Sometime in the future, when a think tank or university hosts a seminar on the law of unintended consequences, it’s possible that a modern practical example will be the effects of unprecedented regulation — strangulation, some might call it — on pharmaceutical meetings — that are attended by many of the most renowned doctors in the U.S. and from around the world.

As of January 1, 2015, relatively longstanding but vague ethical guidelines created by Pharmaceutical Re­search and Manufacturers of America (PhRMA) collided head-on with new requirements under the provisions of the Open Payment Act (OPA), formerly known as the Sunshine Act, to wreak havoc on pharmaceutical companies and their meeting planners.

Although there are no formal rules under either PhRMA guidelines or OPA, concerns about optics have forced pharma companies to set strict and conservative limits on the amounts of money they can spend on hotel rooms, meals and other costs such as transportation.

In light of the pre-existing and much-feared PhRMA guidelines, OPA — which requires detailed reporting on a public website of every “transfer of value” to a doctor or other health care professional (HCP) who attends a meeting paid for by the pharma company — has led to even more draconian limitations on spending.

As a result of the enactment of the OPA reporting requirements as of January 1, “all of the big pharmaceutical companies now have their own (policy) practices and standards and all the HCPs (health care professionals) are fully aware of them,” says Vanessa Stafford, CMP, senior project manager at Indianapolis-based Ashfield Meetings & Events, which is noted for its expertise in medical meetings and events. Today, Stafford says, the high-end meetings once hosted for doctors at five-star resorts — as an incentive to attend — are a thing of the past. “Now a lot of these meetings are being held at airport hotels across the U.S.” she says, “in order to make the rate limitation in major cities.”

In top-tier destinations, Stafford says, a major-flag downtown meeting hotel can no longer be used if the hosting pharma company wants to adhere to the rate restrictions. “The only possible exception to that would be off-peak times of the year or week,” she says.

Judy Johnson, CMP, HMCC, president emeritus of Plano, Texas-based Rx World­wide Meetings, says that as a result of the latest generation of cost guidelines, it is now becoming increasingly difficult to get the dates, rates and space needed to hold the meeting and still meet the spending guidelines.

Incredibly, however, there is no set of formal spending guidelines. Neither PhRMA nor OPA dictates any specific restrictions or cites any numbers. In effect, acute paranoia about optics has motivated pharma companies to set increasingly conservative spending restrictions of their own — with little commonality among them except that expenditures have been reduced.

The OPA just made an already bad situation worse. It requires that all financial details of a meeting, broken down by doctor or HCP individually, be posted to a public website within 25 days of the meeting. Doctors then get 15 days to review their line items and either confirm or disagree with accuracy.

The concern of doctors, Stafford says, is based on the simple fact that the Open Payment Act website is public. “Anyone can go to it,” she says. “It’s there for the entire world to see. So the doctors want to make sure that a (meeting host) is not showing too much money — or an incorrect amount. And, for example, if they are driving to the meeting and not staying at the hotel overnight, they don’t want it reported there was a $300 hotel stay they actually did not use.”

Johnson notes that there is also growing concern, especially among doctors, that media sensationalism will expose them to even more scrutiny. For example, Johnson says, a newspaper reporter might look at a $200,000 figure reported next to the name of a doctor, for the year, and construe that as $200,000 in compensation. “But the reporting doesn’t mean the doctor was paid $200,000,” she says. “It means the pharma company spent $200,000 to get that doctor to the various meetings during a clinical trial of a new drug. But the newspapers will never tell the story that makes that clear. The press is not playing ‘gotcha’ with this stuff yet, but they will be. And the thing the media will never say is that these doctors are worth the investment. They are the best of the best. So it’s just not fair they have to be so concerned about going to these meetings, which are absolutely essential to the development of new drugs.”

Market Reaction

Because pharma meetings have been an almost recession-proof, bread-and-butter form of meeting business for decades, hotel companies and individual operators are looking for ways to gain advantage in the current climate.

For example, Stafford says, a number of major-flag and independent hotels in popular pharma meeting destinations such as New York, Chicago and Dallas have created special “pharma menus” designed to meet the need for carefully controlled costs. “And a lot of restaurants in those destinations also have pharma menus as well,” Stafford says.

The fact that some hotels have already addressed the issue of cost limitations is helpful to meeting hosts and planners, she says. “But it’s also true that not all hotels have done that yet. So we have to work into the contracts menus that meet the cost requirements and there can be no variation from those limitations for any meeting anywhere.”

To her knowledge, Stafford says, no major national hotel brand has formalized a set of offerings based on the cost guidelines. “So far, no brand has done it. It’s being done by individual hotels in certain destinations. We have preferred vendor programs with all the major brands. But they can’t get all of their hotels to agree (to meet the specific cost guidelines).” As a result, she says, the process today is a property-by-property proposition, not a brand standard.

Stafford does not believe that the major hotel brands such as Hyatt, Hilton or Marriott will ever create a standard set of pharma meeting room rates or F&B menus because it would be too cumbersome and potentially controversial among franchised operators of individual hotels.

