OIG to release sweeping draft guidance for pharmaceuticals

Hospitals and physicians also will be immediately affected, health care attorneys say

Department of Health and Human Services Inspector General Janet Rehnquist is set to release the Office of Inspector General's (OIG) long-awaited draft guidance for the pharmaceutical industry tomorrow. "It is fair to say that depending on what the OIG says, the basic rules of the game could be fairly significantly impacted," says Bill Sarraille, a health care attorney with Arent Fox in Washington, DC.

According to Sarraille, a major focus of the draft guidance will be not only the practices of pharmaceutical companies but also practices as they relate to relationships with their customers such as hospitals and physician practices.

From a hospital perspective, the guidance likely will shed some new light on how pharmaceutical companies can price products to hospitals and how discounts can be packaged, Sarraille says.

For physician practices, the guidance will have an effect on the physician staff of hospitals, how they interact with pharmaceutical companies, and possibly the motivation of physicians to pressure hospitals to make particular purchases, Sarraille says.

"It could mean even the nature of the exchanges and the basic sales calls by reps to hospitals will change," he adds, "so that you can get this kind of lunch but not that kind of lunch and this kind of freebie but not that kind of freebie."

Joe Metro, a partner with Reed Smith in Washington, DC, says one major focus of the guidance will be kickback issues, which are being scrutinized closely by government investigators. "I would think from a hospital's perspective, the things that are going to be of the most interest will be kickback relationships, educational grants, pricing relationships, and discount disclosure," he says.

Another important area will be clinical investigator relationships. "I suspect we will see some of that too, and that will be of interest to hospitals," he says.

Metro says he expects the guidance to be somewhat general in nature. "I don't think they are going to bless any particular substantive standards in terms of educational grants," he explains.

The OIG's guidance comes a few months after the Pharmaceutical Research and Manufacturers Association (PhRMA) in Washington, DC, released revised marketing guidelines for its members. Like the OIG's guidance, the PhRMA code is voluntary. However, it was widely embraced by the pharmaceutical industry.

"PhRMA obviously tried to preempt what it was concerned could be some very strict guidance that would cut back on sales practices and pricing approaches which its members think are critical to function competitively in the marketplace in the code they put out," says Sarraille.

Wendy Goldstein, a heath care attorney with Eptein, Becker and Green in New York City, says the major distinction between the OIG guidance and the PhRMA code, which is much narrower, is that PhRMA's code essentially is limited to the interaction between the pharmaceutical industry and the physician.

"The issue really becomes the scope of the PhRMA code and the scope of the OIG compliance program," Goldstein explains. "You are going to see a much broader guidance from the OIG because it is built around the Federal Sentencing guidelines."

Goldstein says the OIG's guidance will cover appointing a corporate compliance officer, establishing committees, and implementing training, as other compliance guidances have done. However, she predicts that it likely will differ in that it will include more specific examples for an indirect biller situation since, unlike hospitals, pharmaceutical manufacturers do not submit anything directly to the government.

She says it also is likely to be much more specific than the other OIG guidances.

The OIG's pharmaceutical guidance has been in the works for more than a year. The agency published a notice in the Federal Register seeking information and recommendations for developing voluntary guidance for the pharmaceutical industry in June 2001. It is expected to be posted on the OIG web site at www.oig.hhs.gov tomorrow and published soon in the Federal Register for formal comment.