United States: A Guide to New Jersey's New Limits On Pharmaceutical Industry Payments To Prescribers

Last Updated: February 2 2018
Article by Jordan T. Cohen and Bethany J. Hills

The pharmaceutical industry is facing new limits on payments to prescribers in New Jersey. Earlier this month the state's Division of Consumer Affairs finalized sweeping new rules prohibiting some types of payments and capping others. New Jersey now joins the ranks of other states, like California and Massachusetts, with specific payment prohibitions between manufacturers and prescribers. The new rules place the burden of compliance on prescribers licensed in New Jersey, but manufacturers should be fluent in these requirements. We expect engagement and collaboration with New Jersey prescribers to be impacted, as these rules are clearly designed to be a disincentive to financial arrangements between manufacturers and prescribers. How deeply this impacts ongoing and new collaborations with prescribers is yet to be seen, as manufacturers do rely on prescribers for contributions to product design, product feasibility in clinical workflow, and patient expectations. Below is a summary of the key aspects of the new rules, along with tables to assist in identifying how certain payments are affected.

When is the Effective Date?

The regulations became effective on January 16, 2018. The restrictions do not apply to contracts entered into on or before January 15, 2018.

Who is impacted?

The regulations apply to payments from "pharmaceutical manufacturers" to "prescribers." The regulations define "pharmaceutical manufacturers" as entities, or their agents, that either:

  1. engage in the production, preparation, propagation, compounding, conversion, or processing of prescription drugs or biologics; or
  2. directly engage in the packaging, repackaging, labeling, relabeling, or distribution of prescription drugs or prescription biologics.

The rule carves out prescribers that are employees of a manufacturer, so long as the employees don't provide patient care.

The regulations define "prescribers" to include licensed physicians, podiatrists, physician assistants, advanced practice nurses, dentists, or optometrists.

What Payments are Prohibited?

The following table sets forth the payments that prescribers are prohibited from receiving from pharmaceutical manufacturers and their agents:

Prohibited Payments Details
Financial or in-kind benefits Examples include gifts, payments, stock, stock options, grants, scholarships, subsidies, and charitable contributions.
Entertainment or recreational items Examples include tickets to theater or sporting events, or leisure or vacation trips.
Items of value that do not advance disease or treatment education

This category includes:

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

2. 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 nonprofessional setting, such as electronic devices;

3. Payments in cash or cash equivalent, such as a gift certificates; and

4. Payments or direct subsidies 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 education event or a promotional activity.

Note: Educational events and promotional activities are subject to an exception. See discussion of exceptions, below.

Meals There is an exception for "modest meals." See discussion of exceptions below.

The restrictions apply equally to payments made to a prescriber's immediate family member unless the family member is employed by a pharmaceutical manufacturer and receives the payments as part of their usual and customary employment relationship.

What are the Exceptions?

The broad prohibition above is qualified by the following exceptions:

Exception Details
Sample medication A prescriber may accept sample medications that are intended to be used exclusively for the benefit of the prescriber's patients, as long as the prescriber follows applicable dispensing standards and doesn't charge patients for such samples.
Educational items with minimal or no value outside of professional use Examples include anatomical models, information and materials directly related to patient care or prescriber education, and electronic devices that are used by patients and remain in a common area of the prescriber's office.
Subsidized registration fees Subsidized fees at an education event if that fee is available to all event participants
Modest meals Modest meals can be provided if they have a fair market value of no more than $15 and are provided by (i) an event organizer at an education event (provided the meals facilitate the educational program to maximize prescriber learning) or (ii) a manufacturer to non-faculty prescribers through promotional activities.
Reasonable payment or remuneration for travel, lodging, and other personal expenses Prescribers can receive payments made in connection with research activities as well as payments made to prospective applicants in connection with employee recruitment.
Research Research activities are specifically not subject to the requirements for bona fide services and not subject to the annual cap, discussed below. Although not clearly drafted in the rules as an exception, payments for research activities appear to be permitted.
Royalties and licensing fees This exception is limited to royalties and licensing fees paid in return for contractual rights to use or purchase a patented or otherwise legally recognized discovery for which the prescriber holds an ownership right.
Compensation for educational events Prescribers can receive fair market value compensation for providing bona fide services as a speaker or faculty organizer or academic program consultant. In this context, prescribers can also receive reasonable payment for travel, lodging, and other personal expenses. Prescribers can be granted continuing education credits for participation in such activities.

