Vermont Law Targets Drug Marketing*

By Ronald L. Scott

During my college days in the seventies, I worked for a photography store, and it wasn’t uncommon for drug companies to purchase expensive photographic equipment such as $500 camera lenses and have us deliver them to physicians as gifts from the drug companies.  Changes in federal and state fraud and abuse laws have limited such practices, and such gifts would today violate many medical societies’ code of ethics. However, it seems that the public—or at least some lawmakers—are still not happy with marketing practices employed by some drug companies.  Vermont is the first state to legislatively address such practices.

A new Vermont law aimed at prescription drug cost containment has a number of controversial provisions, including the disclosure of drug company gifts to physicians.  The law requires that drug companies file annual reports with the Vermont Board of Pharmacy disclosing the “value, nature and purpose of any gift, fee, payment, subsidy or other economic benefit provided in connection with detailing, promotional or other marketing activities by the company, directly or through its pharmaceutical marketers, to any physician, hospital, nursing home, pharmacist, health benefit plan administrator or any other person…” See Vt. Stat. Ann. Tit. 33 §2005(a)(1).

First reports under the new law are due January 1, 2004. The pharmacy board is directed to provide the Vermont attorney general complete access to the information required to be disclosed, and the attorney general in turn reports annually to the governor and legislators.

The law contains a number of exemptions from disclosure, including:

The law authorizes the attorney general to bring an action for injunctive relief, costs, and attorneys’ fees, and to impose a civil penalty up to $10,000.00 per violation on a pharmaceutical manufacturing company that fails to disclose as required.  Each unlawful failure to disclose is treated as a separate violation.  Not surprisingly, the pharmaceutical industry lobbied against the legislation, arguing that the disclosure requirement violates the First Amendment.  On the other hand, the Vermont Medical Society supported the legislation.  Earlier versions of the legislation required a $5,000 license fee from drug manufacturers and a $400 license fee for each drug “detailer.”  These licenses and fees were removed in the final version of the law.

The Pharmaceutical Research and Manufacturers of America (PhRMA) adopted a new voluntary marketing code effective July 1, 2002.  The full text of the code is available on PhRMA’s web site at The code governs the pharmaceutical industry’s relationships with physicians and other healthcare professionals.  Under the code, drug company representatives may only offer to pay for meals if they are “modest as judged by local standards” and “occur in a venue and manner conducive to informational communication and provide scientific or educational value.”  Even paying for a spouse’s meal is considered inappropriate, as are “take-out” meals, and “dine & dash” programs.  The code prohibits all cash payments to physicians except for legitimate documented consulting or speaking fees. The code does not regulate compensation to physicians in connection with clinical trials.  For gifts, the code distinguishes between those that could benefit patients or be used in the physician’s practice and those solely for the personal benefit of the physician.  For example, pens and pads with the drug company name are appropriate since they could be used in the physician’s office.   Golf balls with the drug company name are not allowed under the code, however, since they cannot be used in the physician’s practice.

*  A version of this article was originally published in the Internal Medicine World Report, September 2002.