The New "Gift Ban" Statute in Massachusetts: a Primer on Compliance and Enforcement

Boston, MA - April 22, 2009

Foley Hoag Presents a Panel Discussion Providing Insight on Massachusetts’ New Sales and Marketing Rules and Disclosure Regulations

Speaking to in-house counsel, compliance and marketing executives from pharmaceutical and medical device companies, lawyers from Foley Hoag LLP recently offered a primer on Massachusetts’ recently-enacted Pharmaceutical and Medical Device Manufacturer Conduct Rules, commonly known as the “Gift Ban Statute.”

The Gift Ban Statute applies to any pharmaceutical or medical device company that transacts business with physicians who are licensed in Massachusetts and regulates the implementation of marketing codes of conduct, training and compliance programs, and disclosure of payments made for purposes of sales and marketing.  Starting July 1, 2009, companies will need to have in place appropriate codes of conduct, training and compliance programs, and be able to certify compliance with the code.  In addition, starting on that date, companies will need to begin collecting relevant data in order to file disclosure reports on July 1, 2010 identifying payments occurring from July 1, 2009 through December 31, 2009. 

Massachusetts is known for having the broadest definition of “sales and marketing” of any state.  In fact, the Commonwealth is the only state to include medical device manufacturers in this type of regulation, and one of two states to make disclosure of physician payment data part of public records.  “This is a new world for pharmaceutical and medical device companies,” said Colin Zick, a Partner in Foley Hoag’s Administrative Law and Litigation Departments with a specialty in health data privacy and security.  “No other industry in any other state is open to this type of transparency and scrutiny of their business relationships.  They are operating in a fishbowl.” 

Leading with a glimpse at what might come in the morning mail, veterans of the Attorney General’s Office presented an overview of how the Attorney General might use her power to issue a Civil Investigative Demand (CID) to investigate perceived violations of the new rules.  And, while the new rules provide the Attorney General with a means of enforcing compliance through fines of $5,000 for each “transaction” that violates the regulations, the Attorney General may also turn to the standard consumer protection and false claims act to obtain as three times the actual damages.

“While it remains to be seen, the new rules open the door to new avenues of enforcement for the State Attorney General, who can use her existing arsenal of investigative tools to engage in wide-ranging investigations of companies covered by the new rules,” said Michele Adelman, Counsel in the firm’s Business Crimes Group.  Ms. Adelman is a former state and federal prosecutor with background in the health care and pharmaceutical industries.

Massachusetts is well known for being proactive in the areas of regulation of pharmaceutical and medical device companies and the enforcement of penalties for violating such regulations.  As an example, in January 2009 the Medicaid Fraud Division of the Massachusetts Attorney General’s office reported that 2008 recoveries totaled more than $46.7 million, surpassing the previous recovery record. 

Panelists offered insight into how the Attorney General might learn of violations.  While the new rules vest reporting authority with the Department of Public Health, case referrals to the Attorney General may continue to come from such stock sources as internal whistleblowers, other states with similar requirements, and federal regulators.

The panelists, including Foley Hoag Partner Dean Richlin, Deputy Chair of the firm’s Litigation Department and former First Assistant Attorney General for the Commonwealth of Massachusetts, offered some tips in fighting back an Attorney General’s Office investigation, such as:

  • Define objectives early, determine what a “win” means
  • Know your adversary
  • Identify potential statutory penalties
  • Assess whether time works for or against you
  • If you negotiate, get all issues on the table
  • If you litigate, take the long view 
To avoid such an investigation, or secure a positive outcome, it is vital to have an updated compliance program and a Compliance Officer to oversee its implementation.  “Most companies already have compliance programs, so they are well on their way to compliance with these Massachusetts rules.  However, existing compliance programs will need to be modified by July 1, 2009 to be compliant,” according to Colin Zick. 

Foley Hoag’s Business Crimes Group has extensive national experience providing comprehensive legal advice to businesses and executives who are subject to government civil and criminal investigations or who are the victims of criminal wrongdoing. Lawyers in the practice also represent clients who need an assessment of a matter under investigation, or guidance on the government enforcement or investigative process.  Additionally, the group has substantial experience conducting confidential internal investigations, and we regularly assist our clients in developing and implementing compliance programs.

Foley Hoag’s Government Strategies practice is active on both the state and federal levels. Lawyers in the practice, located in Boston and Washington, work with clients in regulated industries to achieve mutually beneficial solutions to public policy issues. Foley Hoag’s Government Strategies lawyers have worked in senior-level positions within presidential administrations, on Capitol Hill, in regulatory agencies, and in industry trade associations. The firm’s Life Sciences practice provides a full range of services including Patent Litigation, Prosecution and Strategy; Corporate Finance and Securities; Mergers, Acquisitions and Strategic Alliances; FDA and Reimbursement; Government Strategies; Venture Capital and Emerging Companies, and Product Liability and Complex Tort.

About Foley Hoag LLP

Foley Hoag LLP is a leading national law firm in the areas of dispute resolution, intellectual property, and corporate transactions for emerging, middle-market, and large-cap companies. With a deep understanding of clients’ strategic priorities, operational imperatives, and marketplace realities, the firm helps companies in the life sciences, high technology, energy technology, financial services and manufacturing sectors gain competitive advantage. 225 lawyers located in Boston, Washington, and the Emerging Enterprise Center in Waltham, Massachusetts join with a network of Lex Mundi law firms to provide global support for clients’ largest challenges and opportunities. For more information visit www.foleyhoag.com.

CATEGORIES

Life Sciences, Healthcare, Business Crimes & Government Investigations, Government Strategies, Product Liability & Complex Tort