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February 8, 2013

"Sunshine" regulation published requiring reporting of payment or transfer of values to physicians and teaching hospitals

By Jay Nawrocki, MA

Payments and transfer of anything of value to physicians and teaching hospitals by most manufacturers of drugs, devices, biological and medical supplies covered by Medicare, Medicaid and the Childrens' Health Insurance Program (CHIP) will have to be reported to CMS (Final rule, 78 FR 9458, February 8, 2013). Group purchasing organization (GPOs) as well as manufacturers will have to report certain physician ownership or investment interests as well. The first report will be due March 31, 2014, and will cover all payments and transfers of value from August 1, 2013 to December 31, 2013. Reports will be due on March 31 of subsequent years for all payments and transfers made during the previous year. A covered drug, device, biological or medical supply includes (1) one that is covered by Medicare, Medicaid or CHIP; (2) a drug or biological that requires a prescription; and (3) a device or medical supply that has a pre-market approval by the Food and Drug Administration (FDA) or a pre-market notification to the FDA. Physicians and teaching hospitals will have 45 days to review the reports and, if necessary, challenge any information before the information is made publicly available on a CMS website. The Final rule implements sec. 6002 of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), as codified at 42 U.S.C. sec. 1128G.

Reports. Each payment or transfer of value will have to include the name of the physician or teaching hospital receiving the payment. The physician's name must be provided as listed in the National Plan & Provider Enumeration System. Payments or transfers of value to physicians must include the physician's (1) National Provider Identifier, (2) state license number, and (3) the physician's primary business address. Also to be included in the report is the amount of the payment, the date of the payment, and the form of the payment. The name of the covered drug, device, biological or medical supply to which the payment is related must also be included on the report. If the payment or transfer is not related to a covered item, the word "none" must appear. The payment must be categorized into one of these groups: (1) consulting fee; (2) compensation, such as being a speaker at an event or serving as a faculty member; (3) honoria; (4) gift; (5) entertainment; (6) food and beverage; (7) travel and lodging costs; (8) education; (9) research; (10) charitable contribution; (11) current or prospective ownership or investment interest; (12) royalty or license; (13) grant; or (14) space rental or facility fees at a teaching hospital. The report filed by GPOs and manufacturers regarding ownership information will contain the same information, except the ownership or investment interest does not have to be categorized like a payment or transfer of value. A GPO is an organization that purchases, arranges for, or negotiates the purchase of covered drugs, devices, biologicals or medical supplies for a group of individuals or entities. All data used to compile the report will have to be retained for 5 years.

Costs. CMS estimates that 1,150 manufacturers and 420 GPOs will be affected by this Final rule. CMS estimates that the cost of compliance with this Final rule by manufacturers will be about $158,000 in the first year and about $119,000 in subsequent years, while the cost to a GPO will be about $23,000 per year in the first year and about $18,000 for a GPO in subsequent years. The overall cost to manufacturers and GPOs is about $269 million in the first year and about $180 million each subsequent year.

Purpose and penalties. CMS said, "transparency will shed light on the nature and extent of relationships, and will hopefully discourage the development of inappropriate relationships and help prevent the increased and potentially unnecessary health care costs that can arise from such conflicts." The penalties for failing to file a report can range from $1,000 to $10,000 for each incident and will not exceed $150,000 a year. A penalty of $1 million may be assessed for knowingly failing to submit a report. HHS' Office of the Inspector General and CMS will enforce these regulations.

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