Category: Pharmaceutical

Transparency and the Avoidance of Corruption: Revisions to New Jersey’s Ban on Gifts From Pharmaceutical Companies

In October 2017, we had a post about a proposed regulation promulgated by the New Jersey Division of Consumer Affairs that would place limitations on payments from pharmaceutical companies to health care providers. The rule did not provide for enforcement or penalties to be assessed against manufacturers, but rather prohibited providers from “accepting” such payments.  The affected licensees were physicians, podiatrists, physician assistants, advanced practice nurses, dentists, and optometrists.  The proposed regulation became effective as of January 16, 2018 and is codified at N.J.A.C. 13:45J-1 et seq. The regulation was one of several initiatives taken by then Attorney General Christopher Porrino to combat the opioid epidemic.  Under the regulation, a New Jersey prescriber may not accept, directly or indirectly, any of the following from a pharmaceutical manufacturer or a manufacturer’s agent:

  • Any financial benefit or benefit-in-kind, including, but not limited to, gifts, payments, stock, stock options, grants, scholarships, subsidies, and charitable contributions, except as specifically permitted by the regulation.
  • Any entertainment or recreational items (e.g., tickets to theater or sporting events, or leisure or vacation trips).
  • Items of value that do not advance disease or treatment education, including, but not limited to:

Pens, note pads, clipboards, mugs, or other items with a company or product logo;

Items intended for the personal benefit of the prescriber or staff, such as floral arrangements, sporting equipment, or artwork;

Any payment in cash or a cash equivalent; or

Any payment or direct subsidy to a non-faculty prescriber to support attendance at, as remuneration for time spent attending, or for the costs of travel, lodging, or other personal expenses associated with attending, any education event or a promotional activity.

  • Any meals unless permitted as described in the regulation with a cap in the amount of $15.

Following Governor Phil Murphy’s election, in the Spring of 2018, the new administration assessed the operation of the rule and its dampening effect on physician participation in continuing education programs. Recognizing the purpose of the regulation as establishing uniform standard to minimize conflicts of interests between health care providers and pharmaceutical manufacturers so that patient care would be guided by the unbiased, best judgment of prescribers, Attorney General Gurbir S. Grewal proposed revisions to the regulation. These appeared in the August 6, 2018 New Jersey Register.  The changes are rather limited. They modify the definition of “modest meal” from a blanket $15 per prescriber to $15 for breakfast and lunch and $30 for dinner during the calendar year 2018 with the amount in future years tied to the consumer price index. Experience with the regulation had shown the absolute $15 limit was “unrealistic.” Another change is to remove the concept of “modest meals” and the limits when associated with educational events even where a manufacturer was the sponsor “provided the meals facilitate the educational program to maximize prescriber learning, including information about disease states and treatment approaches.” Any such meals are not counted in determining the annual cap of $10,000 on payments from pharmaceutical companies for services in connection with presentations as speakers at promotional activities, participation on advisory boards, and consulting arrangements established by the original regulation. The revisions further clarified that the regulation applied only to health care providers with active New Jersey licenses who were involved with patient care in New Jersey and would not apply to an employee of a pharmaceutical company.

The time for comment on the proposed revisions closes as of October 5, 2018.

The revisions to the New Jersey regulation are being considered when a spotlight is once more on the issue of conflicts of interest among prominent physicians and the pharmaceutical industry. On September 13, 2018, the New York Times reported the resignation of Dr. Jose Baselga, the chief medical officer of Memorial Sloan Kettering Cancer Center, for failure to disclose millions of dollars he had received from drug companies while publishing articles about these products in medical journals. The article included a comment that “Ethicists say that outside relationships with companies can shape the way studies are designed and medications are prescribed to patients, allowing bias to influence medical practice.  Reporting those ties allows the public, other scientists and doctors to evaluate their research and weigh potential conflicts.”

The same issue of the New York Times contained an Op-Ed piece by Marcia Angell, M.D. entitled “Transparency Hasn’t Stopped Drug Companies From Corrupting Medical Research.”  Dr. Angell had been the editor of the New England Journal of Medicine for over 20 years and was at the NEJM in 1984 when it became the first major journal to require authors to disclose financial ties to companies that could be affected by the publication of their research.  In her Times piece, Dr. Angell reviewed the reasons that manufacturers became financially involved with medical researchers and how financial ties could bias the work.  She concluded with these comments:

Disclosure is better than no disclosure, but it does not eliminate the conflict of interest. It’s simply a way of saying caveat emptor, and leaving it to readers to decide whether the research was biased.  But most people – even doctors and science reporters – aren’t really equipped to make those judgments, particularly when data are suppressed.

