Regulatory Perspectives

New Massachusetts Compliance Requirements May Require Timely Upgrade to Existing Systems

Mark Langdon and Meenakshi Datta

In a groundbreaking regulatory development with significant implications for medical device manufacturers, the Massachusetts Department of Public Health recently issued final regulations implementing the commonwealth’s new compliance and reporting requirements for medical device and pharmaceutical manufacturing companies. The new requirements take effect July 1.

As we discussed in a prior column, the new law and implementing regulations impose significant requirements upon medical device and pharmaceutical manufacturers’ sales and marketing activities that take place in the commonwealth or are directed to healthcare practitioners licensed in the commonwealth. Significantly, the Massachusetts requirements impose new payment reporting regulations that medical device companies have not previously faced in any other state. Therefore, medical device manufacturers to which the law applies should take steps now to ensure timely compliance with the regulations.

The law contains two basic requirements. First, manufacturers must comply with the requirements of the marketing code of conduct set forth in the recently published final regulations. Second, companies must annually report certain information to the Massachusetts Department of Health by July 1 of each year. One submission relates to adherence to the marketing code of conduct, and includes a personnel training and a certification requirement. The deadline for the first marketing code of conduct submission is July 1. The other annual submission relates to the disclosure of payments made by the company to Massachusetts-licensed healthcare practitioners. The deadline for the first payment disclosure report is July 1, 2010.

Marketing Code of Conduct

The final regulations require medical device and pharmaceutical manufacturers to adopt a marketing code of conduct that is consistent with the requirements and limitations set forth in the final regulations. Although not explicitly referenced in the final regulations, the statute requires that the marketing code of conduct provisions promulgated by the department be no less restrictive than the codes set forth by the Pharmaceutical Research and Manufacturers of America and the Advanced Medical Technology Association (AdvaMed). Key marketing code of conduct provisions of the final regulations are set forth below.

1. Meals

Under the final regulations, meals may not be provided to Massachusetts healthcare practitioners under the following circumstances:

• If part of an entertainment or recreational event

• If offered without an information presentation made by a medical device marketing agent or without such an agent being present

• If offered outside of the healthcare practitioner’s office or a hospital setting

• If offered to a healthcare practitioner’s spouse or other guest

Furthermore, all meals must be “modest and occasional in nature.”

2. Continuing Medical Education and Certain Other Meetings

The final regulations prohibit medical device companies that sponsor CME, third party scientific or educational conferences and professional meetings from engaging in the following activities:

• Providing direct or indirect financial support for the costs of travel, lodging or other personal expenses of nonfaculty healthcare practitioners attending any such event

• Providing funding to compensate for healthcare practitioners for attending such events

• Providing payment for meals directly to a healthcare practitioner at such events, although a CME provider or conference or meeting organizer may, at its own discretion, use such financial support provided by a medical device company for the event to provide meals for all participants

• Sponsoring or paying for CME that does not meet the Standards For Commercial Support as established by the Accreditation Council for Continuing Medical Education or equivalent commercial support standards of the relevant continuing education accrediting body.

3. Other Prohibited Payments

In addition to restrictions on meals and CME and related activities, the department also prohibits the certain payments and activities, including reminder items and any payment or renumeration that is prohibited under the federal anti-kickback statute or any similar Massachusetts anti-kickback laws.

4. Key Exceptions

The final regulations created several exceptions for the activities of medical device companies, including the following:

• Reasonable compensation and reimbursement of expenses for bona fide services, where such payments are set forth in or provided under a written agreement

• Reasonable reimbursement or payment for expenses necessary for technical training of healthcare practitioners on the use of a medical device so long as a written that specifies the commitment to provide for such expenses, and the amounts or categories of reasonable expenses to be paid

• The provision of reasonable quantities of medical device demonstration and evaluation units to assess the appropriate use and functionality of the product

• Price concessions“in the normal course of business”

• The provision of information regarding product reimbursement or technical or other support intended to assist with product installation so long it does not run afoul of anti- kickback laws

Other Compliance Requirements

Medical device companies subject to the Massachusetts requirements must adopt and submit to the department a training program for all sales and marketing staff and other appropriate employees. The training must ensure that such personnel who act on behalf of the company and who visit healthcare practitioners have sufficient knowledge of the marketing code of conduct, general science, and product-specific information to provide “accurate, up-to-date information consistent with the state law and FDA requirements.” These same individuals must also undergo regular assessments to ensure that they are in compliance with the marketing code of conduct and other relevant company policies.

Beginning July 1,companies subject to the law also must annually certify compliance with the Massachusetts final regulations as well as adopt and submit to the department policies and procedures for investigating instances of non-compliance, taking corrective action in response to non-compliance, and reporting instances of non-compliance to the appropriate state authorities. Furthermore, beginning July 1, 2010, a company covered by the Massachusetts law must annually certify to the department that it has conducted an audit to monitor compliance with the final regulations.

Reporting of Payments

A first of its kind for medical device companies, the Massachusetts law and final regulations require companies to make annual disclosures of any fee, payment, or other economic benefit with a value of at least $50 made to a “covered recipient” in connection with the company’s “sales and marketing activities.” The final regulations explicitly state that the $50 payment rule applies to separate events or transactions and does not require the aggregation of payments of less than $50 to the same healthcare practitioner.

The first report is due July 1, 2010 and must cover payments made between July 1, 2009 and Dec. 31, 2009. Thereafter, reports shall be due annually on July 1 and cover the prior calendar year. The department will provide a reporting form and an electronic submission mechanism. Each annual submission must be accompanied by a $2,000 fee (with the first fee due on July 1, 2009, even though the first payment report is due one year from that date).

Significantly, the annual payment report also must be accompanied by a certification that the report is true and accurate, to the best of the company’s knowledge. The statute specifies that all data disclosed to the department will be made publicly available on the department’s Web site in an easy-to-search format. The department, in turn, must report to the Massachusetts Attorney General any payment, entertainment, meals, travel, honorarium, subscription, advance, services, or anything of value provided in violation of the marketing codeof conduct.

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Medical device companies that conduct sales and marketing activities in Massachusetts should consider whether it will be necessary to upgrade existing compliance systems to satisfy the marketing code of conduct and reporting requirements in a timely and accurate fashion. Companies also will need to continue to monitor developments on the federal legislative front. There also are bills that have been pending in other states relating to medical device reporting and transparency. Close coordination with legal, compliance and IT departments will be necessary to ensure compliance with any federal and legal developments.

Mark Langdon is a partner with the Washington, D.C., office of the law firm Sidley Austin LLP. He is a nationally recognized expert on healthcare compliance issues, with a particular focus on fraud and abuse and reimbursement matters. Mark can be reached at (202) 736-8162 or [email protected]. Meenakshi Datta is a senior associate with the Chicago, Ill., office of the law firm of Sidley Austin LLP. She has substantial experience in various areas of healthcare regulatory law, including fraud and abuse; healthcare compliance programs; and HIPAA privacy and security implementation and compliance. Meena can be reached at (312) 853-7169 or [email protected].