Physician Payment Sunshine Act Final Rule: Reporting Requirements
The Centers for Medicare & Medicaid Services (CMS) released the long-awaited and 15-month delayed final rule implementing the Physician Payment Sunshine Act— section 6002 of the Affordable Care Act (ACA), which added section 1128G to the Social Security Act (the Act).
In general, the Sunshine Act requires applicable manufacturers of drugs, devices, biologicals, or medical supplies to report annually to the Secretary of HHS certain payments or other transfers of value to physicians and teaching hospitals. It also requires applicable manufacturers and applicable group purchasing organizations (GPOs) to report certain information regarding the ownership or investment interests held by physicians or the immediate family members of physicians in such entities.
Applicable manufacturers and applicable GPOs must begin to collect the required data on August 1, 2013 and report the data to CMS by March 31, 2014. CMS is then expected to publish the payments for this period on a public website by September 31, 2014.
CMS estimated that the total cost of these provisions will be approximately $269 million in the first year and $180 million annually thereafter. Interestingly, CMS admitted having “no empirical ability to estimate the monetary benefits of this provision.” Nevertheless, they emphasized the “nonmonetary benefits, which are difficult to quantify.”
CMS claimed that, “Increased transparency regarding the extent and nature of relationships between physicians, teaching hospitals, and industry manufacturers will permit patients to make better informed decisions when choosing health care professionals and making treatment decisions, and deter inappropriate financial relationships which can sometimes lead to increased health care costs.”
CMS did recognize that “collaboration among physicians, teaching hospitals, and industry manufacturers contributes to the design and delivery of life-saving drugs and devices.” Moreover, CMS acknowledged that, “financial ties alone do not signify an inappropriate relationship.” While conflicts of interest may arise, CMS noted that “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.”
Importantly, CMS clarified that “compliance with the reporting … does not exempt applicable manufacturers, applicable GPOs, covered recipients, physician owners or investors, immediate family members, other entities, and other persons from any potential liability associated with payments or other transfers of value, or ownership or investment interests (for example, potential liability under the Federal Anti-Kickback statute or the False Claims Act).”
However, CMS made “clear that the inclusion of a payment or other transfer of value, or ownership or investment interest on the public database does not mean that any of the parties involved were engaged in any wrongdoing or illegal conduct.” Unfortunately, we know too well that media and press outlets will use these payments once they are made public to create elaborate headlines and biased stories about these payments creating “conflicts of interest.”
CMS also acknowledged that the Sunshine Act does not afford it “the authority to limit the payments or other transfers of value made to covered recipients.” They recognized that the statute requires applicable “manufacturers to report the relationships, but does not limit or ban them in any way.”
§ 403.904 Reports of payments or other transfers of value to covered recipients.
Direct and indirect payments or other transfers of value provided by an applicable manufacturer to a covered recipient during the preceding calendar year, and direct and indirect payments or other transfers of value provided to a third party at the request of or designated by the applicable manufacturer on behalf of a covered recipient during the preceding calendar year, must be reported by the applicable manufacturer to CMS on an annual basis. For CY 2013, only payments or other transfers of value made on or after August 1, 2013 must be reported to CMS.
Limitations. Certain limitations on reporting apply in the following circumstances:
(1) Applicable manufacturers for whom total (gross) revenues from covered drugs, devices, biologicals, or medical supplies constituted less than 10 percent of total (gross) revenue during the fiscal year preceding the reporting year are only required to report payments or other transfers of value that are related to one or more covered drugs, devices, biologicals or medical supplies.
(2) Applicable manufacturers under paragraph (2) of the definition in §403.902 are only required to report payments or other transfers of value that are related to a covered drug, device, biological, or medical supply for which they provided assistance or support to an applicable manufacturer under paragraph (1) of the definition.
(3) Applicable manufacturers under either paragraph (1) or (2) of the definition in §403.902 that have separate operating divisions that do not manufacture any covered drugs, devices, biologicals, or medical supplies (for example, animal health divisions) are only required to report payments to covered recipients related to the activities of these separate divisions if those payments or other transfers of value are related to a covered drug, device, biological, or medical supply. This includes reporting of payments or other transfers of value that are related to covered drugs, devices, biologicals, or medical supplies made by applicable manufacturers to covered recipients through these operating divisions.
(4) Applicable manufacturers that do not manufacture a covered drug, device, biological, or medical supply except when under a written agreement to manufacture the covered drug, device, biological, or medical supply for another entity, do not hold the FDA approval, licensure, or clearance for the covered drug, device, biological, or medical supply, and are not involved in the sale, marketing, or distribution of the product, are only required to report payments or other transfers of value that are related to one or more covered drugs, devices, biologicals, or medical supplies.
