Revisions to the AdvaMed Code of Ethics

29 January 2009 Publication
Authors: Judith A. Waltz

Health Law360

Law360, New York (January 29, 2009) -- Following in the footsteps of the Pharmaceutical Research and Manufacturers of America (PhRMA), the Advanced Medical Technology Association (AdvaMed) released major revisions to its Code of Ethics on Interactions with Health Care Professionals (Code) on Dec. 18, 2008.

AdvaMed is the largest member association in the United States for manufacturers that produce medical devices, diagnostic products and health information systems. Last July, PhRMA released revisions to its own Code on Interactions with Health Care Professionals (PhRMA Code), which went into effect Jan. 1, 2009.

AdvaMed’s revised Code will go into effect July 1, 2009. The industry codes are important because the government has, in its enforcement actions, pointed to prohibitions contained within the codes to establish intentional misconduct or notice that conduct could be violations of law.

The continuing enforcement focus on device and drug manufacturers’ contacts with health care professionals (via consulting agreements, conference support and other funded activities) dictates a need for health care providers to review their policies and procedures to avoid possible conflicts of interest, which the government believes may result in inappropriate influence on clinical decisions.

While manufacturer codes of conduct are not specifically addressed to customers (e.g., hospitals and other providers receiving manufacturer support or physicians ordering the product for their patients), these codes provide focused guidance as to what may be viewed as the “industry standard” with respect to manufacturer contacts with health care professionals.

Clinical research, product training, formulary decisions and even continuing medical education often reflect involvement by product manufacturers for which health care providers’ policies and procedures may need to be revised and updated.

In addition, provider participation in “product support” activities such as the receipt of reimbursement advice or assistance from the product manufacturer should be regularly reviewed.

Both code revisions come at a time when government regulators, from state Medicaid programs to the United States Department of Health and Human Services to the lawmakers on Capitol Hill, have focused increased scrutiny on the relationships between health care professionals and companies that manufacture and distribute medical devices and pharmaceuticals.

Massachusetts passed legislation last year that imposes a mandatory marketing code on manufacturers with restrictions on gifts to providers and new disclosure requirements.

Legislation proposed during the last Congress, the Physician Payments Sunshine Act of 2007, is expected to be reintroduced during this Congress. This legislation would require public disclosure of payments by drug and device manufacturers and distributors to physicians.

The U.S. Department of Justice and the Office of Inspector General of the U.S. Department of Health and Human Services (OIG) have announced a number of high-profile settlements involving allegations of illegal payments to health care practitioners.

The 2008 revisions to the AdvaMed Code reflect enhanced expectations as to “voluntary” compliance with its provisions.

Whereas the 2005 Code stated that members would communicate the “Code’s principles” to business associates and employees with the “expectation” that those associates and employees would adhere to the Code, the revision uses much stronger language.

Member companies are now “strongly encouraged” to adopt the Code and submit annual certifications to AdvaMed that they have adopted the revised Code and implemented an effective compliance program.

In addition, AdvaMed members are now required to provide contact information for their compliance departments or compliance hotlines to AdvaMed, which will publish this information on its Web site.

There also is a pronouncement that AdvaMed members shall not “engage in any unlawful inducement,” with an explicit reference to the Federal Anti-kickback Statute.

The specific changes to the revised Code fall into the topic areas outlined below. In one topic area, sales, promotional and other business meetings, the Code was not changed substantially.

Company-Conducted Product Training And Education

In this section, the revised Code explicitly permits training and education to occur at the health care professional’s office or location.

Qualified field sales employees with the “necessary” technical expertise also are permitted to conduct training and education.

Where a company pays for out-of-town travel for training or education, the need for the travel must now be supported by “objective reasons.”

Support For Third-Party Educational Conferences

The revisions to this section of the Code do not pose significant new requirements and were primarily clarifying changes. Grand rounds were removed from the list of types of third-party education conferences.

The revised Code also permits member companies to provide funding to conference organizers to sponsor meals or refreshments, subject to some limitations.

Refreshments would have to be provided to all attendees unless there is a justification and would need to meet the general standard that they are modest, subordinate in time and focus to the conference, and clearly separate from any continuing medical education portion of the conference.

