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Vermont Gift Ban and Disclosure Laws Amended to Require Drug and Device Manufacturers to Report Product Samples

Recently enacted Vermont Senate Bill 88 (“S.B. 88“)[1] amends Vermont’s existing gift ban law, Vt. Stat. Ann. tit. 18, § 4631a (“§ 4631a“), and disclosure law, Vt. Stat. Ann. tit. 18, § 4632 (“§ 4632“).[2] Significantly, S.B. 88 requires manufacturers of pharmaceuticals, medical devices and biological products[3] to report annually to the Vermont Office of the Attorney General certain information related to “free samples of prescribed products provided to health care providers during the preceding calendar year.”[4] “Sample” is defined as “a unit of a prescription drug, biological product, or medical device that is not intended to be sold and is intended to promote the sale of the drug, product, or device,” including starter packs and coupons or vouchers that allow an individual to receive a prescribed product for free or at a discounted price. The first report is due by April 1, 2012, for the reporting period of January 1, 2011, through December 31, 2011.

S.B. 88 is the first state law relevant to drug and device transparency[5] to be enacted since the enactment of the Patient Protection and Affordable Care Act (“PPACA“)[6] on March 23, 2010. PPACA includes several transparency provisions applicable to manufacturers, including Section 6002 entitled “Transparency Reports and Reporting of Physician Ownership or Investment Interests” (“Section 6002“) and Section 6004 entitled “Prescription Drug Sample Transparency” (“Section 6004“).[7]

This Alert provides an overview of S.B. 88 relevant to § 4631a and § 4632. It then discusses some key considerations for pharmaceutical, medical device and biological product manufacturers as they seek compliance with S.B. 88.

OVERVIEW OF S.B. 88 RELEVANT TO § 4631a AND § 4632

Key Changes to § 4631a

Generally, § 4631a bans manufacturers from providing “anything of value to a health care provider for free” unless the item is an “allowable expenditure” or otherwise permitted by § 4631a. S.B. 88 expands the definition of “allowable expenditure” to include the following items:

  • Payment by a manufacturer to the sponsor of a significant conference or seminar used at the sponsor’s discretion to provide meals and other food for all conference participants.
  • Payment of a health care professional’s reasonable interview expenses in connection with a bona fide employment opportunity with the manufacturer.

S.B. 88 also amends several other key definitions in § 4631a to provide additional detail or clarity, including the following changes:

  • “Health care professional” is limited specifically to include someone “who regularly practices in this state.”
  • “Health care provider” excludes a “hospital foundation that is organized as a nonprofit entity separate from a hospital.”[8]
  • “Prescribed product” includes “a compound drug or drugs” and limits the definition to products that are “for human use.”[9]

Section 4631a has been amended by S.B. 88 to include several additional items that a manufacturer may provide to a health care provider. Specifically, manufacturers may provide the following:

  • In addition to samples, “reasonable quantities” of over-the-counter (“OTC“) drugs and nonprescription medical devices or durable medical equipment.
  • Free prescription drugs, OTC drugs, medical devices, biological products, medical equipment, medical supplies and financial donations to a “free clinic.”[10]
  • Free prescription drugs to, or on behalf of, an individual through a manufacturer’s patient assistance program.
  • Grants for fellowship salary support, if an academic institution or hospital applies for the grant and selects the recipient without any further demands or limitations on the use of the funds from the manufacturer. The fellowship may not be named for a manufacturer and no individual fellowship may be attributed to a particular manufacturer or product.
  • Coffee, snacks and refreshments at a conference or seminar booth.

Key Changes to § 4632

Generally, § 4632 requires manufacturers to report annually certain information to the Vermont Office of the Attorney General related to gifts and payments provided to health care providers. S.B. 88 amends § 4632 to exclude the following additional items provided by manufacturers to health care providers from the reporting requirements:

  • Payment of a health care professional’s reasonable interview expenses in connection with a bona fide employment opportunity with the manufacturer.
  • Coffee, snacks and refreshments at a conference or seminar booth.
  • Any allowable expenditure or gift to a nonprofit hospital foundation under § 4631a.

Manufacturers also must now report annually the following information related to samples of prescribed products during the preceding calendar year:

  • Name of the product.
  • Recipient.
  • Number of units.
  • Dosage.

Section 4632 has been further amended to state that the Vermont Office of the Attorney General may contract with academic researchers to provide the reported data for analysis and aggregated public reporting. The manufacturer data provided to the academic researchers by the Vermont Office of the Attorney General will be subject to confidentiality provisions and may not include the names or license numbers of individual recipients. Any public report of such data may not include information that allows for the identification of individual recipients or monetary value of the samples provided to a specific recipient.

Samples reported in accordance with Section 6604 of PPACA do not need to be reported under § 4632 if, by January 1, 2011, the Vermont Office of the Attorney General determines that the U.S. Department of Health and Human Services will collect and report state-specific and recipient-specific information related to manufacturer distribution of free samples.