(c) Required information to report. A report must contain all of the following information for each payment or other transfer of value:
(1) Name of the covered recipient. For physician covered recipients, the name must be as listed in the NPPES (if applicable) and include:
- first and last name, middle initial, and suffix (for all that apply).
(2) Address of the covered recipient. Primary business address of the covered recipient, including all the following:
i. Street address.
ii. Suite or office number (if applicable).
iii. City.
iv. State.
v. ZIP code.
(3) Identifiers for physician covered recipients. In the case of a covered recipient who is a physician, the following identifiers:
i. The specialty.
ii. National Provider Identifier (if applicable and as listed in the NPPES). If a National Provider Identifier cannot be identified for a physician, the field may be left blank, indicating that the applicable manufacturer could not find one.
iii. State professional license number(s) (for at least one State where the physician maintains a license), and the State(s) in which the license is held.
(4) Amount of payment or other transfer of value. A payment or other transfer of value made to a group of covered recipients should be distributed appropriately among the individual covered recipients who requested the payment, on whose behalf the payment was made, or who are intended to benefit from the payment or other transfer of value.
(5) Date of payment or transfer of value. The date of each payment or other transfer of value.
(i) For payments or other transfers of value made over multiple dates (rather than as a lump sum), applicable manufacturers may choose whether to report each payment or other transfer of value as separate line item using the dates the payments or other transfers of value were each made, or as a single line item for the total payment or other transfer of value using the first payment date as the reported date.
(ii) For small payments or other transfers of value reported as a single line item, applicable manufacturers must report the date that the first bundled small payment or other transfer of value was provided to the covered recipient.
(6) Form of payment or transfer of value. The form of each payment or other transfer of value. An applicable manufacturer must report each payment or transfer of value, or separable part of that payment or transfer of value, as taking one of the following forms of payment that best describes the form of the payment or other transfer of value, or separable part of that payment or other transfer of value.
(1) Cash or cash equivalent.
(2) In-kind items or services.
(3) Stock, stock option, or any other ownership interest.
(4) Dividend, profit or other return on investment.
(7) Nature of payment or transfer of value. The nature of each payment or other transfer of value (See our story on nature of payment categories).
(8) Related covered drug, device, biological or medical supply. The name(s) of the related covered drugs, devices, biologicals, or medical supplies, unless the payment or other transfer of value is not related to a particular covered drug, device, biological or medical supply. Applicable manufacturers may report up to five covered drugs, devices, biologicals or medical supplies related to each payment or other transfer of value. If the payment or other transfer of value was related to more than five covered drugs, devices, biologicals, or medical supplies, the applicable manufacturer should report the five covered drugs, devices, biologicals, or medical supplies that were most closely related to the payment or other transfer of value.
(i) For drugs and biologicals, applicable manufacturers must report the name under which the drug or biological is or was marketed and the relevant National Drug Code(s), if any. If the marketed name has not yet been selected, the applicable manufacturer must indicate the name registered on clinicaltrials.gov.
(ii) For devices and medical supplies, applicable manufacturers must report at least one of the following:
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- The name under which the device or medical supply is or was marketed.
- The therapeutic area or product category for the device or medical supply.
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(iii) If the payment or other transfer of value is not related to a covered drug, device, biological or medical supply, but is related to a specific non-covered product, applicable manufacturers must indicate “non-covered product.”
(iv) If the payment or other transfer of value is not related to any drug, device, biological, or medical supply (covered or not), applicable manufacturers must indicate “none.”
(v) If the payment or other transfer of value is related to at least one covered drug, device, biological, and medical supply and at least one non-covered drug, device, biological, or medical supply, applicable manufacturers must report the name(s) of the covered drug, device, biological or medical supply (as required by paragraphs (c)(8)(i) and (ii) of this section) and may indicate “non-covered products” in addition.
(9) Eligibility for delayed publication. Applicable manufacturers must indicate whether a payment or other transfer of value is eligible for delayed publication, as described in §403.910 (See our separate story on Research Payments).
(10) Payments to third parties.
(i) If the payment or other transfer of value was provided to a third party at the request of or designated on behalf of a covered recipient, the payment or transfer of value must be reported in the name of that covered recipient.
(ii) If the payment or other transfer of value was provided to a third party at the request of or designated on behalf of a covered recipient, the name of the entity that received the payment or other transfer of value (if made to an entity) or indicate “individual” (if made to an individual). If a covered recipient performed a service, but neither accepted the offered payment or other transfer of value nor requested that it be made to a third party, the applicable manufacturer is not required to report the offered payment or other transfer of value unless the applicable manufacturer nonetheless provided it to a third party and designated such payment or other transfer of value as having been provided on behalf of the covered recipient.
(11) Payments or transfers of value to physician owners or investors. Must indicate whether the payment or other transfer of value was provided to a physician or the immediate family of the physician who holds an ownership or investment interest (as defined §403.902) in the applicable manufacturer.
