STATEMENT OF COMPLIANCE WITH CALIFORNIA LAW

Effective July 1, 2010, to the best of our knowledge, Broncus Medical, Inc. (“Broncus”) is in all material respects in compliance with a Comprehensive Compliance Program (“CCP”) that satisfies the requirements of California Health and Safety Code §§ 119400-119402, based on our good faith understanding of the statutory provisions as they may apply to a medical device manufacturer.

Consistent with the Department of Health and Human Services Office of the Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers (“HHS-OIG Guidance”), Broncus has tailored its CCP to the nature of its business as a medical device manufacturer.  While California Health and Safety Code §§ 119400-119402 makes reference to compliance with the Pharmaceutical Research and Manufacturers of America’s Code on Interactions with Healthcare Professionals (“PhRMA Code”), Broncus manufactures medical devices rather than pharmaceutical products. Therefore, Broncus determined that it was more appropriate for the company instead to adopt policies and procedures consistent with The AdvaMed Code of Ethics on Interactions with Healthcare Professionals (“AdvaMed Code”) which, although substantially similar to the PhRMA Code, recognizes significant differences applicable to the medical device industry.

In addition to our CCP, Broncus has established an annual spending limit for certain promotional activities directed toward healthcare professionals practicing in California (“Annual Spending Limit”). The Annual Spending Limit is set at $3,000 per year for each applicable California healthcare professional. The Annual Spending Limit applies to gifts, promotional materials, and other items or activities that are provided to an individual California healthcare professional. The only exceptions to the Annual Spending Limit are: 1) the value of samples or evaluation product; 2) financial support for continuing medical education forums or health educational scholarships or fellowship grants; 3) payments made for legitimate professional services provided by a California healthcare professional, including reimbursement for reasonable expenses; 4) research grants; and 5) patient education materials and health-related items provided for the patient’s benefit.

Broncus is committed to the highest standards of ethical and legal conduct. We have developed a CCP that is reasonably designed to prevent and detect violations, and includes the following:

  1. Written Standards. We have established and implemented a Code of Conduct and Ethics as well as a Compliance Policy that is consistent with the provisions of the AdvaMed Code.
  2.  Leadership and Structure. We have established effective oversight over the CCP, including selection of a Compliance Officer to develop, operate, and monitor the CCP and creation of a compliance committee to provide strategic direction and oversight.
  3. Training and Education. All employees receive copies of our Code of Conduct and Ethics and Compliance Policy and certify that they have read, understood, and agree to abide by these written standards. We also provide ongoing comprehensive live training to those employees who regularly interact with healthcare professionals.
  4. Lines of Communication. To facilitate an open door environment, we have adopted confidentiality and non-retaliation policies as well as mechanisms to facilitate anonymous reporting.
  5. Auditing and Monitoring. Our CCP includes ongoing efforts to monitor, audit, and assess compliance.
  6. Enforcement. Broncus will consistently investigate and appropriately respond to violations.
  7. Corrective Action. Broncus will take appropriate corrective action to prevent violations from recurring, including repairing any gaps in our policies or procedures.

To obtain a print version of our CCP or this declaration, please call Customer Support at 1-877-428-1600