The New Code - Pharmaceutical Executive

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The New Code

Pharmaceutical Executive

In July, the Pharmaceutical Researchers and Manufacturers of America (PhRMA) released its revised "Code on Interactions with Healthcare Professionals," which addresses the scope of permissible pharmaceutical company interactions with and marketing to healthcare professionals.

In 2002, PhRMA published its original, voluntary code of ethics that established standards of conduct for pharmaceutical companies dealing with healthcare professionals. The theory behind the Code is clear: The risk is that providing certain benefits to healthcare professionals may cause them to prescribe a drug or product based on receiving these benefits rather than using independent clinical judgment.

The new Code, effective January 1, 2009, will replace PhRMA's 2002 Code and further restrict the types of permissible interactions between pharma reps and healthcare professionals. The revised Code includes additional processes by which pharmaceutical companies electing to comply may be publicly recognized by PhRMA. Companies that publicly announce their commitment to abide by the provisions of the Code will be recognized on PhRMA's Web site upon the completion of an annual certification signed by the company's CEO and chief compliance officer. Moreover, the revised Code encourages companies to seek independent verification of their compliance with the PhRMA Code by having an external source verify, at least once every three years, that the company has adopted and implemented policies and procedures to foster compliance.

These changes come at time of increased government scrutiny over the marketing practices of the pharmaceutical industry. Many of these practices may also violate federal and state healthcare fraud and abuse laws, potentially leading to civil and/or criminal sanctions.

What's Changing?

Non-Educational Items In contrast to the 2002 Code, the revised Code prohibits a pharmaceutical company from providing healthcare professionals with any items that do not advance disease or treatment education. Even practice-related items of minimal value, such as pens, notepads, mugs, hats, t-shirts, mouse pads, and similar items with a product or company logo, are prohibited. Likewise, pharmaceutical companies should refrain from sending boxes of cookies, candy, and gift baskets to physicians' offices. (Pharmaceutical companies may still provide items designed primarily for education, such as anatomical models.) This new prohibition represents a major departure from PhRMA's previous position with respect to practice-related items.

Informational Presentations and Meals Pharmaceutical companies are now precluded from providing restaurant meals to healthcare professionals. Occasional meals may still be offered, but only if both they are both attending a bona fide informational presentation during the working day, and such presentation takes place at either a physician's office or hospital. Sending lunch to a physician's office is, in general, no longer permissible.

Entertainment and Recreation The revised Code strengthens PhRMA's prohibition on providing entertainment and recreation items to healthcare professionals, such as tickets to theater and sporting events, treating physicians to golf, and providing free sports equipment (such as golf clubs, golf balls, or general sports memorabilia) and leisure trips (i.e., vacations, boating, fishing/hunting trips, or any other travel-related excursion). These items should not be offered to any healthcare professional who is not a salaried employee of the pharmaceutical company, regardless of: the item's value, whether the healthcare professional is engaged as a speaker or consultant, or whether the benefit is secondary to an educational purpose.

Retention as Consultants The importance of pharmaceutical companies entering into consulting arrangements with healthcare professionals is still recognized. However, decisions regarding the retention of healthcare professionals as consultants should be based on defined, objective criteria such as medical expertise, reputation, and experience. Compensation should be for legitimate services (i.e., not a reward for prescribing or recommending a particular product), and should be reasonable and fair market value in all respects. In order to document and verify that the compensation paid to consultants is fair market value for bona fide speaking and consulting services, pharmaceutical companies should carefully monitor the tasks that the consultant performs, the approximate amount of time spent on such tasks, and the compensation paid to the consultant. One further caveat: The 2009 Code imposes additional requirements on arrangements with healthcare professionals who participate in committees that develop formularies or clinical practice guidelines. Before a pharmaceutical company engages such a professional as a speaker or consultant, the professional must disclose his/her prospective relationship with the pharmaceutical company to the committee in which he/she participates. This disclosure requirement should be ongoing, and extend for a period of two years after the termination of the professional's arrangement with the pharmaceutical company.

CME Grants Further guidance is provided regarding the circumstances under which a pharmaceutical company may provide certain support for CME, such as: Decisions regarding CME program grants should be separated from (and not influenced by) sales and marketing departments; objective criteria should be established for CME grant decisions; the independent judgment of the CME provider should be respected, and applicable accreditation standards should be followed; and no advice or guidance should be provided to the CME provider regarding the content or faculty of a particular program, even if such advice is solicited.

Practical Recommendations

In light of the increased restrictions contained in the revised Code, and increased legislative and enforcement activity with respect to arrangements with healthcare professionals, pharma companies should consider taking the following proactive measures:
Update existing policies and procedures to comply with the revised Code, and notify all employees in writing of such updates.
Provide training on the revised Code, as well as applicable laws and relevant FDA requirements, to all sales representatives and other employees and agents who interact with healthcare professionals, or those who oversee such arrangements. Representatives should be evaluated periodically to assess their current understanding of, and compliance with, these requirements. Maintain copies of all training materials, as well as attendance records.
Carefully review all existing arrangements with healthcare professionals to determine compliance with the revised Code. All arrangements that do not comply should be amended or terminated in writing.
Review all compensation paid to healthcare professionals to confirm that payments are reasonable and fair market value for legitimate services provided. Consider using an outside valuation firm to conduct such reviews, and document all reviews (whether performed internally or externally).
Require healthcare professionals with ongoing consulting or speaking arrangements to maintain a time log detailing the services provided on behalf of the pharmaceutical company. Such time logs should be reviewed on a regular basis to determine if the compensation is fair market value and reasonable with respect to the services actually provided.
Any arrangements which are determined to be in excess of fair market value for services actually being provided should be terminated or modified in writing.
Consider whether to participate in PhRMA's compliance certification and/or external review programs described above.

The revised Code, as well as the recommendations listed above, should be considered at your company's next compliance committee meeting. The compliance committee's determinations should be forwarded to management for approval, with the objective of implementing any changes, reviews, and training prior to January 1, 2009.

Gary W. Herschman is chair of Sills Cummis & Gross P.C.'s Health and Hospital Law Practice Group. He can be reached at

Alexandra Miller Khorover is an associate in Sills Cummis & Gross P.C.'s Health and Hospital Law Practice Group. She can be reached at

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Source: Pharmaceutical Executive,
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