Draft Guide to Vermont’s Prescribed Products Gift Ban and Disclosure Law 2012:Update Round 2 – A Guide to Confusion

The “legality principle” is the fundamental legal ideal that requires all law to be clear, ascertainable and non-retrospective.  The legality principle posits that laws must give fair warnings to citizens of the nature of the conduct declared to constitute a criminal or civil offense.  There are several cornerstones associated with the legality principle. 

First, laws must be promulgated in a democratic way.  Second, those laws enacted must be publicized so that the public and citizens are aware of them.  Third, laws must be clear and comprehensible; they cannot be vague or ambiguous.  Fourth, laws must impose achievable (non-impossible) limits on conduct).  Fifth, laws and rules must not be changed too often.  Finally, laws and rules must be enforced in a regular and consistent manner.  

If laws, legislation, regulations, and public policy do not follow the legality principle, a number of negative effects would be imposed on citizens as well as businesses and industry.  Without the predictability and consistency of laws that are reasonable and understandable, citizens and industries cannot conduct their lives and businesses in a predictable, efficient and effective manner. 

Consequently, the State of Vermont seems to have forgotten this century old legal principle when it comes to their Prescribed Products Gift Ban and Disclosure Law.  Specifically, over the past three years, Vermont has regularly changed, amended, and added new provisions to its disclosure law, making it extremely difficult for providers and stakeholders to know exactly how to comply with the law, forcing many to change their compliance systems each year. 

In fact, Vermont recently announced an update to the Draft Guide to Vermont’s Prescribed Products Gift Ban and Disclosure Law for 2012 and making numerous changes, (This is not to be confused with the Draft Guide for the combined Vermont’s Prescribed Products Gift Ban and Disclosure law for 2012 issued June 2011) which will likely cause significant problems for providers and healthcare stakeholders within the state of Vermont.  It is possible that Vermont is considering such changes in light of the recent Supreme Court decision, IMS v. Sorrell, which struck down Vermont’s data-mining ban that was created by the state as a way to attempt rising healthcare costs. 

Vermont’s Prescribed Products Gift Ban and Disclosure Law was first enacted in 2001 and became effective in June, 2002.  It was amended several times thereafter (see below for specifics).   On June 8, 2009, Vermont Governor Jim Douglas signed into law Act No. 59, which amended Vermont’s existing pharmaceutical marketing disclosure law.  The Act, which went into effect July 1, 2009, included a ban on certain gifts to health care providers and expands reporting requirements to medical device and biological product manufacturers. 

2012 Proposed Changes 

The proposed changes to the Vermont disclosure law for 2012 are extensive, as evidenced by a conference call held this week, which lasted for almost two hours.  There were many questions asked by providers, and it was clear that there was a tremendous amount of confusion from stakeholders who are trying to comply with the regulations.  Many callers asked questions about recording payments in 2011, which the staff would subsequently answer.  

However, they would then instruct callers of changes to the substance of these questions which will be enacted in 2012, making the call extremely confusing.  One participant described these new requirements as “impossible.”  

First, the proposed drafted noted that, “Effective January 1, 2012, some of Vermont’s disclosure requirements will be preempted by federal law. In short, while the gift ban and samples reporting will not be affected, Vermont will no longer be able to require manufacturers to disclose those allowable expenditures and permitted gifts which must also be reported to the federal government under the Physician Payments Sunshine Provision (§ 6002) of the Patient Protection and Affordable Care Act (Pub. L. No. 11-148).” 

“The federal law is narrower than Vermont’s law in several ways, however; for example, only physicians and teaching hospitals are covered recipients under the federal law. Therefore, manufacturers must take care to make all nonpreempted disclosures regarding allowable expenditures and permitted gifts.” 

“The federal law does not prohibit manufacturers from making duplicative disclosures to states, it simply prohibits the states from requiring duplicative disclosures. At this time, the Office will accept such duplicative disclosures.” 

Reports need to be in the name of the Holding Company and distributors count as manufactures.  There will be no delay or grace period for mergers and acquisitions.  Alliance companies need to report separately based on who wrote the check.

If the state decides to audit a company, they will ask for records about how booklets, patient materials, and pamphlets were distributed by sales reps and to which doctors as well as the fair market value of the brochures.   

Reporting must be done online and uploaded into the state computer system.  In addition, Vermont is coming up with more regulations on Medical Foods.  Samples have to be in reasonable quantities, but no definition as to what constitutes a reasonable quantity – state said they are leaving that up to manufacturers.  