In addition, a company may sponsor off-site sales, promotional or other business meetings ancillary to the conference if they comply with the conference sponsor’s guidelines and there is a legitimate business purpose.

Any grants provided to reduce conference costs to attendees have to be consistent with the conference sponsor’s standards. In addition, conference sponsors must have independent control of the content, faculty and materials presented at conferences.

Consulting And Royalty Arrangements

Included within the umbrella of consulting agreements with health care professionals are contracts for research, product development, development and/or transfer of intellectual property, marketing, participation on advisory boards, presentations at manufacturer-sponsored training and other services. The revised Code advises that manufacturers should comply with the following standards:

  • Consulting agreements should be written and describe all services to be provided.
  • Consulting agreements should be entered into only where there is a legitimate need identified in advance and documented.
  • Compensation should reflect fair market value and should not be related to the volume or value of past, present or anticipated business.
  • Expenses may be paid by the manufacturer if they are necessary to carry out the agreement such as costs for travel, modest meals and lodging.
  • The venue and circumstances for meetings of the manufacturer and the consultant should be appropriate to the subject matter of the consultation.
  • Manufacturer-sponsored meals and refreshments should be modest in value and subordinate in time and focus to the primary purpose of the meeting. Recreation or entertainment should not be provided in conjunction with these meetings.
  • Sales personnel may provide input as to the suitability of a proposed consultant, but should not control or unduly influence the decision to engage the proposed consultant.
  • With respect to royalties, arrangements for payment to a health care professional should meet the contractual standards set forth above. Royalty arrangements should only be entered into where the health care professional is expected to make or has made a novel, significant, or innovative contribution.

Calculations of royalties to be paid should be based on factors that preserve the objectivity of medical decision-making and avoid the potential for improper influence.

For example, the calculation should not be conditioned upon a requirement that the health care professional purchase, order or recommend that product or medical technology, or a requirement to market the product upon commercialization.

Entertainment, Recreation and Meals

The revised Code contains a new section establishing prohibitions on the provision of entertainment and recreation expenses to health care professionals who are not employees.

Specific examples of these types of expenses are provided and include items such as theater and sporting event tickets, vacation trips, and sporting goods such as golf clubs or ski equipment.

These prohibitions appear to echo concerns raised by the OIG in enforcement actions since the original Code was issued in 2005. For example, in 2006, the OIG settled a $10-million civil monetary penalty law case against Lincare Holdings Inc.

The case alleged that Lincare paid illegal remuneration to referral sources in the form of sporting and entertainment event tickets, gift certificates, rounds of golf, golf equipment, fishing trips, meals, advertising expenses, office equipment and medical equipment as well as payments pursuant to consulting agreements.

The Code also contains explicit guidance in the frequently asked questions (FAQ) section that the Code also prohibits a member company employee or agent from paying these expenses, even if they pay for them personally and do not seek reimbursement from the company.

The revised Code further contains extensive guidance on when member companies may provide modest meals to health care professionals. In addition to being incidental to the purpose of the meeting or interaction, they cannot be part of an entertainment or recreational event.

The setting must generally be conducive to the educational or business purpose of the meeting and may occur at the health care professional’s location.

However, “dine and dash” or take-out meals for staff who are not attending the meeting are not permitted. One FAQ suggests that any business presentation must include a substantial discussion of medical technology development, pricing or contract negotiation and that a general business purpose of developing good will or improving business relationships would not suffice.

Educational Items And Gift Prohibition

Like the PhRMA Code, the revised AdvaMed Code contains a prohibition on giving away branded promotional items, even items of minimal value like pens, notepads and mugs. This prohibition extends even to branded items that relate to the health care professional’s work or for the benefit of patients.

Non-branded items with a fair market value of less than $100 that benefit patients or serve a genuine educational purpose are permitted. Medical textbooks and anatomical models continue to be exempt from the $100 cap.

There also is a new prohibition on providing gifts such as flowers or fruit baskets to health care professionals to recognize significant life events such as illnesses, weddings or births. Raffling off items also is prohibited where the company would be prohibited from giving a direct gift.

Gifts to staff are treated the same as gifts to the health care professional. An FAQ also contains detailed guidance on the types of items that would be viewed as benefitting patients.

