CMS Issues Final Physician Payment Sunshine Act Regulations

by Perkins Coie
Contact

On February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) published the long-awaited final regulations implementing the Physician Payment Sunshine Act (Act or Sunshine Act). The Sunshine Act requires drug, medical device, biological and medical supply manufacturers to track and report, for publication by CMS, payments made to physicians and teaching hospitals. The Act also requires manufacturers and group purchasing organizations (GPOs) to disclose for publication by CMS any ownership or investment interests that physicians or their immediate family members have in those entities. The Act is designed to shed light on potential conflicts of interest that could affect treatment decisions and health care costs.

Applicable manufacturers and GPOs must begin collecting data on August 1, 2013 and electronically submit reports to CMS by March 31, 2014 (and the 90th day of each subsequent calendar year). CMS will publish the data on a public website by September 30, 2014 or within 90 days of the last day for data submission after the first year. CMS estimates the cost to manufacturers and GPOs of complying with the Act will be approximately $269 million in the first year and $180 million annually thereafter.

Manufacturers

Manufacturers subject to the Sunshine Act include any entities “operating in the United States” that produce or prepare at least one drug, device, biological or medical supply covered under Medicare, Medicaid or the Children’s Health Insurance Program (CHIP). The final regulations clarified a number of issues with respect to which manufacturers are covered by the Act:

  • Manufacturers are subject to the Act if they have a physical location within the United States or conduct activities in the United States (including selling a product), either directly or through a legally authorized agent.
     
  • Distributors and wholesalers that hold the title to a covered drug, device, biological or medical supply are also subject to the Act. 
     
  • Entities that only manufacture materials or components, which are not themselves covered products, are not subject to the Act, unless they are under common ownership with an applicable manufacturer and provide assistance or support to the manufacturer. 
     
  • Applicable manufacturers are generally required to report all payments and transfers of value, exceeding $10, to covered recipients (physicians and teaching hospitals) even if the payments are not related to a covered drug, device, biological or medical supply. However, applicable manufacturers whose total gross revenues from covered drugs and devices is less than 10% of total gross revenue during the fiscal year preceding the reporting year are only required to report payments and transfers of value that are related to one or more covered drugs, devices, biologicals or medical supplies.
     
  • Applicable manufacturers with separate operating divisions that do not manufacture a covered drug, device, biological or medical supply (such as animal health divisions) are only required to report payments relating to those separate divisions if the payments are related to covered drugs, devices, biologicals or medical supplies.

Common Ownership

Entities under common ownership that provide assistance or support to applicable manufacturers also must comply with the Sunshine Act. Assistance and support is defined as providing a necessary or integral service to the production, preparation, marketing, sale or distribution of a covered product.

  • Common ownership is defined as the same individuals or entities, directly or indirectly, owning 5% or more of the total ownership of two or more entities. This includes, but is not limited to, parent corporations, direct and indirect subsidiaries and brother or sister corporations.
     
  • Entities under common ownership may report payments made to covered recipients either by filing separate reports on behalf of each entity or by filing a consolidated report.

Covered Drug, Device, Biological or Medical Supply

A covered drug, device, biological or medical supply is one for which (1) payment is available under Medicare, Medicaid or CHIP and (2) requires a prescription to be dispensed (in the case of a drug or biological) or premarket approval by or notification to the Food and Drug Administration (FDA) (in the case of a device or medical supply that is a device). Manufacturers have a grace period of 180 days following a product becoming covered to begin complying with the data collection and reporting requirements.

Covered Recipients

Covered recipients include all physicians (unless employed by manufacturers) and teaching hospitals that receive Medicare payments for indirect medical education (IME), graduate medical education or psychiatric hospital IME. The Sunshine Act defines physicians as doctors of medicine and osteopathy, dentists, podiatrists, optometrists and chiropractors who are legally authorized to practice by the state in which they practice. Non-physician prescribers (i.e., nurse practitioners), residents and non-healthcare departments of universities affiliated with teaching hospitals are not covered recipients.

Payments or Other Transfers of Value

For each payment or other transfer of value, manufacturers are required to report (1) the covered recipient’s name, primary business address, specialty, National Provider Identifier and state professional license number (if a physician), (2) amount, (3) date, (4) form (cash, in-kind items, stock or dividends), (5) nature of payment, and (6) the related covered product (if applicable). The nature of payment must fall into one of the categories specified in the Act, which include consulting fee, compensation for services other than consulting, honoraria, gift, entertainment, food and beverage, travel and lodging, education, research, charitable contribution, royalty or license, current or prospective ownership or investment interest, speaking fee, grant, and space rental or facility fee.

  • There are 14 exclusions from the reporting obligations, including payments or transfers of value less than $10 (unless the total annual value exceeds $100), product samples, educational materials that directly benefit patients, discounts (including rebates), short-term loans of covered devices and personal transactions.
     
