Regulation

Health care is “under innovation.” No matter how health care is reformed, new and old arrangements will remain highly regulated, with new technology and collaborations moving faster than the law can adapt. Outdated regulations, some not amended in over two decades, may seem no longer relevant, but regulators won’t hesitate to use them. Innovators in health care must navigate regulatory minefields, as illustrated below.

Telemedicine is becoming part of the standard of care. But rules of professional conduct remain focused on in-person medicine. While many states have adopted telemedicine statutes, there is no uniformity across state lines and, like New Jersey, few implementing regulations. Because the law where the patient receives the virtual services is the law that applies, a telemedicine practice that extends beyond a state’s borders must extend its regulatory compliance accordingly. And CMS’ new telehealth and communication technology-based services initiatives will bring new rules.

HIPAA/HITECH regulations governing Privacy, Security and Data Breach are well known in health care, but are set to be amended. Layered on HITECH are data breach laws in all fifty states. The patient’s state of residence defines which state’s data breach rules apply. The General Data Protection Regulation recently became effective and now a wave of new state laws providing strong consumer privacy rights has begun in California. Meanwhile, the FTC will prosecute those whose practices don’t live up to their website policies. Those who deal in health care data are under new scrutiny, as well. Vermont leads the way with its data broker law, while the FDA issued “best practices” on the use of EHR data in clinical investigations. Incorporating wearable devices, artificial intelligence, and blockchain technology into health care presents similar “layered” regulatory requirements for innovators.

Through Collaboration, licensed health care professionals increasingly are joined by lay entrepreneurs in delivering health care. This requires attention to the prohibition on the corporate practice of medicine, affecting choice of legal entity and limiting layperson influence over medical decision-making. In addition, every category of health care professional in a venture has differing professional practice rules. As for self-referral restrictions affecting ownership, compensation, lease payments, etc., federal Stark rules are on the chopping block but state laws lag behind or contain exceptions that are inconsistent with federal exceptions. The grey area created by differing sets of rules becomes a danger zone.

Innovators, by their nature, may be less risk averse than others. But when signing off on a representation promising “compliance with all applicable laws,” lack of follow up can have severe consequences. Compliance with these myriad regulations is a daunting task, a challenge best met with a comprehensive risk assessment, effective compliance program, and vigilance. In other words, a traditional approach.

This article was featured in “The Chronicle:  A Southern New Jersey Development Council Publication.” To view it, please click here. 

Questions regarding this article may be sent to Publications@Capehart.com.

New Jersey prescribers receiving almost anything of value from a pharmaceutical manufacturer, must ensure that such compensation complies with a new state regulation that took effect January 16, 2018.  The rule, Limitations on and Obligations Associated with Acceptance of Compensation from Pharmaceutical Manufacturers by Prescribers, was adopted as one of the last acts of the Christie Administration to address the state’s opioid epidemic.  The rule’s stated purpose is to regulate the receipt and acceptance by prescribers of anything of value from pharmaceutical manufacturers to ensure that such relationships do not interfere with prescribers’ independent professional judgment.  Despite state and federal laws (such as anti-kickback laws and the Open Payments Act) already in place to limit improper influence by pharmaceutical companies and representatives in medical decision-making, and a voluntary PhRMA code of conduct already governing pharmaceutical companies and representatives, New Jersey has added yet more stringent restrictions on prescribers.

The restrictions—applicable to New Jersey physicians, podiatrists, physician assistants, advanced practice nurses, dentists, and optometrists and, in most cases, the prescriber’s immediate family—include an annual cap of $10,000 on prescriber compensation received, in the aggregate, from all pharmaceutical manufacturers for certain “bona fide services.”  This includes payments for speaking at promotional activities, participation on advisory boards, and consulting arrangements but does not apply to speaking at education events, payments for research activities, and certain royalty payments and licensing fees.  Education events (including continuing education events) must meet the rule’s requirements for overall purpose, acceptable venue, and financial disclosure.

In addition to the cap on compensation for bona fide services, the rule restricts the type of gifts and payments that prescribers can accept from pharmaceutical manufacturers/representatives. Prohibited items include, among other things, cash, gift cards, stock, entertainment and recreational items, and items for a prescriber’s personal use.  Exempted are items for prescriber education or items for the benefit of patients, such as drug samples (which are subject to yet another existing regulation).  Certain payments are permitted if compensation is based on fair market value, or if to remunerate permitted expenses of prescribers.

For so-called “clarity,” the rule allows for and defines the value of “modest” meals that can be provided in different settings. When pharmaceutical company representatives present information about a product in an in-office or in-hospital setting, or at promotional activities or education events, any food and/or beverage that is provided cannot exceed $15.00 per prescriber.

Last, but certainly not least, an arrangement for allowed bona fide services (such as speaking at promotional activities and education events, participation on advisory boards, and consulting arrangements), entered into after January 15, 2018, must be provided pursuant to a written agreement. While other laws already require a written agreement for such a services arrangement, the new rule imposes additional requirements, including a prescriber attestation.

In light of these detailed restrictions, prescribers should proceed with caution when receiving any type of compensation from a pharmaceutical manufacturer/representative and ensure that bona fide services arrangements are governed by a written agreement that complies not only with this new rule, but with all regulations that govern such relationships.

Questions regarding this article may be sent to Publications@Capehart.com.