Vermont Governor Jim Douglas June 8, 2009 signed into law legislation passed by the state’s House and Senate, banning most gifts and payments from pharmaceutical and medical device companies to health care providers licensed by the state, including institutional providers, health plans and pharmacists as well as physicians and other authorized prescribers. (To read the full bill, S. 48, click here). Governor Jim Douglas signed the bill into law on June 8, 2009. The new law obligates pharmaceutical and medical device manufacturers to report annually, without benefit of trade secret protection, all gifts and permissible payments to health care providers in Vermont.  The new Vermont gift ban is now the most comprehensive in the country, even more restrictive than the far-reaching Massachusetts code of conduct or the long-standing Minnesota gift ban. 

The Vermont gift prohibition and reporting requirements become effective July 1, 2009.  Pharmaceutical and medical device companies that made any expenditures directed toward Vermont health care providers last year must file contact information with the state by the law’s effective date and pay an annual $500 registration fee. 

The new law includes harsh penalties for violations.  If a company violates the gift ban, the state may impose a civil penalty of up to $10,000.  Each unlawful gift will constitute a separate violation subject to the penalty maximum.  In addition, Vermont’s Attorney General may seek injunctive relief, costs and attorney’s fees.  If a company fails to comply with the law’s disclosure requirements, the state Attorney General also is authorized to bring an enforcement action to address that failure.

Gift Ban

The Vermont law prohibits pharmaceutical and medical device companies and their agents from offering or giving any gift to a health care provider.  The bill defines a “health care provider” as “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 this state.”  Moreover, a “health care professional,” according to the bill, is defined broadly as a person licensed by Vermont to prescribe products, including partnerships or corporations comprising such individuals, and their employees, agents and contractors.  

The bill defines a “gift” as “anything of value provided to a health care provider for free [or] any payment, food, entertainment, travel, subscription, advance, service, or anything else of value provided to a health care provider.”  However, the bill permits a health care provider to reimburse a manufacturer for the cost of any gift at fair market value. 

The new Vermont law allows gifts that fall into one of the following narrow “allowable expenditures” categories: (1) indirect payments to the sponsor of an educational, medical, scientific or policy-making conference so long as the program content is free from industry control and does not promote specific products; (2) honoraria to faculty at a “significant” conference or seminar so long as the faculty and manufacturer enter a specific type of contract and the content of the presentation is determined by the faculty; (3) bona fide clinical trial gross compensation, direct salary support and expenses paid for review of trial data; (4) expenses associated with specified research projects; (5) royalties and licensing fees paid in return for contractual rights to patented materials; and (6) “other reasonable fees, payments, subsidies or other economic benefits provided by a manufacturer of prescribed products at fair market value.”

Gift Reporting

The Vermont legislature made several significant changes to the gift reporting requirements in the state’s previous gift reporting law.  The new law obligates manufacturers of prescribed products to report to the Vermont Attorney General the value, nature, purpose and recipient information for all gifts and allowable expenditures made to any Vermont health care provider.  The statute excludes from disclosure only the following items: (1) royalties and licensing fees; (2) rebates and discounts for prescribed products provided in the normal course of business; (3) payment for clinical trials; and (4) samples of a prescription drug provided to a health care professional for free distribution to patients.

Reports are due October 1 each year and must cover the previous 12-month period from July 1 through June 30.  However, the first report, covering the period from July 1, 2008 through June 30, 2009, is not due until November 1, 2009.  By July 1 each year, pharmaceutical and medical device companies must provide the Vermont Attorney General with the name and address of the person who is responsible for ensuring the manufacturer’s compliance with this law and submit the annual registration fee of $500.  

The Attorney General is required to publish an annual report summarizing the disclosed information, including all allowable expenditures and gifts made by pharmaceutical and medical device companies, and information on violations and enforcement actions taken.  The Vermont Attorney General is authorized to bring an enforcement action against any manufacturer that does not comply with the disclosure requirements of this statute.  Under the earlier version of the law, which only applied to pharmaceutical manufacturers, the Attorney General took enforcement action against at least four companies for failure to file required disclosure reports.¹

¹Rick Valliere, Drugmaker Biogen Idec Will File Disclosures Under State Marketing Law, Pharmaceutical  Law & Industry Report, Vol. 5 Num. 3 at 65 (Jan. 19, 2007).