Physician Payment Sunshine: Opposition to the Additional Reporting Requirements Grows

Sunburn or Sunshine?  That is the question one has to ask when they consider the extensive effort and economic burden that will be involved in reporting all payments related to physicians and teaching hospitals under the physician payment sunshine provisions in the affordable care act.

Criticism over physician payments has continued to grow over the past several years as companies such as Pfizer, Medtronic and Johnson and Johnson have begun voluntarily disclosing their physician fee schedules over the last two years.

As companies have continued to disclose their payment information, they have also begun to decrease their average level of compensation to physicians by 50 percent, according to a new study of fair-market value benchmarks by Cutting Edge Information.

Cutting Edge Information’s study entitled, KOL Fair-Market Value and Aggregate Spend: Documentation, Tracking and the Sunshine Act, found that these voluntary disclosures have impacted the level of compensation that key opinion leaders receive and many thought leaders are choosing to lower their rates or opting out of working with the industry altogether.

For example, in 2006, the average hourly rate for a top-tier opinion leader — an experienced physician often considered a national- or global-level thought leader — was $604. Since then, drug and device manufacturers have faced public criticism about conflicts of interest, as well as state and federal legislation to regulate physician payments.  As a result, the average hourly rate for medical and scientific activities in 2011 has dropped to $299, or roughly 50% of what it was in 2006.

The study analyzed the fair-market value (FMV) data of more than 30 drug and device manufacturers to benchmark physician fee schedules and the findings include thousands of FMV benchmarks for cardiologists, neurologists, oncologists, primary care physicians and more.

According to the study, the largest drop in hourly rates came between 2007, when the average rate was just under $600 per hour, and 2008, when the rate fell to less than $400 per hour. Elio Evangelista, director of research at Cutting Edge Information, noted that there is a strong correlation between the introduction of the Sunshine Physician Payment Act in 2007 and the decrease rates.  He added that, as companies have “continued to implement new processes and increased structure around fair-market value determination, physician payment rates have continued to drop.”

In addition to the decrease in physician compensation, the Physician Payment Sunshine will also have negative effects on clinical research and education. 

To address this issue, Adam Chasse, vice president for business development at RxTrials, Inc., will participate in a presentation on Capitol Hill this Friday, June 17, regarding the Physician Payment Sunshine provisions. Chasse will join representatives of the Association of Clinical Research Organizations (ACRO) and other industry stakeholders in the briefing for legislative staffers.

Chasse and other clinical research industry professionals believe that disclosing payments made to physicians who serve as principal investigators for clinical research adds great cost and complexity to research & development for relatively small benefit. Chasse asserted that, “research grants differ from consulting fees in that they are intended to cover the very real costs providers incur when conducting clinical research; average profit margins are minimal, so grants are unlikely to entice physicians to write more prescriptions for the pharma company’s drug.”

Further, he explained that, “grants typically flow through one or more intermediaries such as a CRO, research management company, or university, making it very difficult to quantify what the physician actually receives.”  Accordingly, Chasse recognized that he and ACRO will focus their testimony on explaining to Congress the challenges these provisions present to our industry.”  We will provide a summary of the session next week.

Ultimately, as ACRO and other health care stakeholders begin to express their concerns over the Sunshine Act, Congress and the public will have to decide whether the supposed benefits of the legislation will outweigh the significant risks and burdens the act will place on companies and the negative impact it will have on physicians willingness to conduct research and educate other physicians.