Karl A. Thallner Jr.
Katie C. Pawlitz
On February 1, the Centers for Medicare & Medicaid Services (CMS) released the long-awaited final rule implementing the physician payment transparency provisions, commonly referred to as the Physician Payment Sunshine Act, in the Obama administration's 2010 health care reform legislation. The Sunshine Act joins the list of significant federal laws addressing potential conflicts of interest in health care, including the Anti-Kickback Statute and the Stark Law. With implementation of the Sunshine Act now in sight, stakeholders face the real challenge of complying with, and practicing under the shadow of, the Sunshine Act and its complex and detailed regulations.
The Basics
The Sunshine Act requires "applicable manufacturers" of drugs, devices, biologicals or medical supplies covered under Medicare, Medicaid or CHIP to report annually to the CMS certain payments or other transfers of value to "covered recipients," namely physicians and teaching hospitals. Additionally, applicable manufacturers and applicable group purchasing organizations (GPOs) must report certain information regarding the ownership or investment interests in them that are held by physicians or their immediate family members. The CMS will make the data submitted publicly available via a website.
Manufacturers and GPOs will be required to report the data for August through December to the CMS by the first reporting deadline of March 31, 2014, and CMS will release the data publicly by September 30, 2014.
The reporting obligations under the Sunshine Act are broad — anything of value provided to a covered recipient must be reported. The Sunshine Act and its regulations do exclude from reporting, however, certain types of payments or transfers of value, including, among others, payments of less than $10, certain educational materials and product samples. The final rule includes guidance on the application of these exclusions.
Any manufacturer or GPO that fails to submit the required information in a timely manner will be subject to a civil money penalty (CMP) of between $1,000 and $10,000 for each payment or other transfer of value not reported, but not to exceed a total of $150,000. Manufacturers and GPOs that knowingly fail to submit the required reports and information are subject to CMPs between $10,000 and $100,000 for each payment or other transfer of value not reported, but not to exceed a total of $1 million.
The Preparation
Now that the Sunshine Act implementation timeline is in place, manufacturers and GPOs must ensure they are able to begin tracking in August and reporting in March 2014. Although not directly subject to its requirements, covered recipients and physician owners and investors also may be indirectly affected by the Sunshine Act.
ManufactureRs/GPOs
Many manufacturers and GPOs have been preparing for implementation on an ongoing basis through a variety of efforts, including the development of internal data collection processes and systems. Nonetheless, now that the specifics of the final rule are known, manufacturers and GPOs will need to take additional action to ensure that they are able to report as required. As companies prepare for implementation, they may consider the following actions:
• Determine which entities within the company qualify as "applicable manufacturers." Under the definition of applicable manufacturer, an entity may qualify either because it manufactures covered products or because it is under common ownership with an entity that manufactures covered products and it provides assistance and support to such entity.
• Determine what types of payments and transfers of value the company will be tracking and reporting. Generally, the Sunshine Act requires manufacturers of covered products to report all payments and transfers of value to a covered recipient, regardless of whether the payment is associated with a covered product or a noncovered product. However, the final rule includes certain limited exclusions to this requirement.
• Update or revise company policies and procedures to reflect the requirements of the final rule under the Sunshine Act. Although many companies have been preparing for implementation, the final rule does offer some additional clarifying guidance that will need to be incorporated into current policies and procedures. Consistent employee training may also be necessary.
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