Sunshine Act Proposed Rule Released

In response to the growing concerns of potential conflicts of interest between physicians and the pharmaceutical and medical device industries, Section 6002 of the Patient Protection and Affordable Care Act (PPACA), the so-called Physician Payment Sunshine Provision, mandates public reporting of all financial ties with industry beginning in 2013.

Highlights of Section 6002 of PPACA
According to the health care reform law, all manufacturers of a medication, device, biological, or medical supply must provide a public report that discloses payments or transfers of value exceeding $10 to a physician and/or teaching hospital, excluding physicians who are full-time employees of the applicable manufacturer.  Learn more about section 6002 »

Highlights of the Proposed Regulation
On Wednesday, December 14, 2011 the Centers for Medicare and Medicaid Services (CMS) released for public comments the proposed rule implementing the physician payment sunshine provision. 

This provision would make information publicly available about  payments or other transfers of value from manufacturers of drugs, devices, biologicals and medical supplies covered by Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) to physicians and teaching hospitals,  as well as make information publicly available about physician (or immediate family members of a physician) ownership or investment interests in applicable manufacturers and group purchasing organizations (GPOs).

Delay of the collection of information
By statute, applicable manufacturers and applicable GPOs were required to start collecting the data beginning January 1, 2012 and must begin reporting the information by March 13, 2013. In the proposed regulation, CMS proposes to delay data collection until after the release of the final regulation in late 2012.

Definitions
In the proposed rule, CMS defines:

• Applicable manufacturers as any entity that manufactures a drug, device, biological, or medical supply for sale or distribution in the United States that is available for payment by Medicare, Medicaid, or CHIP, regardless of whether the product is manufactured in the United States.The proposed definition includes entities that hold Food and Drug Administration (FDA) approval, licensure, or clearance for a covered drug, device, biological, or medical supply, even if another entity manufactures the product.
  The statutory definition of applicable manufacturers extends to entities under common ownership with an applicable manufacturer that manufacture, market, sell or distribute covered products. CMS is requesting comments as to whether to limit the common ownership definition to circumstances where the same individual, individuals, entity, or entities owns 5 percent or more of total ownership in two or more entities.
• CMS proposes that, if two entities are under common ownership with one another, and both individually meet the definition of an applicable manufacturer, then those entities should report separately.
  
• Applicable Group Purchasing Organizations (GPOs) are defined broadly in the law to include entities that purchase and arrange for, or negotiate the purchase of covered drugs, devices, biologicals, or medical supplies in the United States. CMS proposes to interpret this definition to include traditional GPOs that do not purchase products directly, as well as organizations that purchase products for resale or distribution. This proposed definition would include reporting of ownership and investment interests in physician‐owned distributors (PODs). 
  
• Covered drug, device, biological, and medical supply are defined as all drugs, devices, biologicals, and medical supplies eligible for payment by Medicare, Medicaid, or CHIP, including products paid either separately as a part of a fee schedule, or bundled as a part of a composite payment system (e.g., hospital inpatient prospective payment system).
  
• CMS proposes to limit reporting of drugs to those requiring a physician prescription and excluded over-the-counter medications (OTC). CMS also proposes to limit the definition of devices to those devices and medical supplies that, by law, require premarket approval by or notification to FDA; excluding many Class I devices and certain Class II devices, which are exempt from premarket notification requirements.
  
• However, manufacturers of both OTC drugs or biologicals or those devices that do not require premarket approval and at least one product that falls within the definition of a covered drug, device, biological or medical supply would be required to report all payments or transfers of value to covered recipients.
  
• Teaching hospital is defined as any hospital that receives either Medicare direct or indirect medical education payments.

Use of National Plan & Provider Enumeration System (NPPES) 
CMS proposes that applicable manufacturers use the National Plan and Provider Enumeration System (NPPES), which CMS currently maintains and updates on its public website, to identify physician covered recipients. CMS also is considering whether applicable manufacturers should also report another unique identifier, such as State license number, for physicians who are identified, but do not have an NPI. CMS is requesting comments on what other unique identifiers could be used, including whether these unique identifiers are readily obtainable by applicable manufacturers.

There is an pportunity to review and correct the information prior to publication. By law, CMS is required to give covered recipients 45 days to review and correct the information that is submitted by applicable manufacturers and applicable GPOs. CMS is proposing to notify physicians and teaching hospitals of the processes for this review through various methods of communication, including public postings and emails through CMS’s list serves.

CMS proposes to defer to the applicable manufacturer or applicable GPO and the covered recipient or physician owner to resolve disputes about the reported information. CMS proposes that if the dispute cannot be resolved, the transaction will be noted as disputed, and both amounts will be published. CMS also proposes that, after the 45 day review period, no additional amendments could be made to the data until the data is updated the following year.

Public Availability
Under the law, CMS is required to publish the data reported by applicable manufacturers and applicable GPOs on a publicly available website. CMS requests comments on how to structure the website for usability by the public.

Research payments
Applicable manufacturers are required to report numerous types of payments to physicians and teaching hospitals which are outlined in the law and include consulting fees, food and beverages, and research payments. The proposed rule provides special consideration to research payments since collaboration between physicians and teaching hospitals, and manufacturers is essential to new product development. Research payments often include payment for all research activities, including patient tests and supplies, and the study’s administration. The proposed rule outlines procedures to ensure that the nature of these relationships is understood, but there also is sufficient information on the extent of the research relationship. The law protects applicable manufacturers’ competitive interests, by allowing CMS to delay publication of certain research payments until the relevant product’s FDA approval or four years after the payment date.

Penalties for failure to report
The health care reform law provides that violators of the reporting requirements will be subject to civil monetary penalties, capped at $150,000 for failure to report, and $1,000,000 for knowing failure to report. CMS is proposing that the HHS Office of the Inspector General (OIG) and CMS reserve the right to audit, evaluate, or inspect applicable manufacturers and applicable GPOs for their compliance with the reporting requirements. To facilitate these inspections, CMS is proposing that applicable manufacturers and GPOs must maintain all records and documents for at least five years from the payment date or other transfer of value, ownership or investment interest is published the public web site.

State law preemption 
Section 6002 of the health care reform law preempts any State or local laws requiring reporting of payments or other transfers of value made by applicable manufacturers to covered recipients. No State or local government can require the separate reporting of any information regarding a payment or other transfer of value that is required to be reported under the law unless the information is being collected by a Federal, State, or local governmental agency for public health surveillance, investigation, or other public health purposes or health oversight.

Despite the fact that manufacturers and GPOs are not required to report to the Secretary without regulations, the state law preemption clause takes effect on January 1, 2012. On and after that date, states may not require applicable manufacturers or applicable GPOs to report any information that is the same as the Federal requirements. CMS urges manufacturers to continue to report information to states with reporting requirements until CMS finalizes the regulations and begins collecting this information.