Life Science Compliance Update

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June 09, 2010

Vermont Disclosure Law: Samples Added to Reporting Requirements and Re-Instates Allowing Coffee for Conference Participants

Last month, the Vermont Senate passed a major health care reform bill, which included provisions about disclosure and gifts from drug and device companies. The health care reform bill, S.88, which was strongly supported by a voice vote, contained specific provisions that amended Vermont's existing gift ban law, Vt. Stat. Ann. tit. 18, § 4631a ("§ 4631a"), and disclosure law, Vt. Stat. Ann. tit. 18, § 4632 ("§ 4632").

According to a recent article from the firm Epstein, Becker and Green, significant changes from S.B. 88 to these provisions “require manufacturers of pharmaceuticals, medical devices and biological products 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." The first report is due by April 1, 2012, for the reporting period of January 1, 2011, through December 31, 2011.

"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.

Key Changes to § 4631a

Additional changes to § 4631 include a ban on 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; and
  • 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."
  • "Prescribed product" includes "a compound drug or drugs" and limits the definition to products that are "for human use."

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."
  • 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

Manufacturers will have to report annually 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 from reporting the following additional items provided by manufacturers to health care providers:

  • 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.

Once this data is collected, the amended Section 4632 allows the Vermont Office of the Attorney General to contract with academic researchers to provide the reported data for analysis and aggregated public reporting. This data will not include the names or license numbers of individual recipients, and will not include information that allows for the identification of individual recipients or monetary value of the samples provided to a specific recipient.

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, then samples will not need to be reported under § 4632.

Impact of S.B. 88

The new reporting requirements under PPACA reporting provisions related to certain gifts, payments and samples provided to health care providers will pose significant burdens on company’s staff, time and resources. Also difficult for companies will be the need for them to coordinate and analyze for purposes of preemption of those reporting requirements with current state transparency laws as well as any laws that may emerge. Accordingly, as more states continue to enact their own transparency laws, companies will face significant challenges. In Vermont, for example:

  • Manufacturers will have to 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, since the term is undefined. Prior to S.B. 88's amendment, such expenditures were reportable.
  • A determination for what is reportable may still be unclear and a determination will not be made until, or just shortly before, January 1, 2011—the same date that manufacturers must begin collecting such data.
  • 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.

As the first state law relevant to drug and device transparency to be enacted since the enactment of the Patient Protection and Affordable Care Act ("PPACA") on March 23, 2010, the goal of S.B. 88, to provide more transparency, will be burdensome for companies since provisions in PPACA cover almost all the same reporting requirements. At a time when companies should be investing in more technology, innovation, research and development and clinical trials to help prepare for the influx of 30 million people into our health care system, policymakers must work together with companies to achieve the best success at implementing reform.  

Many of the changes help to reduce the unforeseen consequences of the previous law (Signs on exhibit booths which read physicians from Vermont please don’t drink the coffee, only in Vermont would a state feel that they have the power to restrict consumption of water and coffee.  With the addition of reporting samples these additional requirements will be burdensome and already covered in the Sunshine Provisions of PPACA.

Accordingly, clarification from Congress is needed in a timely manner to address the implementation of the Sunshine Act and federal reporting requirements so that companies are not faced with spending significant resources, time and staff preparing state and federal reports that will be duplicative. 

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