- BrandMuscle, Inc.
- Aquisition of Saepio Technologies, Inc.
- National Dentex Corporation
- Public company merger with GeoDigm Corporation
- Sheehan Health Care Group
- Sale of 5 nursing homes and 2 hospice companies
CMS Held Teleconference Related to Sunshine Law for Drug and Device Manufacturers
June 24, 2011
On March 24, 2011, the Center for Medicare & Medicaid Services (“CMS”) held a teleconference to provide interested parties with the opportunity to publicly comment on certain topics related to the implementation of the Physician Payment Sunshine Act (the “Act”) passed in March, 2010, as part of the federal Patient Protection and Affordable Care Act. This alert will summarize the Act and the teleconference hosted by CMS.
Summary of Section 6002 of Patient Protection and Affordable Care Act
Generally, the Act requires drug and device manufacturers to disclose annually to the Department of Health and Human Services any “payment or transfer of value” made to doctors and teaching hospitals. The Secretary of the Department of Health and Human Services (the “Secretary”) is charged with implementing the Act.
1. Reporting Payments or Transfers of Value
Starting on January 1, 2012, pharmaceutical, biotechnology, medical device and medical supply companies in the United States will be required to keep track of every payment or transfer of value of any kind (over $10) that they make to physicians or teaching hospitals. The first report to the federal government of such payments is due on March 31, 2013, and 90 days following the close of each subsequent calendar year.
“Payment” is defined as any transfer of value, including all consulting fees, compensation, entertainment, food, and travel. Manufacturers will have to report the following information:
- the recipient’s name and business address
- the amount of the payment or transfer of value and the date it was paid or transferred
- a description of the “form” of the payment (such as cash, in-kind, stock, stock options, or any other form of payment as defined by the Secretary)
- a description of the “nature” of the payment (such as consulting fee, honorarium, gift, entertainment, food, travel, research, royalty or license, ownership or investment interest, grant, etc.)
- if the payment is related to a specific drug, device, biological, or medical supply, the name of such item
- and any other category of information the Secretary may require.
All transfers of value must be aggregated into an electronic form, along with the physicians’ National Provider Identifier (NPI).
2. Reporting Physician Ownership
In addition to reporting payments and transfers of value, each manufacturer must report annually certain information regarding any ownership or investment interests (other than publicly traded interests or securities) held by a physician or a physician’s immediate family member in the manufacturer.
The penalty for noncompliance ranges from $1,000 to $10,000 for each payment or transfer of value or ownership interest not reported as required. The penalty is capped at $150,000 for each aggregated annual report. However, for each “knowing failure” to report a payment, transfer of value, or ownership interest, the penalty is between $10,000 and $100,000 with an annual cap of $1,000,000.
The Act applies to all manufacturers of a drug, device, biologic, or medical supply, or any entity under common ownership with such manufacturer which provides assistance or support to the manufacturer in the production, marketing or distribution of a drug, device, biologic, or medical supply. Also covered are group purchasing organizations that purchase, arrange for, or negotiate the purchase of drugs, devices, biologics, or medical supplies. The definition of a “physician” includes doctors, osteopaths, dentists, optometrists, and chiropractors, except any physician who is an employee of the reporting manufacturer. Payments or transfers of value by a manufacturer or group purchasing organization to a “teaching hospital” must also be reported.
Manufacturers and group purchasing organizations are not required to report information related to the following:
- A transfer of anything the value of which is less than $10, unless the aggregate amount transferred to a recipient by a manufacturer during any calendar year exceeds $100
- Product samples
- Educational materials
- Loan of a medical device for 90 days or less to evaluate such device
- Items or services provided under a warranty (such as the replacement of a medical device)
- Transfer of value to a physician who is acting as a patient and not a professional
- Discounts and rebates
- In-kind items used for charity care
- Dividend or profit distributions related to a publicly traded security or mutual fund and
- Provision of health care to employees of a self-insured manufacturer
Issues Presented During Teleconference
During the teleconference, CMS presented several questions to interested parties for comment. More interesting than the participants’ responses are the questions asked by CMS, which shed light on how the Secretary may implement the Act through regulations.
1. Forms of Payment
The Act provides that reportable forms of payment include cash or cash equivalents, in-kind items, services, stock, stock options, ownership interests, dividends, or other returns on investment. CMS inquired whether additional forms of payment or transfers of value should be considered and, if so, what are they. Participants generally stated that the forms of payment should not be expanded by CMS and should instead focus on providing clear guidance on the existing categories. Forms of payment that create particular concerns for interested parties are forms that are difficult to track, such as items provided at conference booths.
2. Nature of Payment
The Act defines “nature of payment” to include “consulting fees, compensation for services other than consulting, honoraria, gifts, entertainment, food, travel (including the specified destination), education, research, charitable contributions, royalty or license fees, current or prospective ownership or investment interest, direct compensation for serving as faculty or as a speaker for a medical education program, and grant.” CMS inquired whether additional natures of payment should be considered and how “narrowly or broadly” CMS should define the nature of payments and other transfers of value listed in the legislation. Participants asked that additional payments and transfers of value not be considered but rather that existing categories be defined clearly and narrowly. Specifically, participants expressed the need for clarification about the payments and transfers, such as research, education and consulting services.
3. Ownership or Investment Interests
With regard to the required reporting of information related to “any ownership or investment interests...held by a physician (or an immediate family member of such physician)” in the manufacturer, CMS asked whether additional information regarding these interests should be required and, if so, what additional information should be considered. Participants responded that CMS should refrain from requiring additional information.
4. Information Made Available to Average Consumer
The Act requires the Secretary to make the information reported annually by manufacturers available on a public website. CMS inquired what type of background information should be provided to the public regarding the relationships between industry and health care professionals and how data should be presented to the public. Participants expressed concern that information not be presented in a way that leads the public to believe that every payment or relationship between industry and health care professionals is problematic. Participants also suggested that CMS use focus groups or industry experts to ensure that the information is not misleading.
5. Data Reporting
CMS asked participants about approaches and mechanisms that it should consider to ensure the accurate and efficient reporting of data, specifically with regard to the electronic format of the reporting submission. Participants who responded generally indicated that CMS should consider a standardized spreadsheet, which is generally acceptable, searchable and downloadable.
Public comments on the Act were due to CMS on April 7. The Act requires the Secretary to publish procedures for electronic submission of data and for making the information available to the public by October 1. The remaining schedule for the implementation of the Act is as follows:
- January 1, 2012: Entities are required to start collecting required information.
- March 31, 2013: Entities must submit their first annual report by this date.
- August 15, 2013: Applicable manufacturers, applicable group purchasing organizations and covered recipients are given the ability to review and submit corrections.
- September 30, 2013: First annual reports available online.
- April 15, 2014: Applicable manufacturers, applicable group purchasing organizations and covered recipients are given the ability to review and submit corrections.
- March 31, 2014: Second annual reports must be submitted.
- June 30, 2014: Second annual reports available online.
This Alert is provided for information purposes only, and does not constitute legal advice. According to Mass. SJC Rule 3:07, this material may be considered advertising. ©2011 Posternak Blankstein & Lund LLP. All rights reserved.