On February 1stthe long overdue final rule of the Sunshine Act was released.  The Act aims to increase transparency relating to payments and investments held by physicians and teaching hospitals.  For those many physicians who have entered into some type of contractual relationship with a manufacturer, taking the time to familiarize themselves with these new rules will be important in order to understand what information will be disclosed, and how it can be disputed.

As part of the Patient Protection and Affordable Care Act, drug and device manufacturers are required to annually disclose almost all payments and “transfers of value” made to physicians or to teaching hospitals.  The new disclosures are required to be made publicly available through a searchable online database.  Manufacturers will also be required to disclose the specific payments, not just the aggregate amount.  Manufacturers must begin collecting the required data by August 1 of this year and begin reporting it to CMS by March 31, 2014.

The rule does not apply to all manufacturers, but only those involved in the production, preparation, propagation, compounding or conversation of drugs, devices, biologics, or medical supplies that operated in the United States or any entity under common ownership with an entity that meets this definition.  However, entities that receive less than 10% of their gross annual revenue from payments relating to covered drugs, devices, biologics, or medical supplies, have to report the value transfers relating only to these covered products.  “Covered drug, device, biologic, or medical supplies” include those that may be covered by Medicaid, Medicare, and CHIP, and that require a prescription or premarket approval from the FDA.

Physicians are considered “covered recipients,” and payments or transfers must be reported, regardless of whether they are enrolled in Medicare.  Contracting through a legal entity does not avoid the reporting requirements.  However, physicians employed “in house” by a manufacturer doing the reporting are not considered “covered recipients.”  Anything with a value greater than $10 must be reported, with fourteen exceptions.  The most common exceptions will likely be: educational materials and items intended for use by or with patients, discounts and rebates, and samples (both devices and medical supplies) intended for patient use.  The final rule also establishes an exemption for certain payments related to speaking at accredited or certified CME programs.

For each payment or transfer, the manufacturer must submit the following:

  • The name and address of the recipient;
  • The amount and date of the payment or transfer;
  • A description of the form or nature of the payment or transfer;
  • Whether the payment or transfer is related to marketing, education, or research specific to a product; and
  • The physician’s NPI and specialty and the state and license number of at least one of the states in which the physician holds a license.

Manufacturers must also submit to CMS specific information regarding any ownership or investment interest (other than in a publicly traded security or mutual fund) held by a physician in the manufacturer during the preceding year, or an immediate family member of a physician in these entities.  Payments and transfers associated with research and development of new technologies, new applications of existing technology, or the development of new drugs, devices, biologics, or medical supplies, must also be reported.

Manufacturers are required to keep all books, records, documents, and other materials relating to payments, transfers, and ownership transfers for five years. The government may conduct audits and inspections in order to ensure proper reporting.  Manufacturers that unknowingly fail to report as required are subject to a penalty of $1,000 to $10,000 for each unreported payment, transfer, or ownership interest.

Physicians will have access to a CMS website to view reported information.  However, it is recommended that physicians inquire with the manufacturer ahead of time as to what information will be reported.  Physicians will have 45 days to contact a manufacturer to dispute reported information, and additional requirements govern how unresolved disputes will be handled.  While these rules focus on what information will need to be reported by the manufacturers, physicians should always be open with their patients when a financial relationship exists with a manufacturer or similar business.