As drug and device manufacturers continue to await final regulations and subsequent implementation of the federal Physician Payment Sunshine Act, passed as part of the Affordable Care Act, Massachusetts has relaxed its similar state law banning the provision by manufacturers of gifts to health care practitioners (“HCPs”) and requiring disclosure of payments and transfers of value to HCPs. The revisions are intended to loosen certain restrictions related to providing meals and other expenses to HCPs, and also expressly to relieve manufacturers of the duty to report to Massachusetts information that has already been disclosed to federal agencies, such as data reported to the Centers for Medicare & Medicaid Services (“CMS”) pursuant to the Physician Payment Sunshine Act. In addition, Massachusetts will now permit pharmaceutical manufacturers to offer drug coupons and other reductions to Massachusetts residents, as long as certain conditions are met.

The Massachusetts gift ban and disclosure amendments come at a time when manufacturers continue to consider how the new federal disclosure requirements will impact state reporting requirements. Massachusetts’ revisions also represent a growing shift in states’ willingness to defer to federal reporting, in lieu of requiring their own reporting.

Notwithstanding this shift, state laws continue to impose their own differing restrictions on certain payments and gifts to HCPs, an issue that is not addressed by the federal law. The Physician Payment Sunshine Law requires manufacturers to disclose to CMS information related to payments and transfers of value to physicians and teaching hospitals, but does not otherwise restrict the types or levels of payments and benefits that may be provided to physicians and teaching hospitals. Multiple states, including Massachusetts, have more prescriptive laws that dictate the types of payments or benefits pharmaceutical and medical device manufacturers can provide to HCPs, including physicians. CMS has indicated that manufacturers may be required to begin tracking reportable payments and other transfers of value for purposes of the Physician Payment Sunshine Act as soon as January 1, 2013.

Amendments to the Massachusetts Marketing Code of Conduct

On July 6, 2012, the governor of Massachusetts signed into law, as part of the FY2013 State Budget, revisions to Massachusetts General Laws, Chapter 111N, the Pharmaceutical and Medical Device Manufacturer Code of Conduct or “Massachusetts Marketing Code of Conduct,” which restricts certain gifts and payments by manufacturers to Massachusetts HCPs.

The revisions to the Massachusetts law include the following:

  • Expenses related to technical training. In a much-needed development, manufacturers are now permitted to provide payment for reasonable expenses necessary for technical training on the use of medical devices, regardless of whether such expenses are covered by a pre-existing purchase agreement. Previously, the law restricted this practice to situations in which such expenses were part of a vendor’s actual purchase contract for the device.
  • Meals Permitted at Non-CME Educational Presentations. Previous Massachusetts law restricted manufacturers from directly providing meals to HCPs except in office or hospital settings. The recent revisions relax this requirement by allowing manufacturers to provide or pay for “modest meals and refreshments” in connection with non-CME educational presentations for the purpose of educating and informing HCPs about the benefits, risks and appropriate uses of prescription products, disease states or other scientific information. The new exception applies only to presentations occurring in a “venue and manner conducive to informational communication.” The term “modest meals and refreshments” is to be defined by the Department of Public Health (“DPH”) through regulations.
  • Detailed Quarterly Reporting of Meals at Non-CME Educational Presentations. To the extent that manufacturers avail themselves of this exception, they must file quarterly reports detailing all presentations at which meals or refreshments are provided. These reports must specify: (1) the location of the non-CME presentation; (2) a description of the products discussed at such presentation; and (3) the total amount expended on such presentation and an estimate of the amount expended for meals and refreshments per participants. This quarterly reporting requirement is in addition to manufacturers’ already-detailed annual reporting requirement with respect to payments or benefits of $50 or more provided to HCPs. However, while the annual reporting requires identification of HCPs, the new quarterly requirement does not appear to be HCP-specific, although amounts per HCP must be disclosed. The revisions make clear that the DPH may require manufacturers to pay a to-be-determined fee to cover the costs of administering this new section.
  • Duplicative Reporting Not Required. The revisions prohibit the DPH from requiring manufacturers to disclose information to the DPH that they have already disclosed to a federal agency pursuant to federal law, if DPH can obtain the federal information. Accordingly, once manufacturers begin disclosing information to CMS under the Physician Payment Sunshine Act, the same information will not need to be disclosed to Massachusetts.
  • Public Availability of Data. Pursuant to a newly added section, the DPH is required to make publicly available and easily searchable on its own website all disclosed data it receives from CMS in annual reports related to manufacturer disclosures pursuant to the Physician Payment Sunshine Act.

As passed on July 8, 2012, these amendments to the Massachusetts Marketing Code of Conduct do not specify an effective date, although the fiscal year of the state budget during which they were passed began July 1, 2012. The DPH has been charged with defining certain terms included in the amendments, and is also expected to make additional conforming amendments to the existing regulations, currently at 105 C.M.R. 970.000. Accordingly, manufacturers should continue to comply with the current regulations, even as they look toward taking advantage of the expanded opportunities for the provision to Massachusetts HCPs of certain meals and expenses consistent with the latest amendments.

Amendments Related to the Coupons, Vouchers, and other Reductions

Separate and apart from the revisions to the Massachusetts Code of Conduct, the FY2012 State Budget also relaxes the Massachusetts anti-kickback statute, which previously prohibited the provision of all coupons, vouchers, and other reductions for prescription medications.

The latest revision limits the prohibition to discounts, rebates, product vouchers or other reductions in an individual’s out-of-pocket expenses, including co-payments and deductibles, only to those prescription drugs having an AB-rated generic equivalent. Accordingly, discounts, rebates, vouchers and other reductions can be offered for all drugs except for those with generic equivalents, provided that they are “provided directly or electronically to the individual or through a point of sale or mail-in rebate, or through similar means.” Moreover, manufacturers offering such coupons or reductions cannot exclude or favor any pharmacy for customer redemption

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Device manufacturers need to be able to provide education to physicians and hospital staff regarding actual and contemplated equipment purchases, and permitting the common courtesy of a modest snack or meal in connection with such training is a needed improvement. At the same time, given how comprehensive the federal disclosure requirements will be once implemented, and with results published on the Internet, we question the need for states to impose their own complicated and more expansive prohibitions and disclosure requirements, considering the significant operational and recordkeeping burdens they impose on manufacturers, not to mention the sometimes absurd practices that result (e.g., complex signage at conference booths with differing instructions for practitioners from different states entering the booth). On balance, it seems that funds for such manufacturer activities would be better dedicated to needed research and development.

We continue to monitor developments with respect to state and federal manufacturer marketing reporting requirements and gift bans. Please contact Elizabeth Carder-Thompson (202 414 9213 or ecarder@reedsmith.com), Katie C. Pawlitz (202 414 9233 or kpawlitz@reedsmith.com), Nancy Bonifant (202 414 9353 or nbonifant@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.