Physician Payment Sunshine Act: Politicians and Groups React to CMS Missed Deadlines

A diverse group of organizations and the congressional sponsors are asking HHS to give some guidance as to the time frame for the release of the regulations around the Physician Payment  Sunshine Act—Section 6002 of the Patient Protection and Affordable Care Act (PPACA).  As we noted earlier this month, the Centers for Medicare and Medicaid Services (CMS) missed its October 1, 2011 deadline to promulgate rules to implement the Act.

The Sunshine Act requires manufacturers to report all payments to physicians, including consulting fees, honoraria, travel and entertainment, and for the Department of Health and Human Services (HHS) to publicly disclose the identity of the manufacturer, physician, and the drug or device associated with the payment on the Internet.  Additionally, the law requires manufacturers and group purchasing organizations (GPOs) to report all ownership or investment interests held by physicians or members of their family, and for making that information public.  The law required the federal government to establish guidance on how manufacturers submit information and how the information would be made available to the public no later than Oct. 1, 2011. 

After CMS missed the deadline, Senators Charles Grassley (R-IA) and Herb Kohl (D-WI) wrote to the agency, asking for a description of the status and reason for delay.   The senators asked for a written response by Friday, Oct. 14.  So far, no written response has been forthcoming. 

Last week, Senator Grassley again expressed his concern over the continued delays in implementing the Physician Payment Sunshine Act.   In a press release, Grassley said, “It’s disappointing that the agency is going so slowly on this issue.  Of all the undertakings for CMS, this seems like one of the most straightforward tasks.  The law was enacted a year and a half ago, and the legislation was pending for a long time before that.  It wasn’t a surprise.  I’ll continue to look for CMS to get this done sooner rather than later.” 

In addition to Senator Grassley’s letter, a group of trade organizations, including the Advanced Medical Technology Association (AdvaMed), Biotechnology Organization (BIO), Pharmaceutical Research and Manufacturers of America (PhRMA), the Pew Health Group (PHG), and several others, sent a letter to HHS Secretary Sebelius pleading with her to fully implement the Physician Payment Sunshine Provision. 

The letter asked that HHS “work quickly,” and that HHS follow the requirement to “engage stakeholders and allow public comment on any procedures established related to the submission and public reporting of information under Section 6002 of PPACA.”  

The groups noted how “many companies have already invested significant resources in preparing to comply with the Sunshine provision,” and noted how “delays in establishing procedures for the submission and public reporting of the required information will make it increasingly challenging for manufacturers to know whether they are meeting their statutory obligation as they begin to collect data in 2012.” 

The groups also asked HHS to give industry three (3) months—the same time Congress gave industry to complete implementation based on the October 1, 2011 statutory date to implement the new provisions—for following establishment of final procedures for the submission and public reporting of 2012 information for companies to achieve full compliance.  

Ultimately, the groups asserted that, “An absence of established procedures could harm both the companies who are trying to comply with the law and the public who stands to benefit from increased transparency of these relationships.” 

Discussion 

What is interesting about Grassley’s concern over the missed deadline is that while advocating for the Sunshine Act, Grassley also believes the individual mandate, the centerpiece of PPACA, is unconstitutional.  And the remainder of the Affordable Care Act be repealed. 

In fact, last year, he told a group of students in Iowa that, “he did not believe a plan to mandate that people buy health insurance was legal because the Constitution limits the federal government’s power.”  He even went as far as saying that, “If somebody other than President Obama would be elected in 2012, I believe it would be repealed.” 

Consequently, it may be difficult for CMS to address Grassley’s concerns, considering he is supporting the implementation and use of government and taxpayer dollars to support part of legislation for a law he hopes to repeal.

More importantly however, the missed deadlines are more problematic for some in industry and healthcare stakeholders.  Over a dozen pharmaceutical and medical device manufacturers already have highly complex and technical systems in place to report payments to physicians.   These companies are depending on CMS to come out with proposed regulations so that they can begin to implement any necessary changes to their current systems and to bring them into compliance with any modifications the proposed rules will likely create.  

