I. An Act Relating to the Marketing of Prescribed Products: Current Status
On June 8, 2009, Governor Jim Douglas of Vermont signed legislation that expands Vermont's existing pharmaceutical marketing disclosure law. The new law, Chapter 59 of the Vermont Acts of 2009 (the "Act") creates the nation's strictest rules regarding marketing activities by the pharmaceutical and medical device industries. As of July 1, 2009, the Act bans nearly all industry gifts to prescribers (including doctors, nurses, and medical staff), as well as gifts to health plan administrators and health care facilities. The Act also strengthens the existing manufacturer expenditure disclosure requirement, and removes certain legal protections pertaining to the disclosure of trade secrets.
The Act received broad bipartisan support, passing unanimously in the Senate and 137-4 in the House. Because the Act substantially expands existing Vermont law regulating pharmaceutical and medical device marketing, its requirements and potential impact are of significant importance to anyone involved in the biotechnology, health care, and drug and device sectors.
II. Background and Overview
Since 2002, Vermont law has regulated pharmaceutical marketing activities by requiring pharmaceutical manufacturers to disclosure the value, nature and purpose of certain marketing-related expenses of $25 or more in value. The prior law also provided an exception to the disclosure requirement for manufacturer trade secrets. The Act has four key elements:
- Extends the reach of the law to biological
product and medical device manufacturers.
- Bans most gifts from manufacturers of
prescription drugs, biologics and medical devices to doctors,
nurses and health care facilities. The ban also extends to food and
free meals.
- Strengthens Vermont's existing disclosure
law by requiring all manufacturers of prescribed products to report
annually all allowable expenditures, including expenditures
relating to clinical trials. Transactions that are exempt from
disclosure include royalties and licensing, samples of prescription
drugs, and rebates and discounts; disclosure is delayed for two
years for payments relating to clinical trials.
- Eliminates the provision in the prior law that
protected trade secrets from disclosure.
III. Summary of Chapter 59 of the Vermont Acts of 2009 (Senate Bill 48)
Section 1 – Definition of "Health Care Professional"
- Defines "health care professional"
as a "person, partnership or corporation, other than a
facility or institution, licensed or certified or authorized by law
to provide professional health care service in this state to an
individual during that individual's medical care, treatment or
confinement."
Section 2 – Legislative Findings
- That Vermonters "spent an estimated $572 million on
prescription and over-the-counter drugs and nondurable medical
supplies" in 2007, and that the state of Vermont has a
"substantial interest in cost containment and protection of
public health."
- That a 2009 report from the Institute of Medicine found that
"acceptance of meals and gifts... are common between
physicians and pharmaceutical, medical device and biotechnology
companies," and that these relationships may influence
physicians' prescribing behavior.
- That a 2009 report from the Vermont Attorney General found
that, in FY 2008, "pharmaceutical manufacturers reported
spending $2,935,248 in Vermont on fees, travel and other direct
payments to Vermont physicians, hospitals and
universities..."
- That "there is little or no difference in the marketing of
biological products and prescription drugs," making it
"logical and necessary to include biological products to the
same extent as prescription drugs..."
- That the Act is "necessary to increase transparency for
consumers by requiring disclosure of allowable expenditures and
gifts to health care providers and facilities providing health
care."
Section 3a – Additional Definitions
- Allowable expenditures: Defines all
permissible payments, including:
- Payments to the sponsor of an educational or medical conference
if 1) the payment is not made directly to the health care provider,
2) the funding is used for bona fide educational purposes, and 3)
the program content is objective and free from industry
control;
- Honoraria and expense reimbursements for health care
professionals serving as faculty at educational, medical, or
policy-making conferences (with some restrictions);
- For a bona fide clinical trial, gross compensation for the
Vermont location(s) involved in the trial, and direct salary
support and expenses paid on behalf of investigators to review
clinical trials;
- For a research project that "constitutes a systematic
investigation" and is used to develop knowledge of
"significant value" to the health care community, gross
compensation, direct salary support, and expenses;
- Royalties and licensing fees paid to health care providers in
return for contractual rights to use or purchase a patented
discovery; and
- Other "reasonable fees, payments, subsidies or other
economic benefits provided by a manufacturer at fair market
value."
- Bona fide clinical trial: An FDA-reviewed
clinical trial that can be "considered of interest" to
health professionals in the field.
- Clinical trial: Any study assessing the safety
or efficacy of prescribed products, or assessing the relative
safety or efficacy of prescribed products in comparison with
others.
- Gift: Anything of value provided for free, or
any payment, food, entertainment, travel, subscription, advance,
service or anything else of value provided to a health care
provider unless it is an "allowable expenditure," or
unless the health care provider reimburses the payor at fair market
value.
- Health care professional: A person authorized
to prescribe or to recommend prescribed products, and who is either
licensed or "lawfully providing health care" in Vermont;
a partnership made up of these persons; or an officer or employee
of such person.
- Health care provider: A health care
professional, a hospital, nursing home, pharmacist, health benefit
plan administrator, or any other person authorized to dispense or
purchase for distribution prescribed products in Vermont.
- Manufacturer: A "pharmaceutical,
biological product, or medical device manufacturer or any other
person who is engaged in the production, preparation, propagation,
compounding, processing, packaging, repacking, distributing, or
labeling of prescribed products." The term does not include a
wholesale distributor of biological products or a pharmacist.
