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NJ Prescribers Now Subject to New Limits on Payments From Pharma Manufacturers

Client Alert

Authors: Lauren DeWitt and Andrew G. Malik

1/23/2018
NJ Prescribers Now Subject to New Limits on Payments From Pharma Manufacturers

A recently finalized New Jersey rule imposes new limits on prescriber acceptance of gifts and compensation from pharmaceutical manufacturers and their agents, and will likely have a significant impact on many prescriber service engagements. The rule applies to agreements entered into after January 16, 2018, and is enforceable by the New Jersey Attorney General and New Jersey’s professional licensing boards, which can initiate administrative action against a violator or seek an injunction. Prescribers who violate the new rule may face disciplinary action by their licensing boards (including loss or suspension of licensure) or civil monetary penalties of up to $10,000 for an initial violation and $20,000 for each subsequent violation. New Jersey prescribers, as well as the manufacturers and manufacturers’ agents who engage with New Jersey prescribers, should be aware of these new limitations to ensure compliance when structuring service agreements or engaging in marketing activities.

Who is subject to the new rule? The rule limits gifts and compensation that any physician, podiatrist, physician assistant, advanced practice nurse, dentist or optometrist licensed to prescribe drugs and biologics in New Jersey (collectively, prescribers) may receive and accept from pharmaceutical manufacturers and manufacturers’ agents. The rule also applies to immediate family members of prescribers and has an exception for employees of pharmaceutical manufacturers.

Pharmaceutical manufacturers include packagers/re-packagers, labelers/re-labelers and distributors of prescription drugs and biologics. A manufacturer’s agent is any person employed by, or under contract with, a pharmaceutical manufacturer, who engages in detailing, promotional activities or other marketing of prescription drugs or biologics to any prescriber. The New Jersey rule imposes limitations directly on prescribers, rather than directly on pharmaceutical manufacturers or manufacturers’ agents.        

$10,000 cap on aggregate payments for services. The rule’s most significant limitation is that it prohibits individual prescribers from receiving more than $10,000 per year in the aggregate from all manufacturers for a prescriber’s bona fide services, which include presenting as a speaker at promotional activities, participating on advisory boards, and consulting arrangements. Reasonable payment or reimbursement for travel, lodging and other personal expenses associated with the bona fide services are excluded from the $10,000 cap. Promotional activities include 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.

Research activities, royalties and licensing fees, and payments for speaking at educational events are excluded from the cap. Educational events are events primarily dedicated to promoting objective scientific and educational activities and discourse, and are held in a venue that is conducive to informational communication and training about health care information. A prescriber serving as a speaker at an educational event or for a promotional activity must directly disclose to attendees at the beginning of the presentation that the prescriber has accepted payment for bona fide services from the sponsoring pharmaceutical manufacturer within the last five years.

Written agreement required. Whether or not the bona fide services are subject to the cap, the rule requires prescribers and manufacturers or their agents to enter into a written arrangement for the services, with compensation set at fair market value. The written agreement must specify the services to be provided, the dollar value that the prescriber will receive, and that the meetings held in connection with the services will occur in venues and under circumstances conducive to the services provided. The agreement must also identify:

  • The legitimate need for services
  • The connection between the prescriber’s knowledge and expertise and the purpose of the arrangement
  • How participation of the prescriber is reasonably related to achieving the identified purpose
  • The manner by which the prescriber will maintain records concerning the arrangement and the services provided
  • An attestation that the prescriber’s decision to render the services is not unduly influenced by a pharmaceutical manufacturer’s agent.

Prohibited gifts and payments. The rule prohibits prescribers from accepting the following items from manufacturers or their agents:

  • Entertainment and recreational items (e.g., tickets to theater or sporting events, or leisure or vacation trips)
  • Any item of value that does not advance disease or treatment education (e.g., pens, notepads, mugs or other items with a company logo)
  • Items intended for the personal benefit of the prescriber or staff (e.g., floral arrangements, sporting equipment, artwork, cash or gifts cards)
  • Meals costing more than $15
  • Payment or direct subsidy for attending any educational event or a promotional activity (including the costs of travel, lodging or other personal expenses), unless the prescriber is a speaker or providing consulting or other services related to the event.

Permitted gifts and payments. Gifts and payments permitted under the rule (in addition to the bona fide services payments discussed above) are:

  • Items designed primarily for educating patients or prescribers, as long as the items have minimal or no value to the prescriber outside of his or her professional responsibilities (e.g., anatomical models for use in examination rooms or other information and materials directly related to patient care or prescriber education)
  • Subsidized registration fees for a pharmaceutical manufacturer’s educational event, if available to all participants
  • Sample medications that are intended to be used solely for the benefit of the prescriber’s patients, provided that the prescriber does not charge patients for the samples
  • Reasonable payment or reimbursement for travel, lodging and other personal expenses in connection with research activities or employment recruitment.

Although the new rule applies directly only to prescribers, it will impact how pharmaceutical manufacturers structure their engagements with New Jersey prescribers. Pharmaceutical manufacturers that engage New Jersey prescribers (directly or through agents) as speakers, consultants or members of advisory boards may need to revise their standard form contracts to ensure compliance with the rule. Additionally, manufacturers should review how they categorize events as educational or promotional in light of how they are defined under the rule.

Lauren DeWitt and Andrew Malik are associates in Pepper Hamilton’s Health Sciences Department, a team of 110 attorneys who collaborate across disciplines to solve complex legal challenges confronting clients throughout the health sciences spectrum.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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