Vermont is no longer requiring reporting of drugs or devices used in clinical trials.  If a manufacturer provides food to a medical office, the food has to be attributed to the physicians in the office even if office staff eats the food.  Combination products must also be reported. 

Donations of prescribed product to free clinics should not be included in the Samples Access database or Samples Disclosures Form, but must be reported with disclosures of allowable expenditures and permitted gifts. 

Front-Office Staff: All permitted gifts and allowable expenditures made to an individual must be allocated to a prescriber or prescribers, even when the immediate recipient is front office staff. When there is only one prescriber in a practice, the expenditure or gift should be attributed to her. In cases in which there is more than one prescriber in a practice, however, the gift or expenditure must be allocated among the prescribers to which it is relevant. For example, if the permitted gift of a reasonable quantity of over the counter anti-inflammatory medication is handed out at a training which includes front office staff of a practice that includes three orthopedic surgeons, that gift would properly be divided between the three surgeons, but should not be attributed to any psychiatrists in the practice. 

Free Distribution to Patients: The provision of reasonable quantities of an over-the-counter drug, non-prescription medical device, or item of non-prescription durable medical equipment provided to a HCP for free distribution to patients and the provision of free drugs, medical devices, biological products, or medical equipment or supplies to a free clinic are permitted gifts. 

2011 Changes 

On May 26, 2011, Vermont for the third time amended the law on the disclosure and “gift ban” requirements applicable to manufacturers (and certain distributors) of prescription drugs, biological products and medical devices (“prescribed products”). Accordingly, on July 1, 2011 (unless otherwise noted), a number of significant changes went into effect, including: 

• Reporting is moved to a calendar year; reports are due to the Attorney General by April 1; there will be a transition six-month reporting period and $250 fee for July 1, 2011 through December 31, 2011.
• Manufacturers whose prescribed products are only certain Class I medical devices do not fall within the law. 18 V.S.A. § 4631a(a)(9).
• Research, such as marketing research or surveys, which does not fall within the allowable expenditures for clinical trials and scientific research, §§ 4631a(a)(1)(C) and (D), is banned. § 4631a(c).
• Patient assistance programs (PAPs) are not within the definition of “sample,” § 4631a(a)(13), are a permitted gift, § 4631s(b)(2)(I), and need not be reported. § 4632(a)(1)(A)(vii).
• Expenses for manufacturers’ employees health care are allowed, § 4631a(a)(1)(G), and need not be reported. § 4632(a)(1)(A)(iv).
• Delayed reporting for clinical trials is extended to four years (similar to the federal “Sunshine” law) for new uses of an FDA-approved prescribed product. § 4632(a)(1)(A)(iii).
• Trial period for loans of medical devices is extended to 120 days (up from 90 days), and need not be reported in all circumstances. § 4631a(b)(2)(B); § 4632(a)(1)(A)(vi).
• Effective January 1, 2012, over-the-counter drugs and medical devices permitted by § 4631a(b)(2)(A) are to be reported; the Attorney General will not disclose the identity of individual recipients to the public. § 4632(a)(1)(B).
• Members of the Green Mountain Care board, established as part of Vermont’s health care reform package, are treated similarly to health care providers for purposes of the gift ban and reporting. §§ 4631a(a)(5) and (b)(1); § 4632(a)(1) 

In light of these new requirements, the Vermont Office of the Attorney General has stated that it will not require reporting of distributions through PAPs for past years, including FY 2011 (due Oct. 1, 2011), even though the statutory provision eliminating PAP reporting does not go into effect until July 1, 2011. 

2010 Changes 

In 2010, Vermont enacted Senate Bill 88, which again amended Vermont’s existing gift ban and disclosure law.  Significantly, S.B. 88 requires 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.” 

“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 was 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.  PPACA includes several transparency provisions applicable to manufacturers, including Section 6002, also known as the Physician Payment Sunshine Act. 

Key Changes  

S.B. 88 expanded 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 amended several other key definitions 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.”  

S.B. 88 also includes several additional items that a manufacturer may provide to a health care provider, including: 

• 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.  

S.B. 88 also excluded 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.  

The law was 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 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.  

