Vermont Expands Physician Gift Ban and Disclosure Policy to Apply to Device Manufacturers

May 22, 2009

The Vermont Legislature has enacted legislation (S.48) that prohibits drug and medical device manufacturers from offering gifts to health care providers and imposes broad financial relationship reporting requirements. The legislation expands and toughens the state’s existing physician gift ban and disclosure law. While the existing law only applies to pharmaceutical manufacturers, S.48 applies to both drug and device manufacturers. Under the new legislation, drug and device manufacturers must publicly disclose certain allowable expenditures made to doctors, nurses, medical staff, pharmacists, health plan administrators and facilities. The types of gifts S.48 prohibits include any type of payments, food, entertainment, travel, subscription, advance, service, and virtually anything of value provided to a health care provider for free.

The legislation exempts certain items from the general gift ban. Exempted items include samples, loans of medical devices for a short term trial period, the provision of medical devices for demonstrative or evaluative purposes, the provision of articles or journals serving a genuine educational function, scholarship, labels approved by the Federal Food and Drug Administration, and rebates and discounts. The legislation also allows manufacturers to make certain expenditures to health care providers. Allowable expenditures include, but are not limited to, payments for bona fide clinical trial and payments to the sponsors of a significant educational, medical, scientific, or policy-making conference or seminar.

Manufacturers providing allowable expenditures or exempted gifts to health care providers must make an annual disclosure of the payment’s value, nature, purpose, and recipient information. Manufacturers must also designate a person who will be responsible for their compliance with S.48 and disclose such individual’s name and address. Notably, the new legislation eliminates a previously existing exemption that restricted disclosure of trade secret information.

S.48 will take effect on July 1, 2009. A manufacturer violating S.48 may face a civil penalty up to $10,000 per violation. The Vermont Attorney General will be responsible for establishing reporting forms and enforcing this law.

Many legislatures around the nation are engaged in similar efforts to bring transparency to the drug and device manufacturer’s marking practices. A number of states, including Texas and Connecticut, have pending legislation that would ban certain gifts to health care providers and require disclosures of payments. Congress is also considering the Physician Payments Sunshine Act, which, if passed, may preempt certain state regulations and laws that require disclosure of information covered by the Federal legislation.

McGuireWoods LLP has formed a state compliance consortium to assist medical device manufacturers in complying with new state marketing compliance rules that have been passed in California, Massachusetts, and Nevada, the new Vermont law, and legislation pending in a number of additional states. The consortium will help medical device manufacturers keep abreast of these new laws and receive practical guidance to comply with the laws. This consortium will not be a lobbying effort but instead an effort to provide specific, practical guidance to help clients comply with the laws.