Update: State Disclosure and Transparency Laws for Pharmaceutical and Medical Device Manufacturers

June 22, 2010

Colorado, Connecticut and Vermont recently enacted legislation creating new compliance and disclosure requirements for pharmaceutical and medical device manufacturers and healthcare professionals. Many state legislatures have recently enacted or proposed legislation that is intended to bring transparency to healthcare providers’ relationships with industry. Such state legislative efforts supplement the “sunshine” provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA), one of two statutes that encompass the health reform legislation.

Specifically, PPACA included a modified version of the previously proposed, but never enacted, Physician Payments Sunshine Act. The recently enacted laws in Colorado, Connecticut and Vermont signal that for the purposes of establishing and enforcing transparency and disclosure laws, states are not exclusively deferring to the federal government.

Colorado

The governor of Colorado signed two bills into law on June 10, 2010. Senate Bill S.10-126 requires the Colorado Department of Regulatory Agencies to post on its website copies of the disclosure reports that pharmaceutical and medical device manufacturers are required to submit to the U.S. Department of Health and Human Services pursuant to the transparency and disclosure provisions enacted as part of PPACA.

The second bill, Senate Bill S.10-124, also known as the Michael Skolnick Medical Transparency Act of 2010 (the Transparency Act), amends the Michael Skolnick Medical Transparency Act (the Original Act) of 2008. The Original Act required physicians to disclose to the Director of the Colorado Division of Registrations (the Director) certain healthcare-related independent contractor or employment contracts that exceed an annual aggregate of $5,000. The Transparency Act expands existing disclosure requirements to a broad range of healthcare practitioners including dentists, physician assistants, nurses, physical therapists and counselors.

Required disclosures must be made whenever physicians or other covered providers are renewing or applying for certification, registration, or a new active license to practice. Contracts requiring disclosure include independent contractor and consulting relationships between healthcare professionals and pharmaceutical and medical device manufacturers. These contracts are disclosed on a public website, such as the website of the Director or that of the state board overseeing the applicant’s practice.

In contrast to PPACA, Colorado does not provide a “trade secret” exception whereby disclosures can be delayed or remain confidential when such disclosures could reveal competitive information or trade secrets related to the manufacturer’s product development.

Connecticut

On June 8, 2010, the governor of Connecticut signed into law Public Act No. 10-117 (S.428) (the Connecticut Act). The Connecticut Act requires pharmaceutical and medical device manufacturers to implement, at a minimum, the PhRMA or AdvaMed compliance codes. In addition, all such manufacturers must adopt a comprehensive compliance program that comports with the recommendations set forth in the Compliance Program Guidance for Pharmaceutical Manufacturers issued by the Office of the Inspector General of the U.S. Department of Health and Human Services. The Connecticut Commissioner of Consumer Protection may impose civil penalties of up to $5,000 for failure to implement a compliant code, or failure to conduct training or regular compliance audits related to the code.

Vermont

On May 27, 2010, the Vermont Legislature, one of the most active in the area of transparency and disclosure laws, enacted new legislation (S.88) (the Vermont Act). This legislation amends existing Vermont legislation related to a healthcare provider’s relationships with medical device and pharmaceutical manufacturers.

Vermont previously enacted certain transparency and disclosure laws, including a prohibition on the provision of gifts by pharmaceutical and medical device manufacturers to healthcare professionals. In addition to the existing requirements under Vermont law, the Vermont Act requires each manufacturer to disclose all free product samples it provides to a healthcare provider (18 V.S.A. § 4632a(2)).

This new requirement does not apply to prescription drug samples that manufacturers are required to report pursuant to the requirements set forth in PPACA. Under PPACA, beginning April 1, 2012, drug manufacturers and authorized distributors must report to the Secretary of the U.S. Department of Health and Human Services the identity and quantity of drug samples requested by, and distributed to, healthcare practitioners to the extent payment for such a drug is available under a government healthcare plan (or a waiver of such plan).

Finally, the legislation modified and expanded the exceptions to the Vermont gift ban (18 V.S.A. § 4631a). Specifically, the Vermont Act expands the categories of permissible free samples; allows restricted support for fellowship salaries; and allows manufacturers to provide coffee or other snacks and refreshments at a conference booth. The Vermont Act also exempts the provision of pharmaceuticals, medical devices and donations to free clinics or patient assistance programs from the gift ban. Finally, the Vermont Act amends the prior legislation to allow manufacturers that sponsor continuing medical educational programs to use part of the sponsorship funding to provide meals and other food for all conference participants.

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