The New PhRMA Code: How Will It Change the Way Drug Companies Interact with Physicians?

With the new year comes a new set of PhRMA guidelines, but exactly how companies follow those guidelines, if they do at all, remains to be scrutinized, especially in states where laws require compliance.

By Tricia Glover

The new Code on Interactions with Healthcare Professionals from the Pharmaceutical Research and Manufacturers of America (PhRMA) goes into effect this month. Since the new Code was initially published last July, there has been a great deal
of discussion about the guidelines and how they will impact the pharmaceutical manufacturers that choose to adopt them—and those that do not. In spite of all the discussion, however, many in the industry are wondering how much of the revised Code has changed, and whether it will have any significant impact on the
way companies interact with healthcare professionals?
To answer those questions, we need to examine the content of the revised Code and PhRMA’s reasons for issuing it. PhRMA’s original Code, published in 2002, was created to reinforce the assertion that drug companies’ interactions with healthcare providers were professional exchanges designed to benefit patients and enhance the practice of medicine. While the voluntary provisions of the 2002 Code were generally embraced by the pharmaceutical industry, many policy makers, government officials, and healthcare professionals voiced concerns that the Code did not fully address questionable practices.
To acknowledge that demand for improvement, and demonstrate its commitment to responsible marketing, PhRMA added new provisions to the 2009 Code and enhanced its existing standards. Below is a summary of the 2009 updates and provisions:

The 2009 Code updates:

• prohibit providing non-educational gifts to healthcare professionals and their staff, including “reminder” items, such as pens, pads, mugs, etc.
• prohibit sales representatives from providing restaurant meals to healthcare professionals, and only allow them to provide modest meals in healthcare professionals’ offices or in hospitals during educational presentations
• prohibit entertainment or recreational benefits to healthcare professionals
• prohibit resorts as locations for meetings
• enhance the independence of CME funded by industry
• enhance the provisions for speaker and consulting arrangements
• require justification for selecting or retaining consultants and speakers

The new provisions in the Code:

• require sales representatives to be informed about applicable laws, regulations, and industry codes of practice
• require companies to develop policies for the appropriate use of speakers; monitor speaker programs for compliance; establish annual cap for speaker compensation; enhance the transparency for promotional speaker programs and independent medical education
• require companies to set guidelines for the use of physician data
• require companies to ensure that speakers or consultants who also serve on formulary or clinical committees provide appropriate disclosure to those committees
• require companies who publicly commit to the Code to provide an annual certification of compliance signed by the company’s Chief Executive Officer (CEO) and Chief Compliance Officer (CCO)

For most manufacturers, the greatest changes resulting from the new Code are the bans on providing healthcare professionals with gifts or “reminder” items such as pens and prescription pads, and restaurant meals—both of which were once common practices. Although those provisions represent a notable change for many sales teams, most pharma executives agree that reminder items and restaurant meals do not play a critical role in influencing a healthcare professional’s prescribing habits, and therefore are not overly concerned about eliminating them.
Sales representatives will still be allowed to provide samples, educational items to healthcare professionals and/or patients, occasional in-office meals, and promotional speaker programs to aid in educating healthcare professionals about company products. Even though certain sales activities are prohibited, PhRMA’s enhanced standards maintain provisions that will enable companies to market their products in a manner that will benefit patients and enhance healthcare.
As one vice president at a leading pharma company said, “The key to effective sales calls comes down to our sales representatives and how well they are able to communicate on issues that matter to the healthcare professional. “Reminder” items help keep products in mind, but in the big picture, they don’t make that much of a difference.”
From a spending perspective, some companies will replace traditional reminder items with educational products such as medical textbooks, while others may shift those dollars into alternative marketing and sales initiatives. Likewise, money spent on restaurant meals is likely to be redirected into in-office education. Still other companies may view the ban on those items as an opportunity to cut expenses during challenging economic times.
Still, the Code is not compulsory, so some companies may continue to provide reminder items or restaurant meals. Those companies that do should be aware that California and Nevada have laws requiring compliance with the Code if a company is marketing a drug in their state. Therefore, violating the Code in those states could have serious legal ramifications.
Other key components of the 2009 Code are the enhanced provisions on speaker and consulting arrangements, and detailed standards regarding the independence of CME. On the surface, those provisions seem to be considerably stricter than the 2002 Code, and therefore require industry to make significant changes. Yet, in reality, those new guidelines mirror many of the same standards and principles that have been previously published by other regulatory groups, such as the Office of Inspector General (OIG), the Accreditation Council for Continuing Medical Education (ACCME), and the American Medical Association (AMA). Companies that are already in compliance with OIG, ACCME, and AMA will probably only need to make minimal changes to their business practices.
So, if many companies are already in compliance with the guidelines on speaker and consulting arrangements, CME, and the ban on reminder items and restaurant meals is a simple change for the industry, why is the 2009 PhRMA Code the subject of so much discussion?
In reality, the focus on the new PhRMA Code has less to do with its changes in guidelines, and more to do with the broader implication that there will be increased scrutiny around the industry’s interactions with healthcare professionals. Regardless of whether they choose to adhere to the Code, all pharmaceutical and biotech companies are being pushed to reassess their policies, ask tough questions, and identify areas where they may have risk.
Those risks likely include any business practices where “intent” can be proven to potentially violate company policies, the federal fraud and abuse laws, and/or state laws. For example, business practices that involve payments to healthcare professionals are typically considered high risk areas. To mitigate the risk and ensure compliance with state and federal laws and regulations, pharmaceutical and biotech companies must capture information on payments to individual healthcare professionals from different touch points across their organization, track aggregate spending, and meet various transparency and reporting requirements. Although the need to monitor and audit spending on healthcare professionals is becoming increasingly critical, it continues to be a challenge for companies. That is because they do not have the resources to capture data at the transaction level from multiple internal and external systems, or from third-party vendors.
Over time, the implications for those companies that choose not to adopt the Code will become clearer. PhRMA has committed to disclose on its website, companies that pledge to follow the Code—and some colleagues believe that government regulators and enforcers may use the site to learn of those companies that elect not to comply. Additional motivation for adopting the Code has been provided by OIG. It states that, although following the Code will not protect a manufacturer under the anti-kickback statute, it will substantially reduce the risk of fraud and abuse and will help demonstrate a company’s good intentions.
Inevitably, some companies may still decide that it is not in their best interest to follow the Code. Depending on how many companies choose not to adopt the new guidelines, we may see more states follow California’s and Nevada’s leads by regulating compliance through new state laws.

In conclusion, although companies assume different risks in the choices they make, demonstrating intent and high ethical standards remains challenging. As an industry, we must show that our interactions with healthcare professionals are designed to benefit patients and enhance the practice of medicine. If we do not, we should expect continued scrutiny, more regulations, and harsher penalties for failing to comply.