(12) Additional information or context for payment or transfer of value. May provide a statement with additional context for the payment or other transfer of value.
(e) Reporting the nature of the payment or other transfer of value. The categories describing the nature of a payment or other transfer of value are mutually exclusive for the purposes of reporting under subpart I of this part.
Rules for categorizing natures of payment. An applicable manufacturer must categorize each payment or other transfer of value, or separable part of that payment or transfer of value, with one of the categories listed below “using the designation that best describes the nature of the payment or other transfer of value, or separable part of that payment or other transfer of value.” CMS explained that “If a payment or other transfer of value could reasonably be considered as falling within more than one category, the applicable manufacturer should select one category that it deems to most accurately describe the nature of the payment or transfer of value.”
(i) Consulting fee.
(ii) Compensation for services other than consulting, including serving as faculty or as a speaker at an event other than a continuing education program.
(iii) Honoraria.
(iv) Gift.
(v) Entertainment.
(vi) Food and beverage.
(vii) Travel and lodging (including the specified destinations).
(viii) Education.
(ix) Research.
(x) Charitable contribution.
(xi) Royalty or license.
(xii) Current or prospective ownership or investment interest.
(xiii) Compensation for serving as faculty or as a speaker for an unaccredited and non-certified continuing education program.
(xiv) Compensation for serving as faculty or as a speaker for an accredited or certified continuing education program.
(xv) Grant.
(xvi) Space rental or facility fees (teaching hospital only).
(f) Special rules for research payments. All payments or other transfers of value made in connection with an activity that meets the definition of research in this section and that are subject to a written agreement, a research protocol, or both, must be reported under these special rules. (see our story here about research payments)
Consolidated Reporting
Applicable manufacturers that are under common ownership with separate entities that are also applicable manufacturers may, but are not required to, file a consolidated report for all of the entities. Applicable manufacturers and an entity (or entities) under common ownership with such manufacturer also may, but are not required to, file a consolidated report.
Because CMS expressed concern that it would not be clear to consumers which companies are under common ownership and are either reporting together or separately, CMS is requiring that if a consolidated report is submitted by multiple applicable manufacturers, “the report must provide information specified by CMS to identify each applicable manufacturer and entity (or entities) under common ownership that the report covers. Additionally, “consolidated reports must specify on an individual payment line which entity made which discrete payment or other transfer of value.”
Because CMS did not receive any comments on its proposed reporting method for joint ventures and co-promotions, CMS “finalized these provisions as proposed, which required reporting by the applicable manufacturer that actually made the payment or other transfer of value (unless decided by the parties to report differently) and that the payment or other transfer of value was only reported once.”
Exclusions
Section 1128G(e)(10) of the Act excludes specific types of payments or other transfers of value from the reporting requirements. CMS stated that it does not have the “statutory authority to add exclusions beyond what was outlined in the statute.” CMS finalized its policy to define the exclusion categories “by their dictionary definitions” but provided additional clarification in response to comments. This clarification will be critical to applicable manufacturers and covered recipients.
Existing Personal Relationships: CMS finalized in §403.904(i)(14) that reporting will not be required for “purely personal transfers of value.” For example, “if one spouse, who works for an applicable manufacturer, gives a present to the other spouse who is a covered recipient.”
Payments or Other Transfers of Value of Less Than $10: Small payments or other transfers of value, which the statute defines as payments or other transfers of value less than $10, do not need to be reported, except when the total annual value of payments or other transfers of value provided to a covered recipient exceeds $100. For subsequent calendar years, the dollar amounts specified will be increased by the same percentage as the percentage increase in the consumer price index (CPI) for all urban consumers (all items; U.S. city average) for the 12-month period ending with June of the previous year.
Given the timing of this final rule (15 months late), CMS decided to begin increasing the de minimis thresholds for reporting in CY 2014, and retain the statutory de minimis thresholds ($10 and $100) for reporting in CY 2013.
Consequently, CMS finalized that “applicable manufacturers have flexibility in reporting small payments.” They may either report them individually or bundled with other small payments or other transfers of value in the same nature of payment category, as long as applicable manufacturers are reporting consistently and clearly indicating the method they are using. Additionally, CMS agreed that the de minimis thresholds should not change within a reporting year and will be constant for the entire year. For example, for the entirety of data collection in 2014, the thresholds will be those adjusted based on CPI published in June 2013. CMS will report the new de minimis value with the reporting template for the next reporting year.
CMS also provided additional guidelines for the “reporting of payment or other transfers of value at conferences or similar events.” In general, these guidelines will apply to “conference and similar events, as well as events open to the public.” At events open to the public, CMS recognized that “it will be extremely difficult for applicable manufacturer to identify physician covered recipients.” Therefore, CMS finalized “that small incidental items that are under $10 (such as pens and note pads) that are provided at large-scale conferences and similar large-scale events will be exempted from the reporting requirements, including the need to track them for aggregation purposes.”
