Life Science Compliance Update

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November 27, 2017

Vermont AG Probing Pharma and Physician Relationships

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The Vermont attorney general is investigating the extent to which drug and device makers may have violated state law by giving gifts or payments for other items to health care providers, according to a source familiar with the matter.

As some of our readers may recall, Vermont banned industry gift giving to health care providers over concerns that the payments influence the way physicians practice medicine and prescribe medications, a contentious issue that later led the federal government to create a database to which drug and device makers must report any payments to physicians and teaching hospitals.

The Vermont law prohibits payments from industry to physicians in the form of food, entertainment, travel, or most anything of value – few exemptions exist.

However, a check of the federal Open Payments database shows that in 2016, companies gave over $2,200 in gifts, provided roughly $173,400 in travel, and gave an estimated $54,400 in food and beverage.

According to Merideth Chaudoir, an assistant attorney general, “Our office is unable to discuss or comment on whether or not there may or may not be an investigation. Generally, our policy is not to comment on whether or not there may or may not be an investigation such as a probe or other investigatory method. Our office gets thousands of complaints a year and, in order to protect the privacy of individuals and businesses, we do not disclose that information.”

However, some of the reportings may have been done in error due to confusion over reporting requirements. This is because the federal Sunshine Act requires companies to report payments made to physicians and teaching hospitals to the Open Payments database. Since federal law pre-empts state law, companies are not required to report to Vermont any gifts provided to Vermont physicians and teaching hospitals, though they may opt to do so on a voluntary basis.

The Vermont law, on the other hand, more broadly requires companies to report all payments to all health care providers, including payments made to nurse practitioners and physician assistants, as well as benefit plan administrators and hospital foundations. Payments made to these individuals and entities are not required to be reported to the Open Payments database. As a result, some reporting failures could be due inadvertent administrative errors.

The Vermont attorney general may file a civil suit for any violation of either the gift ban or reporting requirements. Any company that fails to comply with the gift ban or fails to report payments may incur a $10,000 penalty for each violation.

Currently, only two other states have similar gift bans. Maine enacted a prohibition this summer and Massachusetts has had such a law for several years.

However, interest in such a law continues to grow. In August 2017, New Jersey Governor Chris Christie introduced a bill to prohibit gifts, including cash, entertainment, and recreational items, given to doctors. The proposed legislation would also cap physician income from industry members at $10,000 annually, the first such effort by any state.

Earlier this year, a bill in California was introduced that would also prohibit gifts. However, that legislation has been put on hold for the time being.

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