I would suggest two reforms. First, researchers at academic medical centers should not accept any payments other than research support from drug companies, and that support should have no strings attached – no control over the design, interpretation and publication of trial results.  We should go back to arm’s length grants.

Second, doctors should not accept gifts from drug companies, even small ones, and they should pay for their own meetings and continuing education, as is standard in other professions. They can afford it.

In the meantime, those of us who read these studies should remain skeptical about them until several different trials reach the same result.

These controversies have been present for a long time with various measures taken to protect patients and keep physicians focused on patient care. Some of that history was reviewed in an earlier blog post from 2014 with the commencement of the Obamacare Physician Payment Sunshine Act which encompasses more than research physicians.  In 2016, New Jersey ranked 11th in the nation for the most non-research payments to health care professionals based on the Open Payments data.[1]

The New Jersey Board of Medical Examiners has brought disciplinary proceedings against physicians for failure to make disclosures of payments received from medical product manufacturers. It has recently continued to bring disciplinary actions based on violation of its kickback rule, N.J.A.C. 13:35-6.17(c)(1), prohibiting licensees from receiving any form of compensation that “a reasonable person would recognize as having been given” to promote the prescribing of a product for patient use.[2]

The efforts of the New Jersey Attorney General to study and explore appropriate ways to deal with these conflicts of interests issues can be traced back to at least 2007 and such efforts are obviously continuing. This may be like the sound of one hand clapping or at least a voice crying in the wilderness.  But it should be noted that the Hippocratic Oath – dating back to the Fourth or Fifth Century B.C. and still administered to modern day physicians – includes a provision that “into whatever homes I go, I will enter them for the benefit of the sick, avoiding any voluntary act of impropriety or corruption.”

[1]  Helman, Farrar, Horton, Segobiano & Dingler, Physician, Feed Thyself: New Jersey’s Restriction On Pharmaceutical Payments (Jan. 24, 2018) available at

[2]   See, e.g., In the Matter of Kenneth Sun, M.D. (Aug. 27, 2018)(between 2013 and 2015 more than $117,000 in payments) available at

New Jersey Proposes Enhanced Limitations on Payments From Pharmaceutical Companies to Health Care Providers

The New Jersey Division of Consumer Affairs recently proposed enhanced limitations on payments from pharmaceutical companies to health care providers.  Those licensees affected by the proposed rules are the following:  physicians, podiatrists, physician assistants, advanced practice nurses, dentists and optometrists.

With limited exceptions, providers would not be able to accept any of the following from pharmaceutical manufacturers or their agents:

  • gifts
  • payments
  • stock
  • stock options
  • grants
  • scholarships
  • subsidies
  • charitable contributions
  • entertainment or recreational items, such as tickets to theater or sporting events, or leisure or vacation trips
  • meals
  • any item of value that does not advance disease or treatment education, including:
  • pens, note pads, clipboards, mugs or other items with a company or product logo
  • items intended for the personal benefit of the prescriber or staff, such as floral arrangements, sporting equipment, artwork, or items that may have utility in both the professional and non-professional setting, such as electronic devices
  • any payment in cash or cash equivalent, such as a gift certificate
  • any payment or direct subsidy to a non-faculty prescriber to support attendance at, or as remuneration for time spent attending, or for the costs of travel, lodging, or other personal expenses associated with attending any continuing education event or a promotional activity

There are some exceptions to the proposed limitations:

  • items designed for educational purposes for patients
  • a manufacturer subsidized registration fee at a continuing education event if that fee is available to all event participants
  • modest meals provided through the event organizer at a continuing education event, provided the meals facilitate the educational program to maximize prescriber learning and are capped at the fair market value of $15.00 per prescriber
  • modest meals provided to non-faculty prescribers through promotional activities no more than four times in a calendar year from the same manufacturer, each of which is capped at the fair market value of $15.00 per prescriber
  • fair market value compensation for providing bona fide services as a speaker or faculty organizer or academic program consultant for a continuing education event (subject to disclosure to attendees), plus reasonable payment and remuneration for travel, lodging, and other personal expenses associated with such services and continuing education credit if permitted by the licensee’s licensing board
  • fair market value compensation (capped at $10,000 per year from all pharmaceutical manufacturers) for providing bona fide services as a speaker or faculty organizer or academic program consultant for a promotional activity (subject to disclosure to attendees), plus reasonable payment or remuneration for travel, lodging, and other personal expenses associated with such services, but no continuing education credit
  • fair market value compensation for participation on advisory bodies or under consulting arrangements, but subject to the aforementioned $10,000 per year cap (together with payments for services for a promotional activity)

A provider can still receive samples from manufacturers, provided that the licensee does not charge patients for the samples and dispenses samples in accordance with the licensee’s licensing board.

