On January 16, 2018, New Jersey enacted a new regulation, N.J.S.A. § 13:45J, titled “Limitations on Obligations Associated with Acceptance of Compensation from Pharmaceutical Manufacturers by Prescribers.” According to the state, the new regulation, which regulates the payments and items of value that prescribers1 (e.g., physicians, physician assistants, advanced practice nurses, and dentists) can accept from pharmaceutical manufacturers2, is intended to ensure that relationships between health care providers and industry do not interfere with a prescribers’ independent professional judgment. The new regulation applies to all contracts entered into on or after January 16, 2018.
In part, the regulation codifies some principles already set forth in the PhRMA Code on Interactions with Health Care Professionals, which is a voluntary industry code limiting prescribers’ acceptance of items of value and other compensation from pharmaceutical manufacturers that do not clearly advance disease or treatment education, as well as prohibiting the acceptance of gifts. More notably, the regulation caps, at $10,000 per calendar year, a prescriber’s collective compensation from all pharmaceutical manufacturers for certain bona fide services. It also imposes a $15 cap per meal on meals that may be accepted by a New Jersey prescriber. Lastly, the regulation places certain disclosure requirements on prescribers.
Some pharmaceutical manufacturers are contemplating whether to amend contract templates to cite specifically this new New Jersey law. But all are carefully assessing the impact of the law’s new $10,000 cap on current and future engagements of key opinion leaders (KOLs) that are licensed in New Jersey. They are also considering how to accommodate the new $15 cap per meal.
The regulations do not include specific penalties for noncompliance by prescribers. However, in accordance with the Uniform Enforcement Act, N.J.S.A. 45:1-1, et seq., relevant professional licensing boards have the authority to impose disciplinary action and/or civil penalties on prescribers for violations of statutes or regulations, such as this regulation. As such, prescribers could be subject to board-imposed disciplinary actions or civil penalties for failure to comply.
Standards for Payments to Prescribers
Do I need a written agreement and what needs to be included?
The new regulation codifies the guidelines of the PhRMA Code, and is consistent with the federal anti-kickback statute safe harbor for personal services and management contracts, by requiring that all payments for bona fide services be governed by a written agreement between the prescriber and the pharmaceutical manufacturer. Consistent with the PhRMA Code and the safe harbor, the regulation requires that this written agreement identify the legitimate business need for the services, the dollar value of the services – based on the fair market value of the services – and an explanation as to why the prescriber is the appropriate person to provide the services. The agreement must also place an obligation on the prescriber to maintain records regarding the arrangement. Lastly, the written agreement must include an attestation that the prescriber’s decision to render the services is not unduly influenced by a pharmaceutical manufacturer or its agent. The requirements related to the written agreement are further described by N.J.S.A. § 13:45J-1.2 (see definition of “bona fide services”).
$10,000 Annual Cap
Which bona fide services are subject to the cap?
Only payments for certain bona fide services are subject to the $10,000 annual cap. Specifically, the cap applies to promotional speaker presentations and events, participation in promotional advisory boards, and other “consulting arrangements.” With respect to these bona fide services, a prescriber is prohibited from accepting more than $10,000 in the aggregate from all pharmaceutical manufacturers in any calendar year.
There are three notable exclusions from the cap: First, payments for speaking at educational, non-promotional events are not subject to the cap (although, as always, payments must be consistent with fair market value and set forth in a written agreement). Second, payments for research activities are expressly excluded from the cap. Research activities include both pre-market and post-market safety or efficacy assessments, and any systemic investigation, including scientific advising on development, testing, and evaluation (e.g., scientific advisory boards). Lastly, payments for royalties or licensing fees are expressly excluded from the cap. In addition, a prescriber who is an employee of a pharmaceutical manufacturer is exempt from the annual cap, but remains subject to the disclosure requirements described below.
Regardless of these exceptions, some KOLs licensed in New Jersey may find the $10,000 aggregate cap very difficult to navigate, especially those who believe it best not to discriminate when consulting with industry. Indeed, in an effort to remain unbiased, many leading KOLs consult with all leading pharmaceutical manufacturers in the applicable medical specialty (e.g., dermatology, oncology, neurology). These KOLs could receive well over $10,000 annually when serving as a promotional speaker for one pharmaceutical manufacturer while also participating on advisory boards for many other pharmaceutical manufacturers.
