CALPIRG, a consumer interest group that helped mobilize support for a new California sales and marketing compliance law will focus its monitoring efforts on pharmaceutical firms, according to a representative.

"Our priority in passing this law was prescription drug[s]," Kerry Smith, an attorney with Sacramento-based organization, said during a June 20 Food & Drug Law Institute audioconference on California Senate Bill 1765. The legislation, which was signed in September 2004, is effective July 1.

The law requires affected companies that market in the state to implement and make publicly available - online and through a toll-free number - a compliance program that adheres to the HHS Office of Inspector General's Compliance Program Guidance for Pharmaceutical Manufacturers and PhRMA's "Code on Interactions with Healthcare Professionals."

The compliance program must include a company-established dollar limit on promotional materials provided to individual healthcare professionals. The law also requires firms to annually declare, in writing, compliance with their programs.

CALPIRG plans to compare and rate drug-firm compliance programs, Smith indicated. She did not rule out the possibility that device companies would be monitored at some future time.

Will Devices Be "Roped In" By The Law?

SB 1765 applies to firms that make or sell "dangerous drugs." However, the statute's definition of "dangerous drugs" includes "any drug or device that...may be dispensed only by prescription" (¹ Also see "Device Firms Await Decision On Pending California Sales Compliance Law" - Medtech Insight, 25 April, 2005., p. 3).

It is not clear whether the law was intended to apply to the device industry, Medtronic attorney Sheva Sanders said during the call. "We are roped in - by what appears to be an accident - to the statute that applies to pharmaceutical companies."

Stakeholders are unsure precisely which prescription devices might qualify as a "dangerous drug" under the terms of the law.

A staffer to former state Senator and SB 1765 sponsor Byron Sher (D-Palo Alto) confirmed that the bill's drafters were focused on pharmaceuticals. "To be honest, devices did not get discussed. No representatives from device manufacturers ever came forward with any concerns," said Heather Scott, now a consultant for state Senator Gloria Romero (D-Los Angeles).

The language including the word "device" came directly from California's Sherman Food, Drug, & Cosmetic Law, she noted.

AdvaMed, in conjunction with state Assemblywoman Lois Wolk (D-Davis), initially tried to exempt devices or clarify the law, but ultimately abandoned those efforts ² Also see "AdvaMed Ethics Code Compliance Starts At The Top – Attorney D’Emanuele" - Medtech Insight, 20 June, 2005., In Brief). An amendment to remove devices from the bill was pulled by Wolk after CALPIRG and another public interest group expressed concern.

Device companies are particularly concerned that the law references the PhRMA code and not the AdvaMed "Code of Ethics." Sanders and others point out that the device industry guidelines allow firms more latitude to pay for healthcare providers to attend multi-day, on-site training sessions because complex devices often require extensive physician education.

PhRMA's code, by contrast, "contemplates a couple of hours in the [provider's] home city," said Sanders, a member of the AdvaMed legal committee's "Code of Ethics" subcommittee.

Concerns Over Free Samples And Intellectual Property

Sections of the statute addressing acceptable exclusions from the spending limit are also troublesome from a device perspective. For instance, the law exempts "drug samples given to physicians and healthcare professionals intended for free distribution."

This "doesn't really fit well with the sampling activities in the device industry," Sanders said, because devices are often sold as bundles, which may include products provided at no cost. Because free samples within a bundle cannot be individually distinguished, they would technically need to be included in a firm's spending limit, she explained.

In addition, the stipulation that the sample needs to be "distributed" to patients does not seem to include trial periods with capital equipment, she noted.

The law also fails to exclude from the spending limits the purchase of intellectual property from physicians - a common practice in the device industry - even as it excludes payments to physicians for consulting arrangements.

Such an exception would have been included had the law been "drafted thoughtfully with respect to the device industry," Sanders said.

AdvaMed Code Adherence Might Be Sufficient

AdvaMed is finalizing a legal opinion to help members understand the risks of the new statute.

Med-tech lawyers have suggested that adhering to the AdvaMed code might suffice for device firms to comply with SB 1765 ³ Also see "AdvaMed Ethics Code Compliance Starts At The Top – Attorney D’Emanuele" - Medtech Insight, 20 June, 2005., p. 14).

The AdvaMed code became effective in January 2004. According to survey results reported at the trade group's annual meeting in March, 92% of surveyed members were familiar with the code and many had adjusted internal policies to conform to it (⁴ Also see "AdvaMed Ethics Compliance Survey Suggests More Analysis May Be Needed" - Medtech Insight, 7 March, 2005., p. 10). However, a majority of respondents lacked performance indicators to monitor their compliance programs.

The Medical Device Manufacturers Association also is developing an ethics code. The group stresses that many of its members already have compliance policies in place.

Sanders said that a device firm's best option might be to "choose to read the law as it would have been drafted had the drafter been really thinking about the distinctions between the device industry and the pharmaceutical industry."

"One could argue that compliance with the AdvaMed code...constitutes material compliance with the statute," she said. In addition, a firm could assume that "the exclusion for pharmaceutical samples would also apply in some reasonable scope to an exclusion of device sampling."

"You could adopt that approach without conceding" that the law applies to devices, she asserted. "And you could be honest about your approach in the annual public disclosure statement."

Two alternative options are less favorable, she suggested.

A device company could "in good faith" determine that the law does not apply and do nothing. However, Sanders acknowledged that this approach "perhaps buys you a fight."

Alternatively, a firm could include multi-day, on-site training sessions in its "gifts and incentives" category. Under the law, such expenditures are subject to a company-set annual spending limit - and a firm could set that limit "very high," Sanders noted.

However, a high limit might prove problematic from a public relations standpoint, she indicated. Furthermore, "those of us who are serious about compliance do not like very high limits," Sanders added.

Law Is Meant To Incentivize Firms - CALPIRG

The law was in fact written with public relations in mind, according to CALPIRG's Smith. "Our main purpose in [pushing for the law] was not to create a litigation stick that would serve as a vehicle for enforcement of" internal compliance policies, she said. Rather, the group hopes the law will serve as a "carrot" in which the public posting of company compliance policies will create an incentive for firms to improve their sales and promotion practices.

SB 1765 does not include any specific enforcement provisions. Smith indicated "that enforcement of this law is primarily going to be done via the Attorney General or other law enforcement authorities."

No civil money penalties were specified in the law either, but the California attorney general's office told CALPIRG that it has enough tools under other state laws to enforce SB 1765, she said.

The device industry is now waiting to see how the law will play out after the July 1 effective date. Assemblywomen Wolk has indicated she might introduce legislation clarifying medical device marketing guidelines if it becomes evident that device firms complying with SB 1765 are hindered in their California sales activities.

AdvaMed, however, has expressed concern over the possibility of its "Code of Ethics" being codified into law. Such codification would discourage future strengthening of the code on the grounds that it could expose companies to potentially damaging lawsuits, according to AdvaMed.

Looming Calif. Law Still Mystifies Device Makers; Watchdog Targets Pharma

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