Beginning August 1, 2013, manufacturers of Medicare or Medicaid covered drugs, medical devices, biologicals and medical supplies must collect and make publicly available data on physicians and teaching hospitals with whom the manufacturer has a financial relationship. The reports will include confidential information such as the name and address of the recipient of the payments, as well as the amount of the payments.
The Physician Payment Sunshine Act (the "Act") requires applicable manufacturers of drugs, devices, biologicals, or medical supplies covered by Medicare, Medicaid or the Children's Health Insurance Program ("CHIP") to annually report payments or transfers of value provided directly to physicians and teaching hospitals. In addition, applicable manufacturers and applicable group purchasing organizations ("GPOs") are required to annually report physician ownership or investment interests and the ownership or investment interests of a physician's immediate family member. Reported information will be published online.
The Meaning of It All
Applicable Manufacturer - An "applicable manufacturer" is an entity that is either (i) engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply for sale or distribution in the United States, or in a territory, possession, or commonwealth of the United States; or (ii) under common ownership with such an entity, and which provides assistance or support to such entity with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological, or medical supply for sale or distribution in the United States, or in a territory, possession, or commonwealth of the United States.
Somewhat surprisingly, some distributors and wholesalers (including repackagers, relabelers, and kit assemblers) constitute "applicable manufacturers" for the purpose of the Act's reporting requirements. In response to comments about whether distributors and wholesalers should be subject to the reporting requirements, CMS reasoned that those distributors that hold the title to a covered product are similar to applicable manufacturers since both hold title to the product at some point in the production and distribution cycle. Accordingly, CMS has clarified that distributors and wholesalers that ever hold the title to a covered drug, device, biological or medical supply meet the definition of "applicable manufacturer," meaning that these entities are subject to the Act's reporting requirements.
Drugs, Devices, Biologicals, or Medical Supplies - The Act defines covered drugs, devices, biologicals or medical supplies as any drugs, devices, biological, or medical supplies for which payment is available under Medicare, Medicaid or CHIP, either separately (such as through a fee schedule) or as part of a bundled payment (for example, under the hospital inpatient prospective payment system); provided that only those drugs and biologicals requiring a prescription to be dispensed are included, and only those devices (including medical supplies which are devices) requiring premarket approval by or premarket notification to the FDA are included.
CMS has clarified that raw materials and components often do not meet this definition because payment is not available for them in their component form under Medicare, Medicaid or CHIP. Accordingly, entities that only manufacture raw materials or components, which are not themselves covered products, will not be required to report unless they are under common ownership with an applicable manufacturer and assist such manufacturer with the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological, or medical supply.
Covered Recipients - The Act uses the term "covered recipients" to refer to physicians and teaching hospitals, and applicable manufacturers should take note the term "physician" encompasses more than just doctors of medicine. Specifically, the Act adopts the Medicare definition of the term "physician," which includes doctors of medicine, doctors of osteopathy (including osteopathic practitioners), doctors of dental surgery or dental medicine, doctors of podiatric medicine, doctors of optometry, and chiropractors.
Content of Reports
Reports of Payments or Transfers of Value - The annual reports regarding payments or transfers of value must contain all of the following information for each payment or transfer of value: (i) name of covered recipient; (ii) address of covered recipient; (iii) in the case of physician recipients, identifiers including specialty, National Provider Identifier, and state professional license numbers; (iv) amount of payment or other transfer of value; (v) date of payment or other transfer of value; (vi) form of payment or other transfer of value; (vii) nature of payment or other transfer of value; (viii) related covered drug, device, biological or medical supply, if applicable; (ix) eligibility for delayed publication; (x) in some cases of payments to third parties, the recipient name; (xi) payments or transfers of value to physician owners or investors or their immediate family members; and (xii) if desired, additional clarifying information.
Applicable manufacturers should also note that there are special rules for reporting payments or other transfers of value made in connection with research activities, continuing education programs, and food and beverage expenses. In addition, certain payments and transfers of value are specifically excluded from the reporting requirements. These include, but are not limited to: (i) indirect payments or transfers where the applicable manufacturer is unaware of the identity of the covered recipient; (ii) for CY 2013, payments or transfers of value less than $10 and not aggregating to more than $100; (iii) product samples intended for patient use and not intended for sale; and (iv) certain educational materials and items that directly benefit patients.
Reports of Physician Ownership and Investment Interests - The annual reports regarding physician ownership and investment interests must contain the following information: (i) name of physician and an indication of whether the ownership or investment interest is held by the physician or an immediate family member; (ii) primary business address of physician; (iii) identifiers including specialty, National Provider Identifier, and state professional license numbers; (iv) dollar amount invested by each physician or immediate family member; and (v) value and terms of each ownership or investment interest.
For the purposes of the Act, an immediate family member is any of the following: (i) a spouse; (ii) a natural or adoptive parent, child, or sibling; (iii) a stepparent, stepchild, stepbrother, or stepsister; (iv) a father-, mother-, daughter-, son-, brother-, or sister-in-law; (v) a grandparent or grandchild; or (vi) a spouse of a grandparent or grandchild.
Timing and Procedural Considerations
Data collection must begin on August 1, 2013, and the data for CY 2013 must be reported to CMS by March 31, 2014. All subsequent reports must be submitted by the 90th day of the calendar year. The procedures for submitting reports are set forth in the final rule. They require, among other things, that applicable manufacturers register with CMS within ninety days of the end of the calendar year for which a report is required.