Who is responsible for ensuring that a prescriber complies with the cap requirement?
It is unclear who is responsible. The new regulation requires only that the written agreement between the prescriber and the pharmaceutical manufacturer specify the manner by which the prescriber will maintain records concerning the arrangement and the services provided by the prescriber. The new regulation does not expressly impose an obligation on the pharmaceutical manufacturer to ensure that a prescriber is under the cap.
However, the New Jersey attorney general, in a response to certain comments during this new regulation’s open comment period, stated that “a pharmaceutical company can obtain from the prescriber the information necessary to ensure that a prescriber is operating within the cap.”
Prohibited and Permitted Items of Value
As a complement to PhRMA Code’s prohibition on pharmaceutical manufacturers’ giving certain items of value to prescribers, the new regulation prohibits prescribers from accepting from pharmaceutical manufacturers any financial benefit or benefit-in-kind, any entertainment or recreational items, or any item that does not advance disease or treatment education.
In addition, although the new regulation does not provide limits on the number of meals that New Jersey prescribers may accept from pharmaceutical manufacturers, it imposes a $15 cap per meal on meals that may be accepted by a New Jersey prescriber from a pharmaceutical manufacturer. Yes, a $15 cap. Many pharmaceutical manufacturers have already established internal limits with respect to meals. In light of this new requirement, pharmaceutical manufacturers should review and update existing policies and procedures related to meals, as necessary. In addition, pharmaceutical manufacturers may consider prominently displaying a written notice at any events where meals valued in excess of $15 are provided to prescribers. The notice should notify New Jersey prescribers that the meal exceeds $15 and provide an option for the prescribers either to opt out of the meal or pay for it out of pocket.
Additional items of value that are prohibited and permitted under the regulation are further described, along with specific examples, in N.J.S.A. § 13:45J-1.3 and N.J.S.A. § 13:45J-1.4.
Lastly, the new regulation imposes certain disclosure requirements on prescribers. The regulation expressly states that a prescriber serving as a speaker at an educational (non-promotional) or promotional event is required to directly disclose to the attendees, either orally or in writing at the beginning of the event, that the prescriber has accepted payment for bona fide services from the sponsoring pharmaceutical manufacturer within the preceding five years.
Because the practical reality is that the pharmaceutical manufacturer will often be involved in reviewing or preparing the content to be presented by the prescriber, pharmaceutical manufacturers should be cognizant of this disclosure requirement and, if a New Jersey prescriber (e.g., a promotional speaker) wants to provide this disclosure in writing, be prepared to assist the prescriber in making necessary disclosures.
The regulation also imposes a disclosure requirement on prescribers that are simultaneously employed by a pharmaceutical manufacturer and also provide patient care. Under the regulation, those prescribers are now required to disclose to patients, either orally or in writing, that they are employed by a pharmaceutical manufacturer.
With this new regulation, New Jersey joins other states in regulating relationships between health care providers and industry, including Massachusetts, Minnesota, and Vermont, which also prohibit or restrict certain payments and transfers of value. However, unlike these other states, the New Jersey law applies to prescribers; it does not directly apply to manufacturers. And unlike the other states, the New Jersey law applies a $10,000 annual aggregate cap.
Prudent pharmaceutical manufacturers would be well served to consider these new requirements when interacting with New Jersey providers. Pharmaceutical manufacturers may also consider reviewing and revising existing policies and procedures and consulting agreement templates in light of the new regulations, as necessary.
- “Prescriber” means a physician, podiatrist, physician assistant, advanced practice nurse, dentist, or optometrist licensed pursuant to Title 45 of the New Jersey Revised Statutes, but does not include a licensee who is an employee, as defined in N.J.A.C. § 18:35-7.1, of a pharmaceutical manufacturer who does not provide patient care.
- “Pharmaceutical manufacturer” means any entity that (1) is engaged in the production, preparation, propagation, compounding, conversion, or processing of prescription drugs or biologics, by extraction from substances of natural origin, or independently by means of chemical synthesis; or (2) is directly engaged in the packaging, repackaging, labeling, relabeling, or distribution of prescription drugs or prescription biologics, provided, however, that pharmaceutical manufacturer shall not include a health care facility licensed by the Department of Health, or a pharmacy holding a permit issued by the Board of Pharmacy. The regulation does not apply to medical device manufacturers.
Client Alert 2018-038