Life Science Compliance Update

June 27, 2017

Maine Legislature Passes Gift Ban Legislation

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The Maine Legislature recently passed LD 911, An Act to Prohibit Certain Gifts to Health Care Practitioners, through the unanimous consent calendar.

This bill amends the Maine Pharmacy Act to prohibit a person engaged in the manufacture of prescription drugs or a person who buys prescription drugs for resale and distribution to persons other than consumers from giving a gift to an individual who is licensed, registered or otherwise authorized in the appropriate jurisdiction to prescribe and administer drugs in the course of that individual's professional practice. "Gift" does not include samples of prescription drugs to be given to patients for free, items with a total value of less than $50 over a calendar year, payments to sponsors of educational programs, honoraria and payments of expenses incurred at an educational conference or meeting, compensation for research, publications or educational materials and salaries or other benefits paid to employees.

The bill specifically declines to include the following in the definition of “gift,” signifying that the below items will be permitted.

  1. Professional samples of a drug provided to a practitioner for free distribution to patients;
  2. Items with a total combined retail value, in any calendar year, of not more than $50;
  3. A payment to the sponsor of a medical conference, professional meeting, or other educational program, as long as the payment is not made directly to a practitioner and is used solely for bona fide educational purposes;
  4. Reasonable honoraria and payment of the reasonable expenses of a practitioner who serves on the faculty at a professional or educational conference or meeting;
  5. Compensation for the substantial professional or consulting services of a practitioner in connection with a genuine research project;
  6. Publications or educational materials; or
  7. Salaries or other benefits paid to employees.

Democratic Rep. Scott Hamann says the proposed law addresses part of Maine's addiction problem by preventing doctors from overprescribing opioids.

The bill is now at the Governor’s desk and he has not yet given indication as to what he plans on doing.  

June 26, 2017

California Gift Ban Bill to be Heard Tomorrow

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On Tuesday, June 27, 2017, California Senate Bill 790 will be heard in the Assembly Committee on Health, with limited testimony allowed per side. We have previously written about the bill, noting that the bill passed the California Senate back in May 2017

The bill, if passed as written, would prohibit a manufacturer of a prescribed product from offering or giving a gift to a health care provider. The bill would further prohibit a manufacturer of a prescribed product or an entity on behalf of a manufacturer of a prescribed product from providing a fee, payment, subsidy, or other economic benefit to a health care provider in connection with the provider’s participation in research, except as specified.

Under existing Sunshine Act law, manufacturers are required to disclose to the Centers for Medicare and Medicaid Services (CMS) any payments or other transfers of value made to physicians or teaching hospitals.

The intent of the Legislature is that the prohibitions and requirements described above will operate in conjunction with the Sunshine Act. If the Sunshine Act is repealed or becomes inoperative, the intent of the Legislature to enact legislation similar to the Sunshine Act.

Specific Bill Language

The bill prohibits or limits the offering or giving of gifts to a health care provider by a drug manufacturer. It allows a drug manufacturer to provide meals for a health care provider, provided the meals do not exceed $250 per person per year in value. Further, drug company payments to health care providers for research and education must meet certain criteria.

Specifically, this bill:

1) Prohibits a pharmaceutical manufacturer from offering or giving a gift to a health care provider.

2) Defines gift as a payment, food, entertainment, travel, subscription, advance, service, or anything else of value provided at no cost or less than full market value to a health care provider.

3) Allows or exempts from the gift ban payments all of the following:

a) The payment is made to the sponsor of a significant educational, medical, scientific, or policymaking conference or seminar, as specified, including allowing some or all of the funding at the sponsor’s discretion to provide meals and other food for all conference participants;

b) Honoraria and payment of expenses of a health care professional who serves on the faculty of a bona fide educational, medical, scientific, or policymaking conference or seminar, if certain conditions are satisfied, as specified; 

c) In connection with a bona fide clinical trial or research project that constitutes a systematic investigation, is designed to develop or contribute to general knowledge, and reasonably can be considered to be of significant interest or value to scientists or health care professionals;

