CMS Issues Final Physician Payment Sunshine Rule

by Holland & Knight LLP

In an action that will have broad implications for drug and device manufacturers, researchers, distributors, teaching hospitals and physicians, on February 1, the Centers for Medicare and Medicaid Services (CMS) publicly released its long-awaited final regulation to implement the "Physician Sunshine Payment" provisions of the Affordable Care Act. Those provisions require applicable manufacturers of drugs, devices, biologicals, or medical supplies covered under Medicare, Medicaid, or the Children's Health Insurance Program (CHIP) to report annually to CMS certain payments or other transfers of value to physicians and teaching hospitals. They also require applicable manufacturers and applicable group purchasing organizations (GPOs) to report certain information regarding ownership or investment interests held by physicians or the immediate family members of physicians in such entities.

Under the regulation, manufacturers are required to collect data beginning on Aug. 1, 2013, and report it to CMS by March 31, 2014, and annually thereafter. CMS will organize and publish this data in a searchable database on its website. It will also submit an annual report to Congress and each state summarizing this information starting on April 1, 2015.

The statutory provisions establishing reporting requirements were enacted because of suspicions among policy makers that payments made by drug and device manufacturers to physicians and teaching hospitals influence research, education and clinical decision-making in nefarious ways. Importantly, the regulation does not prohibit any relationships between manufacturers, physicians and hospitals. Rather, it creates extensive data reporting and publication requirements with severe sanctions for noncompliance.

CMS issued a proposed rule in late 2011; the final rule changes and in some cases clarifies the terms of that proposal. The final rule will significantly impact how manufacturers, physicians, teaching hospitals and other stakeholders will interact.

The following is a synopsis of some of the rule's key provisions.

Who Must Report

The regulation requires reporting by "applicable manufacturers," those that engage in

(1) ... 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 are (2) Under common ownership with an entity in paragraph (1) of this definition, 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.

"Covered" products are those for which payment is available under Medicare, Medicaid or CHIP either separately, such as through a formulary or fee schedule payment, or as part of a bundled payment, and which requires a prescription to be dispensed (for a drug or biological) or premarket approval by or notification to the Food and Drug Administration (FDA) (for a device or medical supplies that are devices).

According to CMS, manufacturers of a covered drug, device, biological, or medical supply are deemed to be applicable manufacturers if their products are sold or distributed in the United States — regardless of where the covered drug, device, biological, or medical supply is actually produced or where the entity is actually located or incorporated. Further, the regulation states that the proposed definition includes entities that hold FDA approval, licensure, or clearance for a covered drug, device, biological, or medical supply as well as those that manufacture any covered product even if the manufacturer does not hold the FDA license, approval or clearance. Entities that only manufacture raw materials or components, which are not themselves covered products, will not be required to report unless they meet the definition related to common ownership with an applicable manufacturer.

The regulation also says that wholesalers and distributors (including repackagers and relabelers) that hold the title to a covered drug, device, biological or medical supply are considered "manufacturers" and must report.

Manufacturers with less than 10 percent of total (gross) revenues from covered drugs, devices, biologicals or medical supplies are only required to report payments or other transfers of value related to the covered products. However, these entities must register with CMS and attest that less than 10 percent of total revenues are from covered products.

What Must Be Reported

All payments or transfers of value made by an applicable manufacturer to a "covered recipient" or to an entity or individual at the request of, or designated on behalf of, a covered recipient must be reported.

Covered recipients include physicians, except those who are bona fide employees of the applicable manufacturer reporting the payment, as well as teaching hospitals (those hospitals that received Medicare medical education payments). CMS will publish a list of these teaching hospitals every year.

The regulation preamble notes that CMS interprets "value" as "discernible economic value on the open market in the United States." Therefore, payments or transfers of value that do not have "discernible" economic value for the covered recipient still must be reported. In addition, they must be reported even if the covered recipient does not formally request the payment or transfer of value.

Categories of information required to be reported for each payment or transfer of value are noted in the statute but the regulation adds a few details. They include:

  • physician's name (including middle initial if known)
  • business address (defined as the "primary practice" location)
  • date of payment (manufacturers have flexibility to report payments made over multiple dates either separately or as a single line item for the first payment date)
  • name of the covered product associated with the payment

The regulation also codifies the form of payment categories listed in the statute such as:

  • cash or cash equivalent
  • in-kind items or services
  • stock, a stock option, or any other ownership interest, dividend, profit, or other return on investment
  • any other form of payment or other transfer of value

Nature of payment categories are listed in the statute and include:

  • consulting fees
  • compensation for services other than consulting
  • honoraria
  • gifts
  • entertainment
  • food
  • education
  • research
  • grants
  • compensation for serving as faculty or as a speaker for a continuing medical education program

Special Rules for Research

The regulation contains new rules for research payments. Specifically, the regulation adopts the definition of research used in other federal regulations found at 42 CFR Part 50 which defines research as "a systematic investigation designed to develop or contribute to generalizable knowledge relating broadly to public health ... [t]his term encompasses basic and applied research and product development." In the preamble, CMS notes that this definition includes pre-clinical research and FDA Phases I-IV research, as well as investigator-initiated studies.