Provision Of Coverage, Reimbursement And Health Economics Information

The revised Code recognizes the increasing complexity of payor coverage and reimbursement policies for medical technologies, and the risk to patient access to necessary medical technology that may result from a lack of availability of information relating to timely and complete coverage, reimbursement and health economics.

Consequently, the revised Code supports the provision of such information by the manufacturer if it is accurate and objective.

The revised Code also supports manufacturer collaboration with health care professionals, patients and other stakeholders to achieve government and commercial payor coverage decisions, guidelines, policies and adequate reimbursement levels. Identified permissible activities for manufacturers include (but are not limited to) the following:

  • Identifying clinical value
  • Collaborating to conduct joint advocacy on coverage, reimbursement and health economic issues
  • Promoting accurate Medicare and other payor claims by providing accurate and objective information and materials, including identifying coverage, codes and billing options
  • Providing accurate and objective information about the economically efficient use of the product
  • Providing information regarding available reimbursement revenues and associated costs
  • Providing information relating to changes in coverage or reimbursement amounts, methodologies, policies and effects of such changes.
  • Providing accurate and objective information designed to offer technical or other support intended to aid in the appropriate and efficient use or installation of the product
  • Facilitating patient access by providing health care professionals with assistance in obtaining patient coverage decisions from payors

Specifically, it is anticipated that manufacturers may be providing information or training on payor policies and procedures for obtaining prior authorizations and providing sample letters and information on medical necessity and appeals of denied claims.

Manufacturers also may assist patients in the preparation of requests for coverage determinations, prior authorizations, etc. Such assistance should not be provided as an unlawful inducement.

The manufacturer should not provide free services that eliminate an overhead or other expense that a health care professional would otherwise have incurred as part of business operations, if doing so would amount to an unlawful inducement.

Moreover, the manufacturer should not suggest mechanisms for billing for services that are not medically necessary, or for engaging in fraudulent practices to achieve inappropriate payment.

Research And Educational Grants And Charitable Donations

This section contains an explicit requirement that member companies implement policies and procedures to ensure that grants or donations are not provided as unlawful inducements.

As part of this compliance process, the decisions regarding grants and donations cannot take into account the volume or value of purchases by the recipient. Companies also need to implement appropriate documentation policies.

Sales personnel are permitted to provide input into the grant/donation process, but are not permitted to unduly influence decision making. This is a fairly significant difference in comparison to the PhRMA Code, which excludes participation by sales and marketing personnel in these processes.

With respect to grants, a new FAQ makes clear that unrestricted grants are now prohibited. The Code also prohibits educational grants to individual health care professionals.

With respect to charitable grants, the Code suggests companies exercise due diligence to ensure the organizations are bona fide charities.

The Code permits companies to contribute to charitable events such as golf tournaments, but prohibits companies from paying entry fees or other expenses for individual health care professionals.

Evaluation And Demonstration Products

In a new section, the Code permits companies to provide products at no charge to health care professionals. For single-use products, the amount should not exceed the number necessary for adequate evaluation of the product. For multiple-use products, the products should only be furnished on a short-term basis to permit adequate evaluation.

Terms of the loan of any multiple-use products must be set forth in advance in writing, and companies must ensure they have a process for retrieving the loaned products from the health care professional’s location at the end of the agreed-upon evaluation period.

The Code differentiates evaluation products intended for patient care from demonstration products used for awareness, education, and training, which should be marked as “samples” or “not for human use.”


The revised Code provides a reminder and an opportunity for health care providers to review their own policies and procedures relating to interactions by product manufacturers with health care professionals.

These interactions, which often include payment to the health care professional for a variety of purposes, may inappropriately influence (or have the appearance of influencing) the clinical decisions of the health care professional.

When those clinical decisions that appear to have been inappropriately influenced result in claims for reimbursement, the enforcement risks for the health care provider increase.

Appropriate conflict of interest policies and procedures must address those risks, while balancing the significant advantages that result from appropriate interactions with manufacturers for purposes of product training and support.

Industry codes of conduct provide guidance on industry expectations that can be measured against existing policies and procedures of health care providers.

Reprinted with permission from Portfolio Media, Inc.

Related Services