CMS To Publish Financial Relationships Between Physicians and Drug Manufacturers Beginning September 2014


Beginning in September 2014, the Centers for Medicare and Medicaid Services (“CMS”) will publish a list of all payments and transfers of value paid by drug manufacturers to physicians and teaching hospitals on a publicly accessible website, pursuant to the Physician Payments Sunshine Act (Sunshine Act). The Sunshine Act, a provision of the Affordable Care Act, is intended to create greater transparency around the financial relationships of manufacturers, physicians, and teaching hospitals.
The Sunshine Act requires companies that manufacture drugs, medical devices, and biologics to provide detailed information to CMS about any direct payments or transfers of value paid to physicians and teaching hospitals worth more than $10, with certain limited exceptions. Transfers of value include, but are not limited to, consulting fees, travel, food, entertainment, gifts, honoraria, royalties, and compensation for speaking and research. Physicians’ ownership or investment interests in any drug or device company will be reported as well. Manufacturers are required to categorize how the recipient received the payment (such as cash, in-kind items or services, stock, etc.), and must provide a reason for the payment. CMS will then post these “transparency reports” on a publicly accessible website beginning September 30, 2014.
Although physicians and hospitals aren’t required to submit these reports to CMS, physicians are subject to exposure when the reports are released to the public. There are several risks that physicians face when these reports are made public:
1. The federal government can use the reports to support an Anti-Kickback or False Claims Act claim, if it appears that there is a suspect relationship between a drug manufacturer and a physician or group of physicians.
2. The IRS may also look to these reports and compare the information to what individual physicians are reporting as income. Physicians will need to be extra diligent about keeping track of what payments they receive and reporting them as income on tax returns.
3. Private citizens could use the information in “qui tam” whistleblower lawsuits. For example, an employee with knowledge of a particular physician’s prescribing practices might develop suspicions, or have existing suspicions validated, upon seeing the amount of money a physician is receiving from a drug manufacturer.
4. A reporter can search the database and publish a damaging article about any physician who routinely prescribes a particular drug or uses a particular medical device from a manufacturer with which the physician has a financial interest.
5. A physician’s reputation can be harmed if it appears she is receiving vacations, dinners, etc. from a drug company that manufactures a drug she routinely prescribes, evidencing a treatment bias.
Physicians can minimize these risks in the following ways:
1. Understand what will be reported. The American Medical Association has published a thorough explanation of the reporting requirements, available here. If physicians understand what will be reported, they can make better decisions about whether any particular financial relationship with a drug manufacturer is worth the potential exposure.
2. Physician groups and hospitals should develop a conflict policy stating what relationships are appropriate between their physicians and drug manufacturers. The conflict policy should balance competing interests, including the benefits resulting from physician knowledge and collaboration with drug companies versus financial incentives that may lead to a treatment bias.

3. Physicians should register with CMS’s Open Payments website, here. Physicians can view their consolidated transparency report and dispute any incorrect information before it becomes public through the Open Payments website. (Physicians have additional time, cumulatively two years, to dispute reports even after the reports are made public.) Physicians can also download the Open Payments App on their cell phone, for easy access to their transparency reports.

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.

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