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New Jersey Finalizes First of its Kind Pharmaceutical Gift Ban to Physicians; New Administration Considering Changes

February 21, 2018

Author: Ryan Jones | Practice Area: Health Care Law, Transactional / Business

After publication and hearing in October 2017, a final Administrative Rule related to contracts and payments entered into with physicians by drug companies took effect on January 15, 2018. The rule establishes an annual cap of $10,000 and restricts appropriate payment to certain caps.

Under the new arrangement, physicians are not able to accept any financial benefit, including, but not limited to, gifts, payments, scholarships, entertainment items, or any item that does not advance disease or treatment education. This restriction applies not only to obvious exchanges of cash or equivalent, but also trivial items such as pens, note pads, flowers, sport tickets, electronic devices, art, etc. It also applies to payment to cover personal expenses related to travel during attendance at an educational or promotional event. Such restrictions apply not only to the physician, but also to the physician’s immediate family.

However, the rule does provide certain types of permitted gifts and payments in limited situations. Items that are primarily for educational purposes are still permissible. This is also true for certain types of registration fees for events in limited situations. Still permitted are modest meals, so long as such meals either facilitate educational or promotional activities (and are limited to $15 per physician, and offered no more than four times per year). Finally, “bona fide services” may also be permitted, subject to a $10,000 annual cap. Generally, bona fide services include giving speeches at educational and promotional events, participation on advisory boards, and consulting arrangements. Such services are evaluated on a case by case basis based upon their need, reasonable relation to further the purpose of the activity, and the physician’s expertise is connected to the activity.

However, even bona fide services are subject to additional requirements under the new rule. In addition to the cap, such services must be formalized in writing, specifying the services, the dollar amount, and other details to specifically explain why such services are justified.

This rule is the first of its kind in the United States to limit physician’s income, as opposed to only capping drug company’s total limits of spending on such activities. At the hearing, the Attorney General’s office spoke of the need to ensure that prescription drugs are prescribed only considering what is in the best interest of the patient. Critics of the rule suggested that the rule would have unintended consequences, especially with specifically defining what qualifies as a “bona fide services” and the low limit of $15 for meals.

Contracts established prior to January 15, 2018 are not subject to this rule. Recent news suggests that the Murphy Administration is closely monitoring the effects this rule has had on the service and hospitality sectors along with how this rule has impacted the opioid crisis within this state. If it is found that these new limits are impairing these industries without reducing the effects of the opioid crisis in the state, the new administration may eliminate or amend this rule in future action.

If you have questions or concerns related to how this rule might affect your medical practice, to examine or draft contractual language pertaining to bona fide services, or other considerations that could expose your practice to legal liability, please do not hesitate to get in touch with our Health Care and Transactional department. We are constantly monitoring this area and our attorneys are well versed in the legislative and regulatory environment in this industry and are always available to guide and counsel your practice.