Health Law Consulting Blog

Monday, May 18, 2015

Transparency & Aggregate Spend: What You Need to Know About the Physician Payments Sunshine Act

In today’s global regulatory climate, transparency is not only expected, but required. Interactions among physicians, drug and device manufacturers beg for transparency, particularly when the public questions the judgment of physicians who, in large numbers, have financial relationships with drug and device manufacturers. For example, in 2009, it was reported that 84 percent of physicians had some form of financial interaction with drug and device manufacturers. Does the nature of these financial relationships impair physicians’ judgment? While we do not know the answer to this question, it is well-known that the interaction between doctors and manufacturers is important for research and development of life-saving drugs and devices, and in the context of consulting. However, conflicts of interest can arise where the lines blur between promotional activities and the conduct of research, and medical practice.

One example of a conflict of interest might be where a physician’s decision-making process is biased toward a particular drug and he/she engages in or encourages inappropriate prescribing, thus potentially causing harm to the very same patient the physician has a duty to provide safe and ethical medical care. In addition to the risk of harm to patients from inappropriate prescribing, the practice also drives up health care costs and undermines the independence and rigor of clinical research. Therefore, in an effort to promote transparency through disclosure of the types of financial relationships many physicians have with drug and device manufacturers, the Physician Payments Sunshine Act (the “Sunshine Act” or the “Act”) was birthed.

The Sunshine Act was initially introduced in Congress in 2007 as a bipartisan bill. The Act was enacted in 2010 as part of the Patient Protection and Affordable Care Act. Section 6002 of the Patient Protection and Affordable Care Act (Public Law No. 116-148), as amended by the Health Care and Reconciliation Act of 2010 (Public Law No. 111-152), provides for a federally-run program that collects information about financial relationships physicians have with drug and device manufacturers. The purpose of the Act is to make public all payments or other transfers of value made directly or through a third party to physicians and teaching hospitals from manufacturers of drugs, medical devices, and biological, and medical supplies covered (collectively referred to herein as “Covered Products”) by Medicare, Medicaid and the State Children’s Health Insurance Program. The database is searchable using identifying information of the physician, teaching hospital or manufacturer.

Aggregate Spend Compliance

The Sunshine Act requires manufacturers to report identifying information about licensed physicians practicing in the United States to whom payments are made to, including their name, business address, specialty; the amount and date of the payment; and the form and the nature of the payment. Additionally, where applicable, the name of the manufacturer’s product(s) related to the payment or transfer will also be reported. The nature of the payments are identified as one of 14 categories, including, among others cash, speaker’s honoraria, consulting fees, travel expenses, meals (unless provided at a conference, readily available to everyone and not directed at one individual physician), entertainment, gifts, participation on a paid advisory board, royalties, licenses and charitable contributions or writing manuscripts. Reporting exceptions include gifts under $10 or an aggregate of less than $100 in a year, product samples intended for use by patients, educational materials for use by or with patients, such as anatomical models (e.g., human skeletal set) and payment to speakers and faculty at certain accredited Continuing Medical Education (“CME”) events.

Final Provisions

The final provisions for implementation of the Sunshine Act were approved in 2013. Data collection for reporting began August 1, 2013, and included the last five months (July to December) of 2013. The first round of data was made available in September 2014 on the Centers for Medicare and Medicaid Services (“CMS”) Open Payment Program website. Thereafter, June is when data will be published and will include a full 12 months (January 1, 2014 to December 31, 2014). The current review period began on April 6, 2015, and the second round of data will be published in June 2015. The Act also requires that manufacturers collect the requested data on an annual basis and then report it to CMS by the 90th day of each subsequent year. Once CMS has the data, physicians have 45 days to review and file disputes with the manufacturer. If the dispute is not resolved within 45 days, CMS will publish the data noting the dispute.

In 2014, four changes were made to the Sunshine Act, effective in 2016. These changes include deletion of the exemption regarding payment to speakers at accredited CME events; deletion of the definition of “covered device;” required reporting of the marketed name and therapeutic area or product category of the related covered drugs, devices or medical supplies and required reporting of stocks, stock options, or any other ownership interest as distinct categories.

Transparency/Disclosure

Payment posting requirements is not a new concept. For example, certain Corporate Integrity Agreements (“CIAs”) require companies to track and post on company websites information about payments made by the companies to healthcare professionals (“HCPs”). The representations of companies with these CIA requirements generally agree that payment posting requirements are expensive and time consuming to implement. While laws have been passed in at least five states and District of Columbia with similar reporting requirements and various professional bodies, academic institutions and medical journals have implemented conflict-of-interest policies aimed at mitigating industry influence on medical education and research, the data is scattered among various agencies, resulting in a lack of access and unification of information.

Though most agree that there is great value in transparency, it is still too early to determine the true value of the data that will be collected under the Sunshine Act. However, the Act offers a centralized repository for housing the information where anyone can have access to it and evaluate the data to draw their own conclusions. Yet, it remains to be seen whether the transparency the Sunshine Act seeks to provide actually creates an opportunity to reveal to the world if payments, including those omitted from conflict-of-interest forms affect the medical decision-making of physicians who have financial arrangements with drug and medical device manufacturers. The general consensus, however, is that having an opportunity to further scrutinize the nexus between such payments and physician behavior, is desirable. In the end, how we use the data will be determined by what it reveals.

Compliance departments will play a pivotal role in implementing the operational aspects of the Sunshine Act, identifying inappropriate relationships and recommending appropriate corrective action, when necessary. However, a rush to judgment should be avoided. Rather, a thorough evaluation based on fact-based outcomes and not possibilities should be the driving force when reviewing the data and drawing conclusions.

Implementation of the Sunshine Act

Practically speaking, the key to success in capturing, reporting and monitoring payments made by drug and device manufacturers to physicians is organizing the resources required to do the work. In this regard, companies should determine an operational model that is most suitable for their company. A model approach should include global resources (i.e. budget, technology/IT systems and infrastructure, processes, master data management, analytics and ownership), country-specific milestones and timelines, and undoubtedly an ongoing monitoring component. Many companies have housed their physician payments transparency goals within their compliance departments, which makes sense as long as the necessary resources will be added to compliance department budgets to do the work necessary to manage the process, achieve the reporting goals and act accordingly on the information the reports yield.