California Senate Passes Ban on “Gifts” to Physicians

Late last week, California passed legislation in the state senate that restricts pharmaceutical companies from giving gifts and incentives to medical professionals. The legislation restricts pharmaceutical companies from providing flights, travel, speaking fees, entertainment, consulting payments, or other financial benefits to healthcare providers.

The sponsor of the bill, Senator Mike McGuire, stated, “I’ll be the first to say that the vast majority of physicians and medical professionals put the needs of their patients first. There’s a reason why doctors answer the call to practice medicine – to help people in their time of need. But growing evidence reveals that financial relationships between some physicians and pharmaceutical companies confirm what has been suspected – financial incentives change minds.”

According to Senator McGuire, data shows that in 2014 California physicians received the highest number of gifts and payments from pharmaceutical companies of any state.

“The facts are clear. Current voluntary efforts are not enough. California physicians and medical professionals lead the nation in the number of gifts taken, over $1.4 billion in 2014.  SB 790 will curb financial payments, gifts and incentives to medical professionals and help drive down the skyrocketing costs of prescription drugs for millions in California.”

Senator Ted Gaines, an opponent of the bill, believes its passage will affect patients, noting that, “Successful products provide the funding for the research, for cures. Why would we do anything to diminish the ability of pharma companies to be successful in providing these new products?”

Senate Minority leader Patricia Gates, also pointed out that gifts from pharmaceutical companies to doctors are already regulated. She also believes that doctors may now be deterred from participating in clinical trials and limit Californians’ access to experimental drugs.

As drafted, this bill looks like it would only apply to drug manufacturers and prescribed medications, not device manufacturers and any products that have a medical device as part of the combination. Interestingly, it also included a provision toward the end that says if the Sunshine Act is repealed, the state would enact a similar provision to disclose payments.

The Bill is drafted as a hybrid between VT’s and MN’s gift ban law. It explains what allowable expenditures are, and then carves out certain exceptions from the “gift” definition (e.g., samples, reprints, scholarships, rebates, etc.)

Under the legislation as currently drafted, “Gift” means either of the following:

(1) Anything of value provided for free to a health care provider.

(2) A payment, food, entertainment, travel, subscription, advance, service, or anything else of value provided to a health care provider, unless it is an allowable expenditure as defined in subdivision (a) or the health care provider reimburses the cost at fair market value.

For example, companies are permitted to pay for meals for doctors as long as the costs are below $250 per year per individual doctor and educational events but not all education.

They did give some allowable expenditures including:

Payment by a manufacturer of a prescribed product to the sponsor of a significant educational, medical, scientific, or policymaking conference or seminar, provided that all of the following conditions are satisfied:

(A) The payment is not made directly to a health care professional or pharmacist.

(B) Funding is used solely for bona fide educational purposes, except that the sponsor may, in the sponsor’s discretion, apply some or all of the funding to provide meals and other food for all conference participants.

(C) All program content is objective, free from industry control, and does not promote specific products.

(2) Honoraria and payment of the expenses of a health care professional who serves on the faculty at a bona fide educational, medical, scientific, or policymaking conference or seminar, provided that all of the following conditions are satisfied:

(A) The honoraria or payment is governed by an explicit contract with specific deliverables which are restricted to medical issues, not marketing activities.

(B) Consistent with federal law, the content of the presentation, including slides and written materials, is determined by the health care professional.

(3) For a bona fide clinical trial, the annual direct salary support for principal investigators and other health care professionals.

(4) For a research project that constitutes a systematic investigation, is designed to develop or contribute to general knowledge, and reasonably can be considered to be of significant interest or value to scientists or health care professionals working in the particular field of inquiry, all of the following:

(A) Gross compensation.

(B) Direct salary support per health care professional.

(C) Expenses paid on behalf of each health care professional.

Royalties and licensing fees paid to health care providers in return for contractual rights to use or purchase a patented or otherwise legally recognized discovery for which the health care provider holds an ownership right.

 The payment of reasonable expenses of an individual related to the interview of the individual by a manufacturer of prescribed products in connection with a bona fide employment opportunity or for health care services on behalf of an employee of the manufacturer.

Provision of meals for a health care provider that do not exceed two hundred fifty dollars ($250) per person, per year in value.

(5) Voluntary provision of care

 The bill, passed by a 23-13 vote, now heads to the California Assembly and if it passes there, then it heads to the governor’s desk for a signature.    This bill could put a huge chill on the biotech industry in California.  With little to no evidence that payments for services or meals lead to more prescribing the myth of “gifts” is still promoted throughout legislatures.