How the Healthcare Reform Law is Expected to Affect
the Healthcare Convention Marketing and Exhibitions Industry

The recently passed federal Patient Protection and Affordable Care Act contains certain provisions that are expected to affect directly the healthcare convention marketing and exhibitions industry.  Following is HCEA’s analysis of the provisions known to be most likely to impact the industry.

Highlights

• As expected, the law requires gifts to healthcare professionals to be reported.  It incorporates a $10/$100 gift dollar limit.  That is, any transfer of value greater than $10 must be reported, and an aggregate annual value of $100 or more must be reported (similar to many of the relevant state laws).
• Educational materials that benefit patients or are intended for patient use are excluded from the reporting requirement.
• The law appears to standardize these gift limits nationally.  Specifically, the federal law preempts relevant state laws requiring reporting of gifts to healthcare professionals. 
• It does not, however, appear to preempt state laws that ban gifts to healthcare professionals outright, or that contain any other restrictions that go beyond the federal law.
• The law applies to any applicable healthcare company “operating in the United States.”  This presumably would include companies headquartered outside the country but doing business in the U.S.
• Payments made to healthcare professionals indirectly via third parties “where the applicable manufacturer is unaware of the identity of the covered recipient” appear to be exempted from reporting.  While this will undoubtedly be subject to interpretation, this could mean that sponsorship of association-sponsored conventions and related activities could be designed to fall outside the reporting requirements.  This provision also has implications for market research (see below).

Sunshine Provisions
Language from the original Physician Payments Sunshine Act was included in the final approved version of the healthcare reform act.  This provision, which goes into effect March 31, 2013, requires the electronic disclosure to the Department of Health & Human Services of any “payment or other transfer of value” given to a “covered recipient.”  The act defines “covered recipient” as a physician or a teaching hospital, and does not expressly mention that any other types of healthcare professionals, such as nurses, would be affected by the law.  Many different kinds of “transfers of value” are included:

(I) consulting fees;
(II) compensation for services other than consulting;
(III) honoraria;
(IV) gift;
(V) entertainment;
(VI) food;
(VII) travel (including the specified destinations);
(VIII) education;
(IX) research;
(X) charitable contribution;
(XI) royalty or license;
(XII) current or prospective ownership or investment interest;
(XIII) direct compensation for serving as faculty
or as a speaker for a medical education program;
(XIV) grant; or
(XV) any other nature of the payment or other transfer of value (as defined by the Secretary).
(vii) If the payment or other transfer of value is related to marketing, education, or research specific to a covered drug, device, biological, or medical supply, the name of that covered drug, device, biological, or medical supply.

It is unclear what would be considered an “education” or “research” transfer of value.

Dollar Limits and Notable Exceptions
Healthcare companies will not be required to report any gifts worth less “than $10, unless the aggregate amount transferred to, requested by, or designated on behalf of the covered recipient by the applicable manufacturer during the calendar year exceeds $100.”  The limits will be adjusted for inflation:  “after 2012, the dollar amounts specified in the preceding sentence shall be increased by the same percentage as the percentage increase in the consumer price index.”  Also excluded are “Product samples that are not intended to be sold and are intended for patient use,” and “Educational materials that directly benefit patients or are intended for patient use.”

It appears that marketing research was also saved from the reaches of the law.  The law states that a transfer of value “does not include a transfer of anything of value that is made indirectly to a covered recipient through a third party in connection with an activity or service in the case where the applicable manufacturer is unaware of the identity of the covered recipient.”  According to the Market Research Association (MRA), “This means that, as long as marketing research is conducted by an independent survey and opinion research company and the manufacturer sponsoring the research does not know who participates in the study, incentives can still be offered as a thank you to physicians who participate in research.”  To see the MRA’s statement on this exclusion, visit here. 

Penalties for Not Reporting
For failing to report transfers of value, the law allows for a penalty of  “not less than $1,000, but not more than $10,000, for each payment or other transfer of value or ownership or investment interest not reported...”  Penalties per year “shall not exceed $150,000.” 

For knowingly failing to report, the penalty range is $10,000 to $100,000, and the per-year maximum is $1 million.

To Preempt or Not to Preempt State Laws?  That is the Question
The federal law includes language that says its provisions preempt state laws that require the same types of information required by the federal law.  However, the federal law also says that it will not preempt any state law that includes “additional requirements.”  In other words, it will not preempt any state law that requires the disclosure of information “not of the type required to be disclosed or reported under this section.” 

So it remains to be seen which state laws will be preempted and which ones will not.  For example, the Vermont marketing law calls for a ban on certain gifts to physicians (the federal law does not), so presumably, it would not be preempted.  Connecticut recently proposed a new bill requiring pharma and device companies to adopt a marketing code of conduct; from the way it is worded now, it appears that this new law might be preempted by the federal law.  (To view the Connecticut bill, visit here:  http://cga.ct.gov/2010/TOB/s/pdf/2010SB-00270-R00-SB.pdf)

HCEA’s Healthcare Exhibitors' Matrix of State Laws and Regulations, which is included in the HCEA Compliance Resource Center, provides information on current state laws that address gifts and other transfers of value given to healthcare professionals.  HCEA members may view the matrix at HCEA’s Members-Only Resource Center.

Other Potential Effects
HCEA staff has reviewed several analyses of what are believed by some to be other possible effects for healthcare marketers.  Certain analyses have predicted the new law may be good for continuing medical education because it will increase the need for primary care, and therefore, more physician assistants and nurse practitioners will likely need more medical training.  Other analyses have posited that direct-to-consumer pharmaceutical advertising may be hurt because of new requirements for risk disclosure.  

On March 25, the Pharmaceutical Research and Manufacturers of America (PhRMA) released a statement generally supporting the new law save for certain provisions, such as one related to the creation of an Independent Payment Advisory Board (IPAB) that could enact Medicare changes without action by Congress.  The Advanced Medical Technology Association (AdvaMed) also released a statement on March 21 that indicated concern about a medical technology tax included in the follow-up Health Care and Education Reconciliation Act.  The new tax language is as follows:  “There is hereby imposed on the sale of any taxable medical device by the manufacturer, producer, or importer a tax equal to 2.3 percent of the price for which so sold.”

As always, HCEA recommends that you consult with your own legal counsel when determining how to interpret the law. 

To see the full text of the law, visit here.
The sunshine provisions are located in SEC. 1128G.

To view the Health Care and Education Reconciliation Act, visit here.

To see PhRMA’s statement, visit here.

To see AdvaMed’s statement, visit here.