Those changes will demand a range of new upgrades, and computer systems for compliance, as well as oversight, training, education, and other aspects that companies need to begin planning, especially considering there are significant fines associated with the misreporting of payments under the Sunshine Act.  

Additionally, and more problematic, is the impact delayed regulations are having on smaller and mid-sized companies who do not have the infrastructure to record payments in place already.  Reporting and payment tracking systems are extremely expensive, complicated and highly technical, requiring significant resources and staffing for implementation, oversight and compliance.   Thus requiring staff and financial resources that is normally spent on R&D or product development. 

The longer these companies have to wait for regulations and if the implantation timelines are not extended, the more uncertain their status is, which can scare away potential investors and can leave companies unsure about conducting normal business activities such as clinical research, marketing, advertising, and consulting.  

The guidance with input from those it will regulate is important as companies need to have a clear understanding of how to keep track and report such normal business practices. 

Companies may be hindered and worried from launching a new product or reaching out to look for new ones.  In fact, doctors and potential outside experts themselves may be turned away or decline working with companies that do not have such payment databases in place for fear of investigation. 

As we have already seen numerous times, the national and local media and “journalists” have taken payments already published by companies and attempted to discredit hardworking physicians who collaborate with industry.  As a result, once the payment database regulations are proposed, companies will need to begin preparing for media and public awareness campaigns to ensure that patients and Americans are aware of the important value physician-industry plays and the firewalls in place to ensure objectivity and integrity in such relationships. 

In addition, hospitals, academic medical centers (AMCs) and medical institutions are also affected by the delay in the proposed regulations.  As we have recently seen, many AMCs and a few hospitals have enacted strict conflict of interest policies banning faculty and staff from working with industry or in participating with industry events.  Less stringent policies at other institutions require disclosure and transparency as well.  

Once the Sunshine database regulations are proposed, these institutions will need to ensure that what their faculty and staff are internally reporting is consistent with what gets reported to CMS, otherwise, this could lead to government investigation and potential liability, as well as public scrutiny. 

This will be especially true concerning faculty and staff who are recipients of National Institutes of Health (NIH) research grants, which already have strict requirements for reporting financial interests. 

Last, but not least, these companies will need to put in place significant legal and policy mechanisms to ensure compliance with the Sunshine Act and to prevent exposure to liability and government investigation.  Companies will need regular advice and counseling on their payment structures and use of payments to physicians, and will have to carefully scrutinize contracts with outside experts in every aspect of their business.  

Without clear regulations or even proposed regulations, companies again are facing uncertainty and cannot receive any advice.  This is particularly troublesome considering the Department of Justice (DOJ) and Office of the Inspector General (OIG) are anxiously waiting for these payment databases to be created to continue prosecuting False Claims Act cases and any suspicion of fraud and abuse.  

Ultimately, as the days continue to go by, two things are clear.  First, the Sunshine Act is clearly not a priority for CMS or HHS.  As Grassley pointed out, the legislation has been approved for a year-and-a-half.  Interestingly, in the OIG’s 2012 Year Plan, the Sunshine Act was not mentioned once out of 156 pages of priorities.  And if it is a priority, the delayed regulations will only guarantee a fight down the road from industry and affected stakeholders, especially considering CMS has given industry and stakeholders only one brief opportunity to offer input.   

Second, whatever the cause is for the delay, it is likely that CMS is realizing the tremendous complexity behind reporting thousands of $10 payments to physicians in America.  CMS is probably asking, how can the federal government afford this bill and how can they maintain it.  More importantly, CMS is probably asking, what value will this bring to Americans, who will be using this database, and how in the world will this reduce healthcare costs.  

CMS will probably be digging long and hard to answer these questions, and it is unlikely that shedding any Sunshine on the issue will help them.