Public disclosure of payments from pharmaceutical, medical device, biologic, and medical supply manufacturers to physicians and hospitals will begin under a final rule on the Physician Payments Sunshine Act (Sunshine Act) published by the Centers for Medicare & Medicaid Services (CMS). Applicable manufacturers and group purchasing organizations (GPOs) will need to begin collecting data on and after August 1, 2013. The final rule was issued on February 1, 2013, and implements Section 6002 of the Affordable Care Act.
The Sunshine Act requires applicable manufacturers of drugs, devices, biologics, or medical supplies covered by specified federal health care payors to report annually to CMS payments and other transfers of value made to physicians and teaching hospitals (covered recipients). The Sunshine Act also requires applicable manufacturers and GPOs (covered entities) to disclose ownership or investment interests held by physicians or their immediate family members in the covered entity.
The following is a summary of some of the principal provisions of the final rule.
Applicable manufacturers are entities operating in the United States and that are either:
- An entity engaged in the production, preparation, propagation, compounding or conversion of a covered drug, device, biological, or medical supply (covered product), other than those used solely within the entity itself or by the entity’s own patients (does not include distributors or wholesalers that do not hold title to the covered product)
- An entity under common ownership with an entity described above that provides assistance or support with respect to activities related to the covered product
The term “common ownership” has a very low ownership requirement of 5 percent. An applicable manufacturer whose covered products comprise less than 10 percent of its gross revenue will only be required to report payments made in relation to those specific covered products. An applicable GPO is an entity operating in the United States that purchases, arranges for, or negotiates the purchase of a covered product. The final rule provides guidance on a variety of matters related to these definitions, including what “operating” in the United States means, and which third parties may be considered “applicable manufacturers.”
Covered Drug, Device, Biological, or Medical Supply
Covered products include any drug, device, biological, or medical supply for which payment is available under specified federal healthcare programs (Medicare, Medicaid, and CHIP).
The term “physician” does not include resident physicians or physicians employed by an applicable manufacturer. It does, however, include other categories of physicians for whom exemptions were sought. CMS will publish a list of teaching hospitals on an annual basis at least 90 days before the beginning of the reporting year.
Payments and Transfer of Value
The final rule provides extensive guidance on what payments or other transfers of value (including assistance with valuation of any such transfers) must be reported, including guidance on payments or other transfers of value made by a third party on behalf of the covered entity and/or at the request of the covered recipient.
Reporting Periods and Deadlines
The final rule is expected to become effective on April 9, 2013, 60 days after it is published in the Federal Register. For this year, covered entities are required to collect data from August 1 to December 31, 2013. The first report will be due to CMS by March 31, 2014. In subsequent years, reports will be due within 90 days after the end of the calendar year. After the review period described below, CMS will make the disclosures available to the public by September 30 of each year, beginning in 2014.
Each annual report must contain the required information for each payment or transfer of value. Information includes, but is not limited to:
- The name, address, and identifier (such as a National Provider Number or state license number) of the covered recipient
- The date, amount, and form of the payment
- The nature of the payment
- The covered products
The nature of the payment must be categorized under one of the 16 categories outlined in the final rule. Some of the payment categories are consulting fees, honoraria, gifts, food, entertainment, travel, and charitable contributions. Special rules apply to reporting food and beverages, payments related to research (including delayed reporting), and payments related to continuing medical education. Ownership interests in an applicable manufacturer or GPO by a physician or an immediate family member of a physician also must be reported. The final rule contains guidance on these categories and reporting requirements.
Certain payments are excluded from the reporting requirements. For example, for 2013, payments less than $10 are excluded unless the aggregate amount paid to, requested by, or designated on behalf of a covered recipient exceeds $100 in the calendar year. The exempted amount will change in subsequent years based on a consumer price index calculation. Other exclusions include product samples, coupons and vouchers used by patients to obtain samples, educational materials for patients, items donated for charity care, and short-term loans of covered devices or provision of a limited amount of medical supplies.
Each annual report must be certified for timeliness, accuracy, and completeness by an officer of the applicable manufacturer or GPO. Once an annual report is submitted to CMS, the agency will make such report available to covered recipients for review. The review period is 45 days. During that period, the covered recipient may challenge any information in the report. The final rule provides a short (15-day) dispute and resolution process in such instances.
The final rule establishes penalties for failure to report on a timely or accurate basis, or for failure to report all required transactions. Additional penalties may apply if mistakes or omissions are found during the review process.
Preemption of State Laws
The final rule preempts similar state laws. Information required by a federal, state, or local governmental agency for public health or regulatory oversight purposes, however, must still be reported, even if the same information is required under the Sunshine Act.
As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. We also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.
If you have questions about the Sunshine Act of the ACA or any other implications of the law, contact Jean C. Hemphill at 215.864.8539 or firstname.lastname@example.org, Mary J. Mullany at 215.864.8631 or email@example.com, or Beth Moskow-Schnoll at 302.252.4447 or firstname.lastname@example.org.