Review existing and continuing arrangements with teaching hospitals and physicians. As noted, manufacturers will be required to report direct and indirect payments and transfers of value to physicians and teaching hospitals; manufacturers and GPOs are also required to report ownership and investment interests held by physicians and their immediate family members. Agreements may need to be drafted or amended in order to enable the manufacturer or GPO to meet its reporting obligations. Manufacturers may also consider revising arrangements with third-party vendors through which indirect payments are made to covered recipients to ensure that manufacturers timely receive information to be reported.
With public disclosure of their payments and ownership interests in sight, covered recipients and physician owners/investors should assess their current relationships with manufacturers and GPOs, as well as any anticipated future arrangements, and consider what information will be disclosed, and what may not need to be disclosed, as a result of the final rule.
Physicians and teaching hospitals should also keep in mind that a payment or transfer of value may be something other than a direct exchange of money. For example, costs associated with meals may be reportable, as well as indirect payments, if the manufacturer is aware of the identity of the physician. Because the awareness standard is broad, even those relationships that are attenuated may be reportable. In order to avoid having a transaction reported, a covered recipient may decide not to accept a payment or other transfer of value. However, in order to effect such a waiver of payment (and to avoid reporting), the payment cannot be made to a specific entity or individual "at the request" of such covered recipient or to another entity or individual "on behalf of" the covered recipient.
Finally, under the Sunshine Act, manufacturers, GPOs, covered recipients and physician owners and investors will have an opportunity to review and correct submitted data before it is made public. Specifically, during a 45-day review period, a covered recipient and a physician owner/investor will be able to access the reported information specific to it, and, if it disagrees, dispute the reported information. The CMS will notify those physicians and teaching hospitals that have registered with the CMS ahead of time of the timing and process for this review, using email list serves, online postings and email. Physicians and teaching hospitals should be on the lookout for registration information from the CMS.
The underlying purpose of the Sunshine Act is to provide increased transparency on the scope and nature of financial and other relationships among manufacturers, physicians and teaching hospitals. It was the hope of Congress in enacting the statute, and the CMS in promulgating the regulations, that the transparency afforded by the Sunshine Act may discourage the development of inappropriate relationships and enable patients to make more informed treatment decisions by assessing potential conflicts of interest. Notwithstanding the importance of these efforts, the Sunshine Act will affect a variety of stakeholders within the health care industry, including pharmaceutical and device manufacturers, distributors, physicians, hospitals and GPOs, among others, and it is still unclear how relationships between such stakeholders may be impacted.
For example, with the new public availability of payment information potentially susceptible to inaccuracy and misinterpretation, there is some concern that physicians and teaching hospitals may be hesitant to undertake new research, education and other important efforts.
Further, hospitals and other providers of "designated health services" under the Stark Law may look to the publicly reported data to assess whether a physician's referrals might be prohibited because a manufacturer-vendor's reported payment to the physician has created an indirect compensation arrangement between the provider and the physician.
In addition, it is not clear how the publicly available data will be used by competitors. For example, for all payments related to marketing, education and research specific to a covered product, manufacturers are required to report the name of such related covered product. Even though the Sunshine Act does provide for delayed publication with respect to certain research payments, this information may have competitive implications, as competing manufacturers will be able to see how a manufacturer is focusing its resources.
It is also not clear how the reported data will be used by the government, other than for transparency purposes. The Department of Justice and the Food and Drug Administration can request copies both of the information required to be submitted and any voluntarily submitted "assumptions documents." It is possible that data and information reported pursuant to the Sunshine Act could become a prosecution tool for the government. For example, with respect to payments to physicians, manufacturers are required to report physician specialty information. This detail, combined with a related product, if any, may have off-label implications if the data is analyzed out of context.
Apart from the government, it is also possible that resourceful plaintiffs attorneys may mine the data for purposes of litigation involving potential kickbacks, false claims through off-label promotion or personal injury.
The requirements of the Sunshine Act are onerous and the regulatory guidance, while detailed and helpful, still leaves some open questions especially in light of the myriad arrangements involving payments and transfers of value to covered recipients and physician ownership and investment interests. The CMS has committed to publishing FAQs and other guidance to aid implementation. Nevertheless, armed with an implementation timeline and the additional regulatory guidance provided in the final rule, applicable manufacturers and GPOs should waste no time in preparing for the Sunshine Act, and teaching hospitals and physicians should consider the consequences of the reporting requirements.
Karl A. Thallner Jr. is a partner in Reed Smith's life sciences health industry group whose national practice encompasses regulatory, reimbursement and compliance counseling; business transactions; and government investigations. He represents hospitals, health systems and academic medical centers across the United States and is a recognized authority on the Anti-Kickback Statute and the Stark Law. He can be reached at firstname.lastname@example.org.
Katie C. Pawlitz is an associate in the life sciences health industry group in the Washington, D.C., office. She represents health care providers, suppliers, manufacturers, managed care organizations and associations regarding regulatory issues arising under the Medicare and Medicaid programs and under the health care fraud and abuse laws, including anti-kickback, physician self-referral, beneficiary inducement and false claims laws. She can be reached at email@example.com.