Physician Payment Sunshine Act: CMS Submits Regulations to OMB, Senate Special Committee on Aging to Hold Sunshine Hearing December 8th

As we noted earlier this month, the Centers for Medicare and Medicaid Services (CMS) missed an October 1, 2011, mandatory deadline to issue proposed regulations for Section 6002 of the Affordable Care Act, affectionately known as the Physician Payment Sunshine Act.  As of today, there are still no proposed regulations, almost two months behind the statutorily mandated deadline. 

The Sunshine Act requires drug and device makers to disclose payments made to physicians over $10 starting in March 31, 2013, and they will be at risk for penalties if they fail to do so. Group purchasing organizations must also report physician ownership and investments under the law.  Payments will be posted on a public website. 

Shortly after CMS missed the October 1, 2011 deadline, Senators Herb Kohl (D-WI) and Charles Grassley (R-IA), co-sponsors of the Physician Payment Sunshine Act (Section 6002 of the Affordable Care Act), asked CMS to explain why the agency had missed the deadline.  In response to several letters from both Kohl and Grassley, CMS Administrator Donald Berwick, MD sent a letter in response. 

Aging committee Chair Herb Kohl and Grassley have been pressing CMS to answer questions on why the agency failed to get the regulation out by the mandated deadline, and the panel will hold a hearing on the issue Dec. 8, 2011 according to Inside Health Policy. 

Berwick credited the delay on President Obama’s Executive Order 13563, which “directs all Federal agencies to take steps to reduce regulatory burden.”  He asserted his belief that CMS could “implement the statutory goals of Section 6002 while minimizing burden on the regulated parties.”  Accordingly, he explained that, “CMS is carefully reviewing this statutory requirement and working hard to ensure we meet these goals.”  

Berwick also highlighted in his letter that, “CMS has been actively engaged in stakeholder outreach regarding the implementation of this provision.”  He stated that, “immediately upon receiving the delegation of authority from the Secretary for Section 6002, CMS staff began engaging in stakeholder outreach to better understand the complexities involved with implementing this provision.”  

“The administrator’s response doesn’t tell us anything new,” Grassley said in a statement. “There’s no explanation for the delay and no indication of when to expect completion. It’s an inadequate response any way you look at it.” 

“Given how straightforward and detailed the Sunshine Act provisions were, it’s troubling that the response to our letter would come a month late without any indication on progress, a timeline or what caused the delay,” Kohl added in a statement. 

Consequently, Berwick’s letter explained that the proposed regulations had been sent to the Office of Management and Budget (OMB) for review, just weeks before the Senate aging committee plans to hold a hearing on the issue. 

A Grassley aide told Inside Health Policy that the senator’s office was not informed that CMS had sent the regulation to OMB for review until after the fact, even though Grassley has been closely monitoring the situation.  The staffer said it would have been reasonable to assume CMS would want to let people know that it has been moving forward with the process, considering Congress as well as industry and consumer advocates have been awaiting action for so long. 

The senators are not alone in questioning the delay. On Oct. 25, drug and device makers joined with consumers advocates in a letter to HHS, also urging full implementation of the provision. 

As the deadline continues to linger, one can only imagine what OMB is going through to calculate the costs and benefits of the Sunshine Act.  Presumably Congress and Senators Grassley and Kohl will argue that by making payments from industry to physicians more transparent, it will reduce the use of brand name prescriptions, lowering health care costs, and saving the federal government money.  This rationale however is misguided given the fact that over 75% of drugs prescribed in America are already generics. 

Congress and the Senators might also argue that by making such payments more transparent, they will be able to root about more fraud and abuse in government healthcare programs.  However, this argument is likely misguided as well.  As recently as this month, GlaxoSmithKline joined the ranks of dozens of other large life science companies to be slapped with significant fines—$3 billion, the largest since Pfizer’s $2.3 billion. 

The reality is, many major pharmaceutical and device maker already has a corporate integrity agreement (CIA) with the Department of Justice and the Department of Health and Human Services (HHS) Office of the Inspector General (OIG).  These agreements, along with federal settlements, state settlements, and mandatory compliance arrangements with FDA make it highly unlikely that making such payments transparent will result in any more gains from these agencies in fraud and abuse dollars.  Moreover, the majority of large companies already have payment transparency mechanisms in place and some have been publishing such payments for several years. 

Accordingly, companies that already have these systems in place will only be harmed more by delayed regulations, as they cannot prepare new systems and requirements adequately.  Additionally, the regulations will have an adverse impact on smaller companies who do not have the resources, funding or staff to comply with the Sunshine Act, which will mean less time being spent in the labs researching and discovering new breakthroughs and treatments.  

Patients, Industry, consumers and all affected stakeholders need these proposed regulations to be reasonable and affordable, to allow enough time to implement before the regulations come into effect.  Further delays only cause further confusion and could negatively impact innovation.