2009 Changes 

The 2009 Act required pharmaceutical manufacturers to file annual disclosures by November 1, 2009, for the reporting period July 1, 2008, to June 30, 2009, as required by the FY09 Law. Pharmaceutical manufacturers, as well as biological product and medical device manufacturers, filed their first reports by October 1, 2010, for the period January 1, 2010, to June 30, 2010. 

The Act broadened the scope of the previous law to include manufacturers of medical devices and biological products.  In expanding the scope of the law, the Vermont legislature specifically noted fraud and abuse enforcement actions by the federal government against device manufacturers and concluded that there is “little or no difference in the marketing of biological products and prescription drugs. 

Ban on “Gifts”  

As of July 1, 2009, manufacturers are prohibited from providing “anything of value to a health care provider for free,” unless otherwise permitted by the Act. “Health care provider” is defined broadly to include a health care professional, hospital, nursing home, pharmacist, health benefit plan administrator, or “any other person authorized to dispense or purchase for distribution prescribed products” in Vermont.  The Vermont Attorney General released guidance that, among other things, provides that the ban applies to health care providers that “regularly practice in Vermont,” regardless of whether the item of value is provided within or outside the state. 

Banned “gifts” include “any payment, food, entertainment, travel, subscription, advance or service.”  However, the Act enumerates several permissible gifts and “allowable expenditures.”  The Act further divides the permissible gifts and allowable expenditures into items that do not need to be reported and items that do need to be reported beginning with the 2010 reporting period. 

Permitted Gifts; No Reporting

• Free samples of prescription drugs intended for distribution to patients. This also includes vouchers and discount coupons for samples;
• Labels and package inserts approved by the federal Food and Drug Administration (“FDA“);
• Rebates and discounts provided “in the normal course of business.”  

Permitted Gifts; Reporting Required 

• Short-term loans of medical devices for evaluation purposes;
• Reasonable amounts of medical device evaluation or demonstration units;
• Peer-reviewed academic, scientific, or clinical articles for professional or patient education purposes.
• Educational items that serve a genuine educational function and are for the benefit of patients;
• Scholarships and other support for medical students, residents, and fellows to attend significant educational, scientific, or policy-making meetings if the recipient is selected by the association;
• Gifts to academic institutions or professional, educational or patient organizations.  

Allowable Expenditures; No Reporting 

• Royalties and licensing fees paid to health care professionals with ownership rights.  

Allowable Expenditures; Reporting Required  

• Payments to sponsors of a “significant educational, medical, scientific, or policy-making conference or seminar,” provided that no payment is made directly to a health care provider, the funds are used for bona fide educational purposes, and the content is not controlled by a manufacturer;
• Honoraria and expenses for faculty at a significant educational, medical, scientific, or policy-making conference, provided that there is an explicit agreement with the health care professional and the content of any presentation is determined by the health care professional;
• Direct salary and expenses for the conduct and review of “bona fide clinical trials” and research projects;
• Reasonable expenses for the technical training of health care professionals on the use of medical devices if the expenses are reasonable and set out in a written agreement;
• Other fees, payments, subsidies, or economic benefits provided by a manufacturer at fair market value.

 

Reporting Obligations 

Beginning in 2010, all manufacturers were required to identify by name and address the individual responsible for the manufacturer’s compliance with the Act by July 1^st each year.  Manufacturers also must file annual reports detailing allowable expenditures and permissible gifts provided to health care professionals and providers and pay an annual filing fee of $500.  For each payment reported by the manufacturer, the manufacturer must provide the value, nature, purpose, recipient information including state license number, and the prescribed product(s) being marketed. 

The Vermont Attorney General is authorized by the Act to seek injunctive relief and to impose a civil penalty of not more than $10,000 per violation for failing to comply with the Act.  Each failure to disclose is a separate violation.

 

Public Disclosure  

The Act required the Vermont Attorney General to make all disclosed data publicly available on a searchable Web site.  All information reported under the Act was made public. 

The Act allows manufacturers to delay reporting payments for bona fide clinical trials. Specifically, manufacturers must report expenditures for bona fide clinical trials after the earlier of: (1) the date of the approval or clearance of the prescribed product by the FDA; or (2) two calendar years after the date the payment was made. However, manufacturers must identify minimum information to the Attorney General regarding the clinical trial, including the name, start date and Web link to the clinical trial registration on the national clinical trials registry. A contract for a clinical trial entered into on or after July 1, 2009, may not contain a confidentiality clause that violates the Act.