Compensation for promotional activities

[Subject to cap. See below]

Prescribers can receive compensation, based on fair market value, for providing bona fide services as a speaker or faculty organizer or academic program consultant for a promotional activity. In this context, prescribers can also receive reasonable payment for travel, lodging, and other personal expenses. A prescriber may not claim continuing education credit for participation in such activities.

Compensation for participation on an advisory board or other consulting arrangement

[Subject to cap. See below]

Prescribers can receive compensation, based on fair market value, for participation on advisory bodies or under consulting arrangements. A prescriber serving in this capacity also may accept reasonable payment or remuneration for travel, lodging, and other personal expenses associated with such services.

What is "promotional activity"? What is "research"?

"Promotional activity" is defined as any unaccredited activity, meeting, or program organized or sponsored by a pharmaceutical manufacturer, or the manufacturer's agent, that is directed at prescribers to promote the prescription, recommendation, supply, administration, use, or consumption of the manufacturer's products through any media or medium. "Promotional activity" excludes educational events or services provided in connection with research activities.

"Research" is defined as any study assessing the safety or efficacy of prescribed products administered alone or in combination with other prescribed products or other therapies, or assessing the relative safety or efficacy of prescribed products in comparison with other prescribed products or other therapies. Research also includes systemic investigation, including scientific advising on the development, testing and evaluation that is designed to develop or contribute to general knowledge, or reasonably can be considered to be of significant interest or value to scientists or prescribers working in a particular field. "Research" includes both pre-market and post-market activities that satisfy the requirements of the above definition.

What are "bona fide services"?

The exceptions allowing for compensation for educational events and promotional activities require that the payments be for "bona fide services." The regulations define "bona fide services" as those services provided by a prescriber pursuant to an arrangement formalized in a written agreement including, but not limited to, presentations as speakers at promotional activities and education events, participation on advisory boards, and consulting arrangements. Services provided in connection with research are excluded from the definition. In what might be a drafting error, the exception dealing with advisory board and other consulting arrangements does not include a reference to "bona fide services." But given that the definition of "bona fide services" itself references these types of arrangements, we believe the requirements for "bona fide services," including the written agreement requirement and in some cases an annual cap, discussed below, should be read to apply equally to those advisory board and consulting arrangements.

How must "bona fide services" be memorialized?

The written agreement required for the bona fide services mentioned above must specify:

  1. The services to be provided;
  2. The dollar value of the consideration, which must be based on the fair market value of the services; and
  3. That the meetings held in association with bona fide services occur in venues and under circumstances conducive to the services provided and that the activities related to the services are the primary focus of the meeting.

The agreement must also identify the following:

  1. The legitimate need for services in advance;
  2. The connection between the competence, knowledge, and expertise of the prescriber and the purpose of the arrangement;
  3. How participation of the prescriber is reasonably related to achieving the identified purpose;
  4. The manner by which the prescriber will maintain records concerning the arrangement and the services provided by the prescriber; and
  5. An attestation that the prescriber's decision to render the services is not unduly influenced by a pharmaceutical manufacturer's agent.

What is the cap on compensation for "bona fide services"?

Payments received by prescribers under the exceptions for bona fide promotional and advisory/consulting services are subject to a calendar year aggregate cap of $ 10,000 that includes payments received from all pharmaceutical manufacturers. Payments for speaking at education events are not subject to the cap, but still must be for fair market value and set forth in a written agreement. Payments for research activities and payments for royalties and licensing fees are not subject to the cap.

Public Disclosure Requirement

Prescribers serving as speakers at an education event or for a promotional activity are required to directly disclose to attendees either orally or in writing at the beginning of the presentation that the prescriber accepted payment for bona fide services from the sponsoring pharmaceutical manufacturer within the preceding five years.

Enforcement

The rule does not provide for penalties against pharmaceutical manufacturers for violations. Instead, enforcement will rest with the prescribers' respective licensing boards which will have the authority to impose disciplinary action and/or civil penalties.

Compliance Considerations

Physicians, podiatrists, physician assistants, advanced practice nurses, dentists, and optometrists should ensure that payments they receive from pharmaceutical manufacturers fall outside the ambit of the regulation or fit with an exception. When providing bona fide services, these prescribers should consider working with counsel to ensure that a compliant agreement is executed and should have appropriate documentation on file to demonstrate that the payments received did not exceed the $10,000 annual cap. Pharmaceutical manufacturers (including packagers, repackagers, labelers, relablers, and distributors) should revise their policies and procedures to provide compliant arrangements with prescribers on a going forward basis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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