The New Jersey Board of Medical Examiners, Board of Dentistry and Board of Optometry already have regulations that govern the relationships between their respective licensees and pharmaceutical companies, but the proposed regulations will both clarify and strengthen the existing rules.

While restrictions on payments to providers exist in other states, New Jersey’s proposed rules appear to be particularly stringent.  Pharmaceutical companies will need to carefully review their policies on all interactions with providers and, if the rules are passed, revise them accordingly as well as educate and monitor their employees and contractors for compliance.  Providers will also need to carefully track their relationships with pharmaceutical companies.  The regulations, if passed, will burden both parties.

Amarin Sues FDA Because It Cannot Promote Off-Label Use of Vascepa

A small pharmaceutical company called Amarin — based out of Dublin, Ireland –recently filed a Complaint for declaratory relief against the FDA in the United States District Court for the Southern District of New York. Amarin along with four physicians that prescribe its drug, Vascepa (omega-3 fatty acid derived from fish), allege constitutional violations of the First (freedom of speech) and Fifth (restriction against vague laws) Amendments of the United States Constitution. An Answer has not yet been filed.

The promotion of off-label drugs is the heart of this case. Amarin would like to share with potential prescribers the results of its 2011 clinical study that Vascepa lowers triglycerides, a kind of fat in the blood associated with heart disease, in patients with “persistently high” levels. However, the FDA currently only approves the drug for use in patients with extremely high levels of triglycerides.

Amarin seeks to provide the off-label information to prescribers and not the general public. Physicians, who are permitted to prescribe off-label, are already prescribing the drug in line with the clinical study and Amarin takes the position that these physicians are currently inadequately informed. Further, Amarin seeks to disclose information that is truthful and not misleading.

Opponents have said that Amarin seeks to sidestep the FDA.  If drug companies were permitted to share the results of clinical studies with physicians, there would be no motivation to obtain FDA approval. The FDA has declined to comment other than to state that more comprehensive guidance is on the way. The resolution of the lawsuit as well as the FDAs anticipating guidance may have far-reaching implications for off-label promotion of drugs.

OIG Issues Anti-Kickback and False Claims Warning to Pharmaceutical Manufacturers and Others Who Administer and Honor Copayment Coupon Programs

On September 19, 2014, the OIG issued a Report and Special Advisory Bulletin warning of inadequacies surrounding manufacturer safeguards designed to prevent copayment coupon use for Medicare Part D beneficiaries.  The OIG warned that the acceptance and the use of co-payment assistance coupons for Part D (and other federal health care programs) beneficiaries is a potential  violation of the Anti-Kickback Statute and False Claims Act by the manufacturer, its coupon manager or administrator, and individual pharmacies.

Pharmaceutical manufacturer copayment coupons are designed to stimulate the use of specific products.  After a patient enrolls in a specific drug program, (usually online) and provides basic information, they receive a coupon card.  When the prescription and the coupon are presented to a pharmacist, the pharmacist transmits the information to the patient’s health insurance company or its pharmacy benefits manager (PBM).  The insurer or PBM respond by verifying enrollment and providing the pharmacist with the patient’s copayment obligation.  The pharmacist then processes the coupon as a form of secondary insurance, resulting in the patient paying only the out-of-pocket difference between their copayment and the amount subsidized by the coupon.  An insurer is never told, and has no way of knowing that a third-party has paid all or nearly the entire personal copayment obligation, and pays the full amount of its usual payment for the drug in question, but the patient only pays part (or none) of their ordinary copayment.

Although the OIG recognized that copayment coupons can “provide an immediate financial benefit to beneficiaries,” it nonetheless warned that ultimately, they result in higher overall costs because the availability of a coupon may cause physicians and beneficiaries to choose an expensive brand-name drug when a less expensive and equally effective generic or other alternative is available.  Further, in relieving consumers of copayment obligations, drug manufacturers are simultaneously relieved of a market constraint on drug prices, resulting in excessive costs to federal health care programs such as Medicare Part D in violation of the Anti-Kickback Statute and False Claims Act.

