Physician Payment Sunshine Act: Report Shows Companies are Preparing for US and Global Reporting
Cegedim Relationship Management released an industry report, 2012 US Trends in Aggregate Spend and Disclosure Reporting, which provides an analysis of results of its third annual survey of US decision makers regarding today’s key trends and challenges in the Life Sciences industry. According to the survey, Life Sciences executives’ responses reflect
- The impact of the Physician Payment Sunshine Act provisions of the Patient Protection and Affordable Care Act (PPACA), and global transparency laws;
- A projected increase in automated reporting; and
- Decreased usage of internal and manual reporting methods.
Respondents to this year’s survey had the same level of concern about the Sunshine Act with respect to five key areas:
- Proper identification of spend recipients,
- Collecting all relevant spend data,
- Data integrity,
- Certification of spend before posting, and
- Handling inquiries after spend is posted – respondents’ level of concern with the Sunshine Act is about the same as last year.
The Physician Payment Sunshine Act
The responsibility of the Sunshine Act has undoubtedly set the US apart in terms of transparency. This involves implementing transparency initiatives at all levels of the business structure and ensuring compliance by monitoring each possible aspect of reportable spend data. Moreover, the solutions required to meet these strict standards are creating valuable synergies in the US through increased collaboration and communication – and, in turn, enabling companies to achieve inherently better commercial productivity. In addition to the federal law, global transparency regulations are coming to the forefront of the issue, as most companies do business across borders, further necessitating full expense disclosure.
To determine how companies are dealing with these demands, Cegedim, for a third year in a row, surveyed the industry to identify current practices and expected trends around transparency, aggregate spend, and disclosure reporting and compliance. The report includes responses from 61 companies from the Life Sciences industry, including pharmaceutical, biotech, and medical device companies. This year, the Medical Device industry had a much larger representation (25%) than in past years (7% in both 2011 and 2010
Cegedim Transparency Report
According to respondents, an overwhelming majority (75%) expects to meet disclosure laws using internal or third party solutions as more requirements are implemented. Surprisingly, nearly half (44%) of the respondents, most of which are from the medical device sector, currently report manually or with spreadsheets. However, as more laws are enacted, only a small minority (16%) believes that their manual/spreadsheet practices will continue.
In specific response to the Sunshine Act, most surveyed (67%) currently utilizing manual/spreadsheet processes anticipate migrating to an automated solution in reaction to the federal law. Lastly, implementing an internal automated solution, versus third party, decreased by 15% between 2011 and 2012 – highlighting that companies now leverage revolutionary benefits from outsourcing to third party solution providers.
Moving to an internal automated solution (vs. third party) is down from 28% in 2011 to 13% this year, indicating that companies are realizing the efficiencies of outsourcing. Over three-fourths of respondents indicate that global aggregate spend and transparency initiatives originate in US offices, while about 14% originate from local or regional offices. Europe, Asia Pacific, Australia, etc. – seem to be following the US lead about disclosure and compliance issues.
In fact, Cegedim’s recent survey in Europe found that Europe defers to the mature US enforcement model for insights into their regulatory future, with nearly two-thirds (64%) of respondents anticipating that promotional spend tracking in Europe will reach US levels in one to three years. 87% of respondents consider global capabilities when choosing an aggregate spend solution.
Slightly more respondents indicate in 2012 that it’s a necessity to implement an aggregate spend and transparency solution that can be used in other countries across the world. Only 13% of respondents don’t see this as a factor in choosing a solution.
Interestingly, more respondents (44%) report using manual spreadsheets to satisfy reporting requirements this year than in the past two years. This finding may be partly due to the increase in medical device respondents in this year’s survey and the large amount of respondents from smaller companies. In fact, half of respondents who currently use spreadsheets to satisfy requirements are from companies with under $1 Billion in revenue. The medical device industry overall tends to be slower adapters in setting up automated processes and systems for tracking and reporting on aggregate spend; 33% of respondents who reported using spreadsheets were from medical device companies.
Some respondents indicated again this year that they were either not satisfying requirements or avoiding promotional spend where disclosure is required. With the federal report due in 2013, this will likely have to change if they plan to do any promotional campaigns with values over $10.
Fifty-one percent of respondents also indicate that they are using the same system for sample reporting vs. spend reporting. With samples now being part of the required transparency reporting, there are some significant advantages and efficiencies that can be realized by having this information all in one place, particularly if the data is being fed into an automated system for consolidation and validation.
The majority of respondents expect investment in aggregate spend and disclosure compliance to increase over the next year. The most notable reason for the
expected increase in investment was dealing with the federal requirements and global transparency trends. A notable reason for a decrease was that the biggest cost of putting in place a solution (implementation) was already done in many instances and that a new system would make previously manual process more automated… saving time, money, and resources.
The majority of respondents, (62%) have 1-5 dedicated full time employees (FTEs) to support aggregate spend and disclosure compliance, a similar pattern that in the past. Very few companies indicate having more than 10 resources, possibly reflecting the fact that most companies outsource at least part of the compliance process. Eighty-nine percent of respondents who indicate not having dedicated FTEs to support aggregate spend and disclosure compliance are from smaller companies – less than $1 Billion in revenue.
