The Sunshine Act — 129 Days and Counting

ID-100281241I may be biased but I strongly believe that medical product innovation cannot succeed without the essential insight of physicians and other health care providers. At first blush, the Sunshine Act, which mandates public reporting of payments to physicians by drug and device manufacturers and kicks-in on August 1st, may seem to threaten this vital collaboration. Only time will tell, of course, what the final impact of the law will be, but it’s probably safe to say, the relationship between the medical technology industry and the doctors who use and prescribe its products will never be quite the same.

On March 13th, I attended a Life Science Alley (LSA) Sponsored Program to find out more about this impending law and, in particular, what its consequences might be for those of us with a vested interest in an on-going partnership between industry and physician providers. Read on for a synopsis of what I learned.

Sunshine Act Basics

The Sunshine Act was passed in March 2010 as part of the Affordable Care Act (ACA), with the final 287-page ruling published on February 1st 2013. The primary intent of the law is to expose conflicts of interest with the potential to influence treatment decisions related to drug and device products that are reimbursable under Medicare or Medicaid. The mechanism of exposing such conflicts is to require publication on a CMS-managed Website, referred to as OPEN PAYMENTS, of all “transfers of value” flowing from drug and device manufacturers to physicians. Failure to accurately disclose all such relevant “transfers” constitutes a violation subject to significant fines.

While the nitty-gritty of implementation is probably best left to the legal and finance gurus, those whose roles require routine contact with physician providers will be the ones on the frontline of navigating this new law and thus must have a thorough understanding of what it entails. Whether they are paying a physician consultant for expertise related to a product development initiative, buying bagels for a physician’s staff as part of a training program, or taking a physician to lunch to talk about a new product, this law needs to be considered. Here are the basics:

  • Products that are “covered” under the regulation include those for which payment is available under Medicare, Medicaid or CHIP, either separately or as part of a bundled payment. The product must also require a prescription to be dispensed (in the case of drugs or biologics) or a PMA or 510(k) (in the case of a device).
  • “Transfers of value” include direct or indirect (via third party) payment as well as in-kind provisions such as meals, travel and lodging, grants, and CME-programs.
  • Only transfers to physicians are covered. This law does not require reporting for transfers to hospital administrators or non-physician providers. However, it is important to note that transfers of value to a physician’s staff (e.g., buying lunch for a training program) could be construed under this law as providing indirect value to that physician.
  • As noted above, “transfers of value” executed by third parties such as distributors or consulting firms are not exempt. Reporting responsibilities for such transfers fall with the entity which “holds title” to the product in question.
  • Reports will require a physician’s NPI number, specialty and state license number, date of transfer, value/amount of transfer and nature of transfer (the rule provides 17 options), as well as the related “covered” product. Physicians must be given 45 days to review data prior to publication. The physician can file an objection and request a correction be made. Data can be published as “under dispute” for cases in which an objection cannot be resolved.
  • The rule includes a delayed publication provision for transfers related directly to “research” on a “new” product. The delay status applies for 4-years after the date of payment or until the date of approval, licensure or clearance by the FDA, whichever comes first.
  • Indirect payments are not reportable if the manufacturer does not know the identity of the physician who received payment “during the reporting year or by the end of the second quarter of the following year.”

In the Public Eye: Owning the Conversation

Watchdog groups like ProPublica welcome the transparency of the Sunshine Act as a chance to pullback the curtain on what they characterize as egregious practices whereby drug and device companies buy undue influence over physicians with considerable (outrageous?) sums of money. Undeniably and unfortunately, these types of practices have indeed taken place. In point of fact, fifteen drug companies are currently subject to mandatory physician payment posting as a result of large-scale fraud settlements.

ProPublica’s Dollars for Docs project, a series of investigations into the “financial ties between the medical community and the drug and device industry,” includes a “publically-searchable database” of payments that these 15 companies have made to physicians since mandatory posting began. This database foreshadows the kind of public scrutiny that all physicians and manufacturers are likely to be subject to as the Sunshine Act’s OPEN PAYMENTS database hits the Web in March of 2014.

With so much at stake, there is, it seems to me, an imperative to turn this conversation around. The industry must come together to engage a forthright dialogue with the public that champions the critical role of physicians in getting products that truly make a difference for patients to market. Changing the tenor of public opinion will certainly not be easy. Imagine if your own company’s financial ties to physicians were disclosed on the front page of the New York Times tomorrow. Would you be prepared to respond?