  • Indirect payments or other transfers of value made through a third party do not have to be reported when manufacturers are unaware of the identities of covered recipients. Manufacturers cannot act in deliberate ignorance or reckless disregard and must report indirect payments when the identities of the recipients can be easily ascertained.
     
  • When a meal is supplied to physicians in a group setting, the per person value of the meal must be reported for physicians who actually partook in the meal.
     
  • Buffet meals, snacks, soft drinks or coffee made generally available to all participants of a large-scale conference or similar large-scale event need not be reported.

Ownership and Investment Interest

Manufacturers and GPOs must report direct and indirect ownership or investment interest of physicians and their immediate family members. For ownership or investment interests held on or after August 1, 2013, manufacturers and GPOs must report (1) the owner’s or investor’s name, primary business address, specialty, National Provider Identifier and state professional license number (if a physician), (2) dollar amount of the interest, and (3) value and terms of the interest.

  • Ownership or investment interest in a publicly traded security or mutual fund, interests that arise from retirement plans, stock options received as compensation (until exercised) or unsecured loans subordinated to credit facilities need not be reported.
     
  • Manufacturers and GPOs do not need to report the name or relationship for an immediate family member holding an ownership or investment interest but may instead report aggregate interests across multiple family members.
     
  • Manufacturers and GPOs also do not have to report indirect ownership or investment interests if they are not aware of those interests, but they cannot act in deliberate ignorance or reckless disregard of such knowledge if it is available to them.

Research and Delayed Publication

Manufacturers must report payments and other transfers of value to physicians or teaching hospitals for research conducted pursuant to a written agreement or contract or a research protocol. Manufacturers must separately report research payments in a special template that captures, among other things, the total amount of the research payment, the name of the entity that received the payment and the principal investigator. Research is broadly defined to encompass both basic and applied research and product development, including pre-clinical research, FDA Phase I-IV research and investigator-initiated investigations. Payments or other transfers of value for research purposes may be eligible for delayed publication for up to four years.

Report Submission and Assumptions Document

Manufacturers and GPOs with reportable payments or interests must electronically submit the required reports to CMS. The reports must include an attestation by the chief executive officer or another company officer that the information reported is timely, accurate and complete to the best of his or her ability. Reports for 2013 are due on March 31, 2014. No extensions for submission will be granted and late data will be considered a failure to report and may be subject to penalties.

Review and Dispute Process

Manufacturers, GPOs, covered recipients, and physician owners and investors will have at least 45 days to review, dispute and correct reported information before it is posted online. To be corrected before publication, manufacturers and GPOs must notify CMS of resolved disputes and any changes to the data no later than 15 days after the end of the 45-day period. Until corrected, payments or other transfers of value or ownership or investment interests that are under dispute will be marked as “disputed” and include only the manufacturer’s or GPO’s reported information.

Penalties

Violators of the reporting requirements will be subject to civil monetary penalties, capped annually at $150,000 for failure to report and $1 million for knowingly failing to report.

Practice Pointers

Data collection of reportable payments will begin on August 1, 2013. In advance of that date, manufacturers need to take steps to determine whether they are covered under the Act and, if so, develop a system of tracking reportable data. Manufacturers that may be affected by the Act should review with counsel the following threshold issues in determining how the Act will affect them and developing a system for accurate reporting: 

  • Determine whether the company is subject to the Act based either on a physical location in the United States or otherwise conducting activities in the United States.
     
  • Determine if any of the products being manufactured include “covered drugs, devices, biological, or medical supplies” that will trigger the reporting requirements under the Act.
     
  • If the company is subject to the Act, analyze financial data to determine whether the gross revenue from the covered products is less than 10% of the company’s total gross revenue. If so, only payments related to the covered products will be reportable. If not, all payments to covered recipients will need to be tracked and reported. 
     
  • Determine whether companies are commonly owned for purposes of the Act. If so, management needs to determine whether a consolidated report will be filed or whether each entity will file separately. 
     
  • Companies should review what payments have historically been made that would be reportable under the Act and determine whether any payments should be discontinued prior to the August 1, 2013 date when tracking begins. 
     
  • Companies need to set up a system in advance of August 1, 2013 that will identify which employees will be responsible for the tracking and reporting of payments and what steps will be taken to insure the accuracy of the information.
     
  • Companies should determine whether they have the necessary information about recipient physicians, including National Provider Numbers and state professional licenses to identify the recipients as required by the Act.
     
  • Companies should obtain the list of teaching hospitals subject to the Act, which CMS will publish annually at least 90 days before the beginning of the reporting year. 
     
  • Companies should review whether their payments are related to research and may be eligible for delayed publication under the Act. If so, relevant data must still be collected and reported, but will not be made public until a later time.
     
  • Manufacturers and GPOs need to review available records to determine if there are any reportable ownership interests by physicians or their family members.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie
Contact
more
less

Perkins Coie on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.