Any payments related to research as defined by the regulation are reportable. This requirement includes payments to principal investigators who meet the definition of "physician" even if they do not regularly treat patients.

Payments within this category must be subject to either a written agreement or contract or a research protocol. CMS also says that this may include "an unbroken chain of agreements" that link the manufacturer with the covered recipient such as through clinical research organizations.

The information required to be reported for each research-related payment ultimately paid to a covered recipient includes:

  • the name of the research institution/entity or individual receiving payment (regardless of whether a covered recipient)
  • the covered recipient (and associated information)
  • the name of the study
  • principal investigator(s)
  • the total amount of the research payment

CMS modifies these requirements for pre-clinical research (including lab and animal research carried out prior to beginning studies in humans). For this research, manufacturers only have to report the name of the research institution, principal investigator(s) and the total amount of the payment. The total research payment amount includes the "aggregated amount of any payments for services included in the written agreement/research protocol." CMS says that it will publish information about research studies separately from all other payments provided to the covered recipient.

New Rules for Continuing Medical Education

The regulation adds a new section regarding payments for continuing medical education (CME). Specifically, the regulation status that a payment made to a speaker at a CME program is not reportable if all of the following conditions are met:

  • The program meets accreditation or certification requirements and standards of accrediting bodies such as the American Council for Continuing Medical Education.
  • The applicable manufacturer does not select the covered recipient speaker or provide the vendor with a "distinct, identifiable set of individuals" to be considered as speakers for the program.
  • The applicable manufacturer does not directly pay the covered recipient speaker.

Manufacturers are not responsible for reporting payments made to CME vendors that are used to subsidize attendees' tuition fees for CME events. However, payments or other transfers of value associated with attendance of an event (such as travel and meals) must be reported.

Payments or other transfers of value related to unaccredited and non-certified programs should be reported as required for any other payment.


The regulation elaborates on the specific exclusions listed in the statute. For example, payments or transfers of value less than $10 do not need to be reported except when the total annual value of payments or other transfers of value to a covered recipient exceeds $100. Note that these de minimus thresholds apply for calendar year 2013. For 2014 and subsequent years, the thresholds are increased by the same percentage increase in the CPI for all urban consumers for the 12-month period ending with June of the previous year. CMS will publish these values annually. The regulation specifies that payments or transfers of value below the threshold provided at large-scale conferences and events — such as distribution of pens or other items — as well as at events open to the public, do not need to be reported and are not included for purposes of meeting the aggregate threshold.

In addition, educational materials and items that "directly benefit patients or are intended to be used with patients" are not reportable. The regulation preamble explains that this exclusion encompasses materials, "such as wall models and anatomical models" that are intended to be used with a patient but does not include journal reprints or textbooks that may have "downstream benefits" for patients. The exclusion is limited to educational materials only, not marketing or promotional materials.

Relationship to State Law

The statute preempts state or local laws requiring reporting of the same type of information concerning payments or other transfers of value. No state or local government can require separate reporting of any information regarding a payment or transfer of value that is required to be reported under the federal law unless that information is for public health purposes. Preemption determinations will be analyzed on a case-by-case basis.

Penalties and Enforcement

The regulation specifies that CMS or Office of Inspector General (OIG) may impose penalties of up to $10,000 for each failure to report up to a total of $150,000 per annual submission and up to $100,000 for each knowing failure to report up to $1 million per annual submission. Total annual civil monetary penalties imposed are aggregated separately.

The regulation specifies the factors to be considered when CMS or OIG determines the amount of civil monetary penalty. The agencies may audit, inspect, or evaluate any records, documents, or other evidence that pertains to reporting requirements under these provisions.

In addition, the monetary penalties apply to the organization that files the reports to CMS. Therefore, if companies under common ownership file a consolidated report, it is the company filing the report that will be liable for any non-compliance.


The new regulation is extensive and detailed. It will dramatically affect activities by manufacturers, teaching hospitals, physicians, researchers and other stakeholders. CMS notes that certain guidance and reporting templates are still under consideration and not yet available. Nonetheless, organizations are required to begin collecting data later this year and reporting that data soon thereafter. Since the penalties for non-compliance are severe, organizations should take immediate steps to identify the steps they need to take to comply with this regulation.

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.

© Holland & Knight LLP | Attorney Advertising

Written by:

Holland & Knight LLP

Holland & Knight LLP 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:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. 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. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our 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 are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy 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 our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.