KEY CONSIDERATIONS

Manufacturers are challenged with preparing for the implementation of the new PPACA reporting provisions related to certain gifts, payments and samples provided to health care providers and coordinating and analyzing for purposes of preemption those reporting requirements with current state transparency laws as well as any laws that may emerge. It will be some time before we know whether PPACA ends the surge of states interested in enacting their own transparency laws. Below are a few items that manufacturers should consider as they implement the amendment to the Vermont gift ban and disclosure laws.

  • Manufacturers must update policies, procedures, systems and training to address the amended requirements of § 4631a and § 4632. For example, systems should be updated to distinguish between allowable expenditures and gifts provided to a hospital, which may be reportable, and those provided to a hospital foundation, which are not reportable.
  • It is unclear whether gifts and payments to health care professionals that are licensed in Vermont but who do not “regularly practice” in the state will be reportable. Prior to S.B. 88’s amendment to the definition of “health care professional,” the Vermont Office of the Attorney General provided guidance to manufacturers that stated that such expenditures are reportable.[11] “Regularly practice” is an undefined term.
  • Manufacturers should begin preparing and/or updating policies, procedures, systems and training relevant to the new reporting requirements for samples. Although it is unclear whether the information will be reportable until a determination is made by the Vermont Office of the Attorney General, it is possible that such determination will not be made until, or just shortly before, January 1, 2011—the same date that manufacturers must begin collecting such data. Additionally, manufacturers may need this data for PPACA reporting in connection with Section 6004.
  • Although applicable manufacturers track sample distribution to prescribers in accordance with other federal and state legal requirements, it is likely that manufacturers that provide coupons and/or vouchers will need to update policies, procedures and systems to track these items. Training regarding this tracking process also will need to be provided to field representatives and other relevant employees.
  • Manufacturers should review and update contracts with vendors that distribute samples or adjudicate coupons and vouchers on behalf of the manufacturer to ensure that the manufacturer obtains the necessary information for reporting purposes in the form and format required by the manufacturer. The contract also should include the right to audit for compliance with these contractual obligations.
  • Manufacturers should be aware that reported data related to samples may be made public. Although this data will not identify the individual recipient or indicate the monetary value of samples that any individual recipient receives, public data may include the quantity of samples, coupons and vouchers provided by a manufacturer for a specific product.
  • Manufacturers should note that the failure to disclose the information required by § 4632 may result in civil penalties up to $10,000 per violation. Each failure to disclose constitutes a separate violation.

* * *

This Client Alert was authored by Wendy C. Goldstein and Sarah K. Giesting. For additional information about the issues discussed in this Client Alert, please contact one of the authors or the EpsteinBeckerGreen attorney who regularly handles your legal matters.

 

The EpsteinBeckerGreen Client Alert is published by EBG’s Health Care and Life Sciences practice to inform health care organizations of all types about significant new legal developments.

 

Lynn Shapiro Snyder, Esq.

EDITOR

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ENDNOTES:

[1] S.B. 88 was enacted on May 27, 2010, without the signature of the Governor. Seehttp://www.leg.state.vt.us/database/status/summary.cfm?Bill=S%2E0088&Session=2010. The sections of S.B. 88 discussed in this Alert are effective as of the date of passage.

[2] See http://www.ebglaw.com/showclientalert.aspx?Show=11857 for an overview of Vermont’s gift ban and disclosure laws, as amended previously on June 8, 2009.

[3] Free samples of biological products and medical devices are required to be reported for fiscal year 2010 in accordance with guidance provided by the Vermont Office of the Attorney General. See “Guide to Vermont’s Prescribed Products Law for FY10 Disclosures (10/1/09),” available athttp://www.atg.state.vt.us/issues/pharmaceutical-manufacturer-payment-disclosure.php (“VT AG FY10 Guide“).

[4] Vt. Stat. Ann. tit. 18, § 4632(a)(2)(A)(i).

[5] Prior to the enactment of PPACA, seven states—California, Maine, Massachusetts, Minnesota, Nevada, Vermont and West Virginia—and the District of Columbia had enacted state marketing and disclosure laws relevant to pharmaceutical and/or medical device manufacturers. Several other states have similar legislation pending.

[6] Public Law 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, Public Law 111-152.

[7] See http://www.ebglaw.com/showclientalert.aspx?Show=12676 for an overview of the transparency provisions in PPACA relevant to manufacturers.

[8] “Hospital foundation” is not a defined term.

[9] This change is consistent with previous guidance provided by the Vermont Office of the Attorney General. See VT AG FY10 Guide.

[10] “Free clinic” is defined as “a health care facility operated by a nonprofit entity” that (i) does not accept reimbursement for providing health care from any third-party payor, including an insurance policy, health plan or federal or state health benefits program that is individually determined; (ii) does not impose charges on patients to whom service is provided or imposes charges on patients according to ability to pay; (iii) accepts voluntary donations from patients for health care services provided; and (iv) is licensed or certified to provide health services in accordance with Vermont law.

[11] See VT AG FY10 Guide.