d) Reasonable expenses, necessary for technical training on the administration of a prescribed product, if outlined in an agreement between provider and manufacturer;

e) Public health initiatives, as specified;

f) Royalties and licensing fees in return for contractual rights, including joint ventures;

g) Bona fide marketing research conducted by a third party, as defined;

h) Expenses of an individual related to an interview for a bona fide employment opportunity with a manufacturer;

i) Meals for a health care provider that do not exceed $250 per person per year in value in addition to any meals provided under a) above;

j) Other reasonable fees, payments, subsidies, or other economic benefits at fair market value;

k) Samples of a prescribed product;

l) The provision of peer-reviewed academic, scientific, or clinical articles or journals and other items that serve a genuine educational function;

m) Scholarships for medical students, residents, and fellows to attend significant educational, scientific or policy making conferences of professional associations where the recipient is chosen by the association;

n) Rebates and discounts for products provided in the normal course of business;

o) Financial donations and free prescription drugs and other products to a free clinic;

p) Prescription drugs distributed free or at a discount as part of a patient assistance program;

q) Salary support for fellows through grants from manufacturers, under specified conditions;

r) Coffee or other snacks or refreshments at a booth at a conference or seminar;

s) Anything of value for which the health care provider reimburses the cost at fair market value; and,

t) Any payment made in compliance with the Political Reform Act of 1974 except a gift made under that act.

Previous Legislation

AB 2821 (Feuer) of 2008 would have established a gift limit of $250 per physician per year for each pharmaceutical company and required both the public disclosure of gifts of $50 or more and the payment of a disclosure fee to the Department of Health Care Services (DHCS). AB 2821 failed passage in the Assembly Health Committee.

SB 1765 (Sher), Chapter 927, Statutes of 2004, requires pharmaceutical companies to adopt and update CCPs for interactions with health care professionals. Requires pharmaceutical companies to establish explicitly in its CCP an annual dollar limit on gifts, promotional materials or other items or activities, with exceptions, in accordance with existing guidelines, as specified. Requires such companies to annually declare in writing that they are in compliance with their CCPs and with the limits on gifts established by the bill.

AB 1437 (Koretz), of 2004 would have prohibited inappropriate marketing by pharmaceutical companies by codifying the PhRMA code on Interactions with Healthcare Professionals. AB 1437 failed passage in the Assembly Health Committee.

AB 103 (Reyes) of 2003 would have required pharmaceutical manufacturers to disclose to the Department of Health Services (now DHCS) information about gifts made to any person authorized to prescribe, dispense, or purchase prescription drugs. AB 103 failed passage on the Assembly Floor.

Hearing Information

The hearing is set for 1:30 pm PST, and SB 790 is the second-to-last bill to be heard. The link to the hearing audio can be found here.

Genentech & Escobar: Using Materiality to Escape False Claims Liability

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In constructively bringing an end to a False Claims Act (“FCA”) whistleblower suit alleging Genentech, Inc. (“Genentech”) of defrauding Medicare by way of concealing substantive health care analytics data involving purported side effects of the company’s cancer drug Avastin, the Third Circuit of Appeals in a recent decision determined that the Plaintiff in this matter had failed to demonstrate that any noncompliance had an impact on government payments. Specifically, the Court applied the prevailing standard in Escobar that an FCA lawsuit must demonstrate that any misrepresentation is “material” to the government’s payment decision. In dismissing this suit and invoking this heightened standard of materiality, the Third Circuit not only reinforces Escobar but places the now clear burden on FCA Plaintiffs to demonstrate that any noncompliance was material to alleged fraudulent payments.


Back in August 2016, we highlighted the widely watched and reported U.S. Supreme Court decision in Universal Health Services, Inc. v. United States ex rel. Escobar (“Escobar”). The case “reaffirmed that the government and realtors via qui tam suits can pursue False Claim Act liability against life science and healthcare companies” while adding “a requirement that such parties must also demonstrate any misrepresentations were “material” on statutory, regulatory, or contractual requirements that make such representations misleading on those goods and services."

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