- Marketing: Includes promotion, detailing, or
any activity intended to influence sales or market share.
- Pharmaceutical manufacturer: Any entity
"engaged in the production, preparation, propagation,
compounding, conversion, or processing of prescription drugs,
whether directly or indirectly by extraction from substances of
natural origin, independently by means of chemical synthesis, or by
a combination of extraction and chemical synthesis, or any entity
engaged in the packaging, repackaging, labeling, relabeling, or
distribution of prescription drugs."
- Prescribed product: Any drug or device in
§ 201 of the FDC Act (21 U.S.C. § 321) or a biological
product as defined in § 351 of the PHS Act (42 U.S.C. §
262).
- Significant educational, scientific, or
policy-making conference or seminar: Any
seminars or events that are accredited by the Accreditation Council
for Continuing Medical Education or a comparable organization,
offer CME credit, and have multiple presenters on scientific
research.
Section 3b – Prohibition, Exclusions and Penalties
- Prohibits any manufacturer of a prescribed product or any
wholesale distributor of medical devices to offer or give any gift
to a health care provider.
- Excludes from the definition of "gift" the
following:
- Product samples for free distribution;
- Short-term (90-day) loans of medical devices for evaluation
purposes;
- "Reasonable quantities" of medical device
demonstration or evaluation units provided to a health care
provider for purposes of assessing appropriate use;
- Provision or distribution of peer-reviewed materials that serve
a "genuine educational function;"
- Scholarship support for medical students and residents
attending scientific conferences;
- Rebates and discounts provided in the normal course of
business; and
- FDA-approved labels for prescribed products.
- Authorizes the Attorney General to seek injunctive relief and
civil fines of $10,000 per violation.
Section 4 – Disclosure of Allowable Expenditures and Gifts by Manufacturers of Prescribed Products; Penalties
- Mandates that annually by October 1, manufacturers of
prescribed products shall report to the Attorney General for the
fiscal year ending the previous June 30 the value, nature, purpose
and recipient information of any allowable expenditure or gift
permitted under the Act.
- Excludes from disclosure rebates and discounts
for prescribed products provided in the normal course of business,
royalties and licensing fees, and samples of prescription drugs
provided to health care professionals for free distribution.
- Delays disclosure of clinical trials payments
for the first two calendar years after such payments are
made.
- Requires manufacturers to report annually the name of the
expenditure recipient, the recipient's address and
institutional affiliation, prescribed products being marketed, if
any, and the recipient's state board number.
- Allows the Office of Vermont Health Access to examine disclosed
data and determine whether and to what extent prescribing patterns
by health care providers of products reimbursed by Medicaid, VHAP,
Dr. Dynasaur, VermontRX and VPharm may reflect manufacturer
influence.
- Requires manufacturers to report annually on July 1 the name
and address of the individual who is responsible for the
manufacturer's compliance with the Act, and to pay an annual
filing fee of $500.
- Authorizes the Attorney General to bring actions for injunctive
relief, costs, and attorney's fees, and to impose a fine of not
more than $10,000 per each violation of the Act's disclosure
requirements.
Section 5 – Elimination of Trade Secrets Exemption
- Eliminates statutory trade secret protections for
competitively-sensitive information that manufacturers may be
obligated to disclose under the Act.
Section 5a – Study of Disclosure of Drug Samples
- Directs the Attorney General to study whether the Act should be
further amended to require the disclosure of free drug and device
samples.
Section 6 – Additional Definitions
- Defines the terms "average wholesale price,"
"pharmaceutical manufacturing company," and
"pharmaceutical marketer," in relation to the existing
statutory provision requiring pharmaceutical marketers to disclose
average wholesale prices to authorized providers.
Section 7 – Therapeutic Equivalent Drug Work Group
- Creates a "work group" tasked with increasing the
usage of generic drugs.
- Instructs the work group to generate by January 15, 2010, both
draft legislation for codifying a generic substitution process, and
a sample list of therapeutically equivalent generic drugs that
pharmacists would be authorized to substitute for brand
drugs.
Sections 8 & 9 – Technical Amendments: Establishment of a Work Group to Examine Health Care Costs in Corrections / State Membership in National Legislative Association on Prescription Drug Prices.
Section 10 – Appropriation
- Authorizes $40,000 in FY 2010 to the Attorney General to
collect and analyze information collected pursuant to the
Act.
Section 11 – Effective Date
- Provides that the Act will take effect on July 1, 2009.
- Clarifies that pharmaceutical
manufacturers' disclosure obligations for the July 1, 2008 to
June 30, 2009 period are covered by the prior law.
Those disclosures must be filed by November 1, 2009.
- Clarifies that the first disclosure period for
biological product and medical
device manufacturers — who were not covered by
the prior law — is January 1, 2010 through June 30, 2010.
Those disclosures must be filed by October 1, 2010.
IV. Next Steps
The Vermont Attorney General will promulgate rules pertaining to these new statutory provisions. During this process, input from those with an interest in the Vermont biotechnology, health care, and drug and device sectors will be of significant importance. Additionally, manufacturers who provide payments or items of value to health care professionals in Vermont will need to understand, and ensure compliance with, changes to the current Vermont disclosure database.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.