07.24.08
New Drugmaker Ethical Code May Be Relevant for Device Companies
Mark Langdon
In a long-awaited development, the Pharmaceutical Research and Manufacturers of America (PhRMA)—a national trade association that represents research-based pharmaceutical and biotechnology companies—recently released a revised Code of Interactions With Healthcare Professionals. The original PhRMA Code went into effect in 2002, and the revised version will become effective in January 2009. Though the Code is voluntary, and by its terms is applicable only to pharmaceutical manufacturers, given the heightened healthcare fraud and abuse enforcement environment as it applies to manufacturers generally, and the specific focus being levied by federal and state governments on orthopedic device companies in the past year, medical device companies would be well advised to review the revised Code carefully and consider whether any changes to their compliance policies and procedures might be warranted.
It must be emphasized that the Code of Ethics on Interactions With Healthcare Professionals that was released in 2003 (and subsequently updated in 2005) by the Advanced Medical Technology Association (Adva-Med)—a national trade association for medical device companies—is separate from the PhRMA Code and obviously has more direct relevance to the compliance activities of orthopedic device companies. As has been noted in previous columns, device companies are urged to comply with the AdvaMed Code, as well as the requirements set forth in recent federal settlements with orthopedic device companies, to the extent practicable as a measure to reduce compliance risks.
Notably, the release of the original PhRMA Code in 2002 preceded the release of the AdvaMed Code in 2003. Though it is unclear at this point whether AdvaMed has been considering revising its Code in light of the revised PhRMA Code, it still will be important for device companies to take notice of the new changes to the PhRMA Code.
Inside the PhRMA Code
One of the most significant changes to the PhRMA Code is that pharmaceutical companies now will be forbidden to distribute any non-educational items (eg, pens, notepads, mugs and other “reminder” items that typically include the logo of the company or the company’s product). Previously, such items could be distributed as long as they were related to a healthcare professional’s practice and were of minimal value. This is not an entirely surprising development, given that there has been some state legislative activity in this area lately, and a number of hospitals and other providers have begun to enact very stringent policies essentially prohibiting pharmaceutical sales representatives from bringing these items on campus. However, for at least some companies, it might necessitate a significant change in practice. By way of contrast, under the AdvaMed Code, it is permissible to provide healthcare professionals branded promotional items of minimal value related to the healthcare professional’s work or for the benefit of patients.
Another significant change to the PhRMA Code is that it now prohibits field sales representatives, as well as their immediate managers, from providing restaurant meals to healthcare professionals—though it does allow them to provide occasional meals in healthcare professionals’ offices in conjunction with appropriate informational presentations. This, too, likely will have the effect of changing the behavior of some companies, as the previous version of the Code permitted these types of interactions under certain circumstances. The AdvaMed Code, on the other hand, allows for companies to pay for modest meals in some situations when meeting with healthcare professionals to discuss product features, contract negotiations and sales terms.
The PhRMA Code also includes new provisions that require companies to ensure that their representatives who are employed by or acting on behalf of the companies and who visit healthcare professionals are sufficiently trained about applicable laws, regulations and industry codes of practice—including the PhRMA Code—that govern interactions with healthcare professionals. The Code calls on companies to assess their representatives periodically and to take appropriate action if they fail to comply with relevant standards of conduct. Though these provisions are not inconsistent with the previous version of the Code, and are consistent with the AdvaMed Code, it is significant that they are featured prominently in the revised Code, and they appear to be intended to send the message to manufacturers that they need to take responsibility for ensuring that those who operate on their behalf are aware of, and sensitive to, the applicable industry guidance. This likely will have the effect of ensuring that companies carefully review their compliance programs and conduct an appropriate level of training for their sales representatives. Applying this to the device context, these provisions seem consistent with the requirements of the Deferred Prosecution Agreements entered into last year by several of the leading orthopedic manufacturers, which were required to provide a certain level of training, even to independent distributors.
Along the same lines of the foregoing changes, the revised Code provides that each company will state its intentions to abide by the Code and that company CEOs and compliance officers will certify each year that they have processes in place to comply, which is a process patterned after the concept of Sarbanes-Oxley compliance mechanisms. The Code also provides that companies are encouraged to receive external verification periodically to ensure that they have processes in place to foster compliance. The Code states that companies that publicly announce their commitment to abide by the Code and that complete the annual certification will be identified by PhRMA on a public Web site. These revisions are significant in that they reflect an effort to be as transparent as possible, and the government has strongly encouraged transparency as a way to reduce healthcare fraud and abuse risks.
Additionally, the revised PhRMA Code contains a new section addressing support for continuing medical education (CME). In short, the Code provides that companies must respect the independent judgment of the CME provider and should follow standards for commercial support established by the Accreditation Council for Continuing Medical Education or other entity that may accredit the CME. The Code also makes clear that, when companies underwrite CME, responsibility for control over the selection of content, faculty, educational methods, materials and venue belongs to the organizers of the conferences or meetings in accordance with their guidelines. To this point, the Code provides that the company should not provide any advice or guidance to the CME provider, even if asked by the provider, regarding the content or faculty for a particular CME program funded by the company. In light of recent Congressional activity surrounding the funding of CME programs, this type of additional guidance by the PhRMA Code should be evaluated by medical device companies.
Finally, the revised Code contains certain disclosure requirements for healthcare providers who are members of committees that set formularies of covered medicines or develop clinical practice guidelines and who also serve as speakers or consultants for a company.
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In summary, even though there is a more specific industry code of ethics that is tailored to medical device companies—and that has specific provisions intended to highlight the more collaborative approach that often is a fundamental component of the relationship between device companies and physicians—the new revisions to the PhRMA Code should be carefully reviewed and weighed by medical device companies. This is especially true in light of the current enforcement environment, where prosecutors are using the same theories they have successfully employed against pharmaceutical companies in their investigations of device companies. In addition, the recent focus by Congress and state legislatures on the issue of transparency and disclosure underscores the importance that can attach—from the government’s perspective—to any new industry code. Accordingly, device companies should consider whether to proactively adopt some of the provisions of the revised PhRMA Code.