Sharon Treat, Legal Project Director

In the final hours of the 2009 session, the Vermont Senate and House passed a sweeping law to close loopholes in the state’s existing gift and payment
disclosure law and ban most gifts from manufacturers of prescription drugs, medical devices, and biological products. The gift ban includes food and free meals, a First-in-Nation provision.

The law, S.48, which took effect on July 1 of this year, mandates full disclosure of allowable gifts to physicians, health care organizations, nonprofit groups,
and state-funded academic institutions. It also insures a higher degree of transparency in the state’s health care system. Vermont joins Massachusetts, which enacted a comprehensive gift ban and disclosure law in 2008, and
Minnesota, which enacted a more limited gift ban in 1993.

Exempted from the gift ban are samples and labels; short-term loans of medical devices; clinical articles, medical journals, and other items that serve a genuine educational function for the benefit of patients; scholarships for medical students, residents, and fellows to attend major conferences; and rebates and discounts provided in the normal course of business. Exceptions to the disclosure requirements include royalties and licensing fees, rebates and discounts, and samples of prescription drugs. Special rules apply to the disclosure of clinical trials.

Despite these exceptions, the Vermont legislation is significantly more comprehensive than pending transparency legislation in Congress, the Physician Payments Sunshine Act. Besides Massachusetts and Minnesota, other states with transparency laws—none of which are as effective as the new Vermont law and none of which include gift bans—are the District of Columbia, West Virginia, and Maine.

“The new law allows consumers going to their physician to know whether their doctor is taking money from the pharmaceutical companies,” said Vermont Senate president pro tem and PPC board member Peter Shumlin, a sponsor of the bill. “It allows for greater patient and consumer empowerment and, in these difficult economic times, is a good step toward addressing our rising health care costs.”

Despite heavy lobbying by the pharmaceutical and biotech industries, the legislation received broad bipartisan support and was supported by such organizations as the Vermont Association for Mental Health, Vermont Medical
Society, and Vermont Public Interest Research Group.

Although Vermont already required disclosure of many gifts and payments to prescribers, the new law closes a trade secret loophole which resulted in most data being submitted in aggregate form, with the public in the dark about whether their own providers accepted gifts and payments. According to Vermont legislative staff, only 17% of the requested information was publicly available under the former law.

For several years, the Vermont Attorney General has issued annual reports analyzing the data collected under the previous law. While incomplete, the data was nevertheless eye-opening. In 2008, makers of medical products spent about $2.9 million on marketing to health care professionals in Vermont, according to the most recent report from Attorney General William Sorrell. Of Vermont’s 4,573 licensed health care practitioners, almost half received remuneration, including payments for lectures, meals, or lodging from pharmaceutical
companies.

As Ken Libertoff, director of the Vermont Association for Mental Health and supporter of the new law, told the New York Times, “If the drug industry gives $3 million on average for three years now to physicians in a small state like
Vermont, what is happening in California and New York?”

A flashpoint in the legislative debate was whether to require disclosure of free drug samples. In a compromise, the law required the Vermont Attorney General to hold a hearing and prepare a study to be submitted to the Legislature in December. The hearing was held in October with testimony on the question of disclosure. There was also testimony as to whether free samples are a good idea at all: Are they, as reported by the Associated Press, “a boon to doctors trying to provide medicines to low-income patients and those without insurance, or a marketing ploy that distorts the way health care is delivered?”

The hearing drew dozens of drug industry lobbyists opposing disclosure, including Marjorie Powell, counsel to PhRMA. Academics and health care advocates supported disclosure, and health care providers testified on both sides of the question.

The new Vermont law will collect important data on industry practices that will be useful to researchers and policymakers throughout the country. Its provisions will provide a road map to other states and the federal government moving ahead with transparency and gift legislation. All eyes will be on the Vermont Legislature in 2010 as it considers the Attorney General’s report on
sample disclosure and ponders whether to take further action on this emerging and contentious issue.