While 57% of respondents currently manage their aggregate spend and disclosure reporting and compliance solution fully in-house, 21% of those people would prefer to outsource part or all of that activity based on their resources. Reasons for this could include the enormous effort and expertise required to ensure build, host, and update an internal system while also ensuring that the company is always up to date with ever changing transparency and disclosure requirements.
While the majority of respondents are still using internal resources to monitor new and pending legislation, a slightly greater number of people are reaching out to third parties to help them handle this. This is probably due to the fact that there is an increase in regulations to track with the federal law and global transparency regulations coming into effect. Additionally, most companies report that the compliance or legal department holds this responsibility internally. Similar to previous years respondents continue to use a mix of resources for legislative updates, including webinars/web events (87%), industry conferences (84%), and state/federal websites (87%).
Over half of respondents are planning on a “pre-submission review” by covered recipients (providing covered recipients relevant spend information prior to report submission) as suggested in the draft regulations from CMS. When setting up such a system, make sure that you allow HCPs a private, secure portal for them to review information, as well as a way for them to dispute/ask questions.
The Sunshine Act will also prompt many companies to look for outsourced help in dealing with their reporting compliance. Of those respondents who mentioned that they currently use a manual/spreadsheet solution to satisfy various state promotional and marketing disclosure reporting requirements, 67% plan to move to an automated solution in response to the federal law. Moving to an internal automated solution is down from 28% in 2011 to 13% this year, indicating that companies are realizing the efficiencies of outsourcing such a complex task.
Global Implications of US Companies Maintaining Transparency
The UK Bribery Act and Foreign Corrupt Practices Act (FCPA) impose regulations on US companies with global footprints, further escalating the risks involved with a breach in compliance. Hence, most executives (87%) consider global capabilities when selecting an aggregate spend solution. While most respondents acknowledge its importance, the majority of respondents have not defined when they will move forward with a global solution for aggregate spend and transparency reporting. Critically, companies remain unsure about when migration to a global reporting solution will occur. Within Europe, respondents were most concerned with the UK (33%), France (28%) and Germany (20%). In Asia Pacific, respondents indicated that China and Japan occupy the primary focus of their compliance efforts.
“Observing more stringent transparency laws, revised industry association code of ethics and transparency guidelines, both locally and globally, is a new reality for US Life Sciences organizations. With increased country-specific legislation and / or guidelines, companies must adopt a holistic and globally consistent approach for monitoring financial relationships with their customers,” explained Bill Buzzeo, Vice President of Global Compliance for Cegedim Relationship Management. “Companies must also broaden processes and solutions to consider including more proactive controls that start working prior to transfers of value to HCPs in order to optimize internal transparency and ensure multinational compliance.”
Conclusion
Some large, global pharmaceutical companies have begun to voluntarily disclose their transactions with healthcare providers. Many others, however, have been waiting for final implementing regulations from the Centers for Medicare & Medicaid Services (CMS) before they begin capturing the data needed for the aggregate spend disclosures required by the Physician Payments Sunshine Act. Although companies will not have to report these transactions until March 2013, it is still recommended that their data-collection procedures and systems be in place now. For many organizations, this undertaking will demand extensive time and financial resources.
Some organizations have still not fully prepared for compliance with these new regulations. Compliance is not merely about disclosure; it is also about capturing the source of spend, accurately and promptly. Smaller, emerging companies tend to be somewhat behind the curve — not because they do not wish to comply with the law, but because they think they can wait and tackle the issue after final regulations appear.
Another group includes enterprises that aren’t sure whether the law even applies to them. For example, distributors of medical devices need to disclose transfer-of-value payments for original manufacturer products that they re-label. Some organizations are completely unaware of the law, because they have neither a significant compliance operation nor a proactive culture. Others believe (wrongly) that they don’t have to do anything until 2013.
Companies that have not yet taken the steps face financial penalties for missing federal and state disclosure deadlines. Making compliance investments now will not just avoid penalties—it will also head off potentially deeper impacts on the company’s reputation. No one can afford to have internal and external stakeholders, including the media, perceive them as violating the law. It will be critical for this data to be accurate from point-of-capture to point-of-disclosure.
In addition, global issues and regulations will play a greater role in how companies handle their compliance across the globe. While many regions are taking the lead from the US offices right now, the future may see compliance departments coming together globally to follow a more consistent plan for all company expenditure tracking.
“As the burden grows to comply, companies must adopt a holistic approach to tracking and reporting that includes a focus on high quality healthcare practitioner and organization reference data to ensure accurate reporting and disclosure. This approach needs not only to encompass all internal departments, third parties, and systems in the US, but should take into account global affiliates so that the entire company is aware of disclosure and transparency initiatives.”
“Companies should also be preparing—now—for how they will manage relationships with their customers, the media, patient associations, and special interest groups once the federal government publicly details of financial interactions between them and HCPs/organizations on the internet. Healthcare practitioners and organizations should not be viewed as just recipients, but rather be involved in the process – i.e., given the ability to review transactions for accuracy on an ongoing basis. Communications and public relations action plans should reinforce the benefits of legitimate interactions between life science companies and healthcare practitioners/organizations.”
“Finally, as companies become more confident in their ability to meet aggregate spend reporting and disclosure requirements, they will begin to expand processes and solutions to include more proactive compliance controls prior to a spend transaction occurring, which will enhance overall internal transparency and compliance levels.”