companies that commit to abide by the Code and provide information for companies’ Chief Compliance Officers. In addition, PhRMA will direct complaints about company conduct to the Chief Compliance Officer. Finally, the revised PhRMA Code encourages companies to seek external verification or audits of policies and procedures that comport with the Code. 
   
• Training. The revised Code instructs companies to provide training on applicable laws, regulations, and industry standards as they pertain to interactions between HCPs and that companies train representatives to ensure general science and product-specific knowledge that is consistent with FDA requirements. Additionally, the PhRMA Code provides that companies periodically assess representatives’ compliance with company policies and provide updates or additional training as needed.
   
• Formulary Committee Members. The revised Code obligates companies to require HCPs who act as speakers or consultants on their behalf and who serve as members of a formulary or clinical guideline committee to disclose this relationship to the committee. Importantly, a committee may require the speaker or consultant to recuse himself or herself from decisions relating to the related company’s products. The revised Code further recommends that companies require this disclosure to last for at least two years beyond the termination of the speaker or consulting arrangement with the company.
   
• Prescriber Data. According to the revised Code, if companies opt to use non-patient identified prescriber data (i.e., to determine safety and risk information, to conduct research, to track adverse events, to focus marketing, etc.), they should (1) respect the confidential nature of the prescriber data, (2) develop policies regarding the use of the data, (3) educate employees and agents about those policies, (4) maintain an internal contact person to handle inquiries regarding the use of the data and (5) identify disciplinary action for misuse of such data. Additionally, the revised Code recommends that companies honor requests from HCPs who ask that their individual prescriber data not be made available to sales representatives. 

A comparison of the original and revised PhRMA Codes is set forth in Attachment A.

II.        POTENTIAL IMPACT ON THE PHARMACEUTICAL INDUSTRY

Companies that decide to comply with the revised PhRMA Code will need to amend their compliance policies and procedures by January 2009. In addition to the operational challenges associated with revising, approving and distributing policies and procedures, companies will need to update—and roll-out—updated training programs.  As a practical matter, pharmaceutical companies that do business in California and Nevada will likely have to adopt the PhRMA changes to ensure adherence to those states’ legal requirements that drug companies have comprehensive compliance programs. In addition, the PhRMA Code revisions may signal a change to what have long been standard sales and detailing efforts. For example, the restrictions on off-site meals and branded reminder items foreclose very common industry sales and marketing practices. Although less common to begin with, entertainment activities are likely to diminish or to be eliminated entirely. Another significant adjustment for certain companies relates to the separation of grant-making and sales functions. Companies that desire to comply with the revised Code but currently combine these functions will have to restructure their operations.

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Please contact Christine E. Bloomquist (202-414-9212, cbloomquist@reedsmith.com), Gina M. Cavalier (202-414-9288, gcavalier@reedsmith.com), Matthew E. Wetzel (202-414-9250, mwetzel@reedsmith.com) or any other member of the Reed Smith health care group with whom you work if you would like additional information or if you have any questions.