Adding insult to injury, Johnson says, is the fact that over the past year or so, the market has become a seller’s market again. “For a long time, pharma was the golden child for hotels, because they were planned at the last minute, they paid for every meal for the doctors for the most part at the property, and room rate was never a factor,” she says. “And even back in 2008, when the PhRMA guidelines were strengthened and led to reductions in the amounts you could spend for each meal, pharma meetings were still a great piece of business for the hotels. But now, other industries don’t have the spending restrictions that pharma meetings do in terms of room rates and food and beverage.” And that, she says, has created another level of demand for hotel rooms and meeting space — with pharma planners often at a disadvantage for obvious reasons.

Planner Consequences

In addition to the big challenges imposed by a new set of circumstances, the extra administrative requirements of OPA reporting add more work — and cost — to the planning process. “Now we also have to spend all that time, even before the meeting even takes place, just figuring out the amounts of what will have to be reported for each doctor that is going to attend,” Stafford says.

Many pharma companies and planners did not fully anticipate how much new work would be required once the Open Payment Act’s reporting requirements took effect January 1. “I think we all had a pretty good idea,” Stafford says, “but there are definitely a lot more questions now that the act has actually gone into effect and companies know what is required of them. And that requires a lot more work, especially on the front end. Everyone has to be much more diligent now.”

Under OPA, a standalone website is required for every individual meeting hosted in order to report all data specific to that meeting. “So I now build websites every day as part of my job,” Stafford says.

The great irony, of course, is that neither PhRMA nor OPA actually set any formal restrictions on spending. Determinations are calculated by each pharmaceutical company based on an abstract formula that includes PhRMA’s broad ethical guidelines, the specific reporting requirements of OPA and sensitivity to optics.

“There’s no regulation, rule or law that says what you can or cannot spend. But you hear the word ‘perception’ ad nauseum. There is no end to that. Everything is about perception now. And you have to be aware of that.” — Judy Johnson

“There’s no regulation, rule or law that says what you can or cannot spend,” Johnson says. “But you hear the word ‘perception’ ad nauseum. There is no end to that. Everything is about perception now. And you have to be aware of that.”

Johnson makes it clear, based on her 20 years of experience planning meetings for top pharma clients, that she is a champion of transparency. “I’m all for transparency, because in the past you did have pharma companies ‘buying’ doctors,” she says. “And that needed to be stopped. But now I think it has gone too far to the other extreme and we have lost sight of what the reasonable costs of a meeting for doctors are.”

Asked for comment, PhRMA responded in a statement, “Pharmaceuti­cal company relationships with health care professionals, such as during conferences and other meetings, are intended to benefit patients and to enhance the practice of medicine and are regulated by multiple government entities.  When interacting with the medical community, PhRMA and our member companies are committed to following ethical standards and all legal requirements. To ensure the appropriate focus on education and informational exchange and to avoid even the appearance of impropriety, pharmaceutical companies comply with codes of conduct that address requirements for conducting or sponsoring meetings with health care professionals.”

PhRMA did not comment on the specific issues and concerns raised by planners interviewed for this article.

Miscalculation

The most fundamental indication of the disconnect that has led to the current situation is the fact — which all meeting planners are aware of — that costs of airfare, hotel rooms and F&B are rising each year. And no one doubts they will continue to rise until another economic downturn swings the pendulum back to a buyer’s market, which might not happen for years.

Meanwhile, Stafford says, “It is becoming very challenging now to meet the current guidelines and provide good food — and especially healthy options like whole foods during breaks.”

Johnson adds, “The fact is, we keep asking the hotels to do more and more for less and less money. And then we’re mad if they won’t give us exactly what we want for breakfast when we’re paying $25 inclusive.”

F&B prices, in general, are going through the roof as a result of a seller’s market and rising food costs, Johnson says. On top of that, she adds, are ever-increasing service fees of as much as 22 percent or more in some high-demand destinations.

“And as a result of that, some pharma companies are now taking a closer look at the destinations they use, because there are places where you have to say to yourself, ‘There’s no way we can get breakfast for $25 inclusive in that destination. So you don’t go there anymore. And that is frustrating.”

Fortunately, Johnson says, she is still able to do meetings in Las Vegas, one of the most coveted destinations for many doctors, because of the value proposition she gets there.

Her go-to properties include Aria Resort & Casino and Vdara Hotel & Spa, operated by MGM Resorts International at its sprawling CityCenter complex. “Some clients like Vdara because there is no casino and therefore no perception issue there,” Johnson says. “The No. 1 reason, especially today, that I like MGM Resorts properties is the buying power they have based on their entire portfolio of major Las Vegas hotels. So if you say you have $45 for lunch, you’re going to get a lovely lunch for that $45. You’re not going to be embarrassed in front of your attendees like you would be at some other hotels.” And their hotels are also staffed properly onsite for meetings that require a lot of attention, as pharma meetings do.”

The most frustrating fact of all, perhaps, about the broader current situation, Johnson and Stafford agree, is that it’s as if the current meeting cost guidelines were created without any attention to market dynamics, instead being driven by nothing more than perception and concerns about optics.

And that, in reality, is not good for anyone concerned. C&IT