Moreover, the OIG observed that if manufacturers wanted to offer copayment support to needy beneficiaries, there are a plethora of independent charitable organizations that offer such services without regard to the particular medication involved.  The OIG has previously discussed the proper establishment and operation of such entities in Special Advisory Bulletins from 2014 and 2005.

The Report details measures that surveyed manufacturers claim they have in place to prevent the use of copayment coupons to fund copayments for drugs paid for by Part D and concludes that these measures may not prevent all such use.   These safeguards consisting of  manufacturer notices to beneficiaries and pharmacists along with claims edits in the processing of coupons were determined to be inadequate by the OIG because not all manufacturers used such notices, and claims edits cannot reliably identify all Part D claims.   As a result, the OIG Report found that coupons lack transparency in the pharmacy claims transaction system to entities other than the manufacturers themselves.  This lack of transparency prevents anyone except the manufacturers from fully identifying or  monitoring the use of coupons for drugs paid for by federal health care programs such as Part D, raising serious concerns under the Anti-Kickback Statute and False Claims Act.

In addition to warning pharmaceutical manufacturers, their vendors and pharmacies that use of copayment coupons for Part D and other federal health care program beneficiaries may potentially lead to criminal and civil liability under the Anti-Kickback Statute and False Claims Act, the OIG recommended that the Centers for Medicare and Medicaid Services (CMS) “cooperate with industry stakeholder efforts to improve the reliability of mechanisms to determine when copayment coupons are used in connection with the purchase of drugs paid for, in part, by Part D.”

Until CMS issues definitive guidance in this area, pharmaceutical manufacturers who provide patient co-payment assistance coupons, vendors who operate and administer such programs, and the pharmacies that honor drug coupons should insure that they take all reasonable measures to insure that coupons are not processed for claims involving beneficiaries of any federal health care program, including Medicare Part D.

OIG Issues Favorable Advisory Opinion 14-05 Regarding A Pharmaceutical Manufacturer’s Direct-To-Patient Product Sales Program

The U.S. Department of Health and Human Services, Office of Inspector General (the “OIG’), on July 21, 2014, issued a favorable advisory opinion regarding a pharmaceutical manufacturer’s (the “Manufacturer”) direct-to-patient product sales program, which allows eligible patients to purchase one of the Manufacturer’s brand name products for a fixed price from an online retail pharmacy vendor outside of any applicable prescription drug insurance benefit (the “Arrangement”).  The OIG decided not to impose administrative sanctions on the Manufacturer pursuant to the civil monetary prohibition on offering inducements to beneficiaries or the Anti-Kickback Statute in connection with the Arrangement.  Although Advisory Opinion 14-05 is limited to only the specific Arrangement of this particular Manufacturer, it is a promising decision for patients in desperate need of discounted brand name products and other pharmaceutical manufacturers with aspirations to establish similar arrangements.

Pursuant to the Arrangement, the Manufacturer sells a brand name product, which is eligible under Medicare Part D, but not included on most third party payer formularies or otherwise placed on non-preferred formulary tiers due to the availability of generic equivalents.  The participants enroll by phone, internet, or mail and purchase the product directly from an online retail pharmacy vendor, who contracted to be the Manufacturer’s dispensing agent.  The Arrangement operates completely outside of all federal health care programs.

The OIG addressed several issues regarding the Arrangement, including:  (1) whether the discount provided under the Arrangement is likely to induce the participants to select the online pharmacy to supply items, for which payment may be made by Medicare, Medicaid, or a State health care program; and (2) whether the Arrangement implicated the Anti-Kickback Statute by providing remuneration to the participants or the online pharmacy.  When deciding whether the Arrangement induced participants in violation of the civil monetary prohibition, the OIG concluded that the availability of a discount was not likely to influence the participants to select the online pharmacy to supply other products, which may be payable under Medicare or Medicaid.  Moreover, the OIG similarly concluded that there was a sufficiently low risk that the Arrangement violated the Anti-Kickback Statute.

Advisory Opinion 14-05 is encouraging for other pharmaceutical manufacturers with ambitions of establishing similar arrangements and patients in need of discounts on brand name products.  However, the OIG acknowledged that its decision might be different if the product has no generic equivalents, is covered by more plan formularies, or is more generously covered by some plan formularies.  The
full text of Advisory Opinion 14-05 can be found here.