West Virginia Issues Emergency Regulations on Pharmaceutical Advertising Expense Reporting

The West Virginia Office of the Pharmaceutical Advocate and the Secretary of State have posted an emergency rule and an accompanying proposed legislative rule that govern the reporting of advertising costs by pharmaceutical manufacturers. The emergency rule is available at http://www.wvsos.com/adlaw/proposed/206-01er.pdf and the proposed legislative rule is available at http://www.wvsos.com/adlaw/proposed/206-01.pdf. These identical rules implement W.Va. Code §§ 5A-3C-15 and 29A-3-15(f)(3). Written comments to the proposed legislative rule must be delivered by 5 p.m. on July 10, 2006, and should be addressed to:

  • Hardy Scragg

Executive Assistant
Office of the Pharmaceutical Advocate
Building 3, Room 265
State Capitol Complex
Charleston , WV 25305

However, if the Secretary of State approves the emergency rule, it would become effective immediately for a maximum of 15 months.

Advertising Expense Reporting Statute

Enacted in March 2004, the West Virginia Pharmaceutical Availability and Affordability Act (the “Act”), W. Va. Code § 5A-3C-1 et seq., seeks to address the rising cost of prescription drugs. Specifically, Section 5A-3C-13(a) requires that:

  • Advertising costs for prescription drugs, based on aggregate national data, must be reported to the state authority by all manufacturers and labelers of prescription drugs dispensed in this state that employs, directs or utilizes [sic] marketing representatives. The reporting shall assist this state in its role as a purchaser of prescription drugs and an administrator of prescription drug programs, enabling this state to determine the scope of prescription drug advertising costs and their effect on the cost, utilization and delivery of health care services and furthering the role of this state as guardian of the public interest.

The Act also specifically exempts the following from the reporting requirement:

  • All free samples of prescription drugs intended to be distributed to patients;
  • All payments of reasonable compensation and reimbursement of expenses in connection with a bona fide clinical trial. As used in this subdivision, ‘clinical trial’ means an approved clinical trial conducted in connection with a research study designed to answer specific questions about vaccines, new therapies or new ways of using known treatments; or
  • All scholarship or other support for medical students, residents and fellows to attend significant educational, scientific or policy-making conference of national, regional or specialty medical or other professional association if the recipient of the scholarship or other support is selected by the association.

According to the Act, the advertising expense reports submitted by pharmaceutical labelers and manufacturers will remain confidential and shall not become a public record available for release under the West Virginia freedom of information act (“WV-FOIA”). However, the West Virginia Pharmaceutical Cost Management Council (the “Council”) is authorized to compile data in aggregate form, which will become a public record within the reach of WV-FOIA. Section 5A-3C-13(e).

Proposed Rule

To implement this law, the Act requires the Council to promulgate regulations that will require reporting by drug labelers and manufacturers of “all national aggregate expenses associated with advertising and direct promotion of prescription drugs through radio, television, magazines, newspapers, direct mail and telephone communications as they pertain to residents of [ West Virginia].” Section 5A-3C-13(d).

More than two years after the Act was passed, the Council filed its proposed rule with the West Virginia Secretary of State on June 8, 2006. Although the Council had approved the proposed rule at its May 24, 2006, meeting, the Council revised the initial version of the proposed rule to ensure that it comported with authority granted the Council under the Act. As a result, the Council took several days to redraft the final language for proposed rule.

Notably, the Council removed provisions from the proposed rule that required the reporting of marketing costs, specifically, spending disclosures for pharmaceutical company sales representatives. Shana Phares, the Acting Pharmaceutical Advocate, as part of a majority of the Council, agreed with the PhRMA (Pharmaceutical Research and Manufacturers of America) position that the original draft of the proposed rule exceeded the Council’s authority under the Act.

The final proposed rule requires that “every drug manufacturer, pharmaceutical manufacturer, or labeler” that employs, directs or utilizes marketing representatives and dispenses pharmaceutical drugs in West Virginia must complete the “Pharmaceutical Advertising Expenses” reporting form. The form is due to the Council on or before April 1 of each year and must include advertising expenses incurred during the preceding calendar year. For example, on April 1, 2007, a drug manufacturer would need to report advertising expenses incurred during calendar year 2006.

Reporting entities must attach a list of the following to the reporting form:

  • Gifts, grants or payments of any kind made directly or indirectly by the reporting entity, which equal or exceed a total annual amount of $10,000, to any West Virginia prescriber, except those excluded (noted above) by the Act.
  • Drugs advertised or marketed by the reporting entity using direct-to-consumer (DTC) advertising that reaches West Virginia.
  • Total expenditures, aggregated by drug, on DTC advertising that targets West Virginia. If this data is unavailable, the reporting entity may use West Virginia’s pro rata share of national or regional expenses. However, the reporting entity may exclude any DTC advertising with only a “remote or indirect impact on the West Virginia market.”
  • Gifts, grants or payments of any kind made directly or indirectly to any disease-specific patient support or advocacy group where the amount equals or exceeds $10,000 per year and the group: (a) has West Virginia members or affiliates and (b) lobbies or otherwise appears before the West Virginia Legislature or State agencies to advocate for the advertised drug.

The proposed rule also permits, but does not require, a reporting entity to report the information excluded by Section 5A-3C-13© of the Act. However, the proposed rule clarifies that for clinical trials that do not qualify as bona fide, the reporting entity must report compensation and reimbursement payments.

By signing and submitting the reporting form, a senior officer of the reporting entity must attest to its truth, correctness and completeness under penalty of perjury.

As noted above, the Council has submitted to the Secretary of State both a “Notice Of An Emergency Rule” and a “Notice Of A Comment Period On A Proposed Rule.” Under the West Virginia Administrative Procedure Act, W. Va. Code §29A-3-15(f), the latter notice is required because the Council submitted the request for an emergency rule. If the Secretary of State approves the emergency rule, or if 42 days elapse without action by the Secretary, then the emergency rule will become effective for a maximum of 15 months. During this period, the proposed rule would go through the normal legislative rule-making procedure. If the Secretary of State disapproves the emergency rule, the Council would simply proceed under the regular rule-making process. As a result, the effective date of these proposed regulations will depend on whether the West Virginia Secretary of State approves the emergency rule.

Larri Short
202.775.5786
short.larri@arentfox.com

Anthony H. Choe
202.775.5751
choe.anthony@arentfox.com


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