While these small payments are excluded by statute, the $100 aggregate payment requirement generally requires the tracking of small payments in order to determine whether covered recipients received more than $100 annually. For these covered recipients, CMS said it would be too “difficult for applicable manufacturers to track who receives these small items at conferences or similar events, due to the nature and disparate attendance at large-scale conferences or similar events.
Additionally, this method is consistent with CMS’ decision to “not require reporting of food and beverage at large-scale conferences.” CMS, however, noted that payments or other transfers of value of $10 or more (for calendar year (CY) 2013) need to be tracked and reported even when provided at large-scale conferences or similar events. CMS stated that “if an applicable manufacturer is handing out an item above the threshold, they should be able to track who received the payment since it is a more significant transfer.
CMS also stated that it will not be providing a “standard template for reporting by entities that organize and oversee events and conferences.” These event and conference vendors are not applicable manufacturers, so CMS does not believe it should have any contact with them or impose requirements on them. CMS noted that “many of the interactions at large-scale conferences and similar events will not be reportable.”
Educational Materials that Directly Benefit Patients or are Intended For Patient Use: CMS recognized that “patient education is important and recognize that it may take a form other than written material, especially in the device context.” For example, a device manufacturer may give a physician an anatomical model to help explain to patients how a procedure would work. CMS agreed that “such an item, which is given to physicians for the purpose of educating patients, falls within the exclusion.
Similarly, if a manufacturer provides educational materials to a physician on a flash drive to be distributed to patients, the flash drive would also fall within the exclusion. However, if the drive was provided as a gift alongside the materials, then it would have to be reported, since it was secondary to the materials. Similarly, CMS stated that overhead expenses, such as printing and time, should be included in the exclusion as long as they are directly related to the development of the materials, which directly benefit patients or are intended for patient use.
CMS stated that items “such as medical textbooks and journal reprints … do not … fall within the statutory exclusion. “Although these items may have downstream benefits for a patient,” CMS stated that “they are not directly beneficial to patients, nor are they intended for patient use.” Thus, CMS finalized that “educational materials provided to covered recipients for their own education, but that do not “directly” benefit patients, do not fall within the exclusion and are therefore subject to the reporting requirements.
Conversely, CMS finalized that this exclusion does encompass materials, such as wall models and anatomical models which are ultimately intended to be used with a patient.
Finally, CMS finalized that the exclusion is limited to educational materials only, and not marketing or promotional materials.
Discounts and Rebates: CMS finalized this exclusion as proposed.
In-kind Items for the Provision of Charity Care: CMS agreed with comments that an “analysis of a patient’s ability to pay should include whether the patient can afford his or her copayment or coinsurance and whether the patient has insurance to cover the care.” Accordingly, CMS stated that this exclusion includes “in-kind items given to covered recipients to provide care to patients who are unable to pay, or for whom payment would be a significant hardship.”
CMS noted that it does not intend applicable manufacturers “to be responsible for tracking each individual item provided to a covered recipient to ensure it is provided to a patient unable to pay.” CMS said it will be “sufficient for the applicable manufacturer and covered recipient to agree in writing that the covered recipient will use the in-kind items only for charity care.
CMS also finalized that “only in-kind items will be included in the exclusion, which does not include financial support for charitable covered recipients.” However, CMS recognized that some payments made to charitable third parties may at some point indirectly benefit a covered recipient. Thus, CMS said that these paymentsor other transfers of value should be reported based on the reporting requirements for indirect payments or other transfers of value. However, CMS said that “charitable contributions made directly to or intended for a covered recipient should be reported as a charitable contribution.”
Product Samples: CMS explained that “the statutory text is clear that this exclusion applies to products intended for patient use; therefore, any drug, device, biological or medical supply provided as a sample to a covered recipient that is intended for use by patients will be included in the exclusion.” Given this interpretation, as long as single use or disposable devices, demonstration devices or evaluation equipment provided to a covered recipient are intended for patient use, they will be included in the exclusion.
Otherwise, CMS said these items may be excluded from the reporting requirements under the exclusions for short term loans (see below). In addition, CMS said that “products used for research studies should be included as a part of the larger research payment.” Additionally, CMS finalized that “all coupons and vouchers for the applicable manufacturer’s products that are intended for patient use to defray the costs of covered drugs, devices, biologicals or medical supplies will be included in this exclusion category.” For the purposes of this rule, CMS said that “such coupons and vouchers are materially similar to samples.” Finally, CMS stated that “applicable manufacturers should not be responsible for tracking what actually happens to samples.” Instead, CMS stated that samples can be excluded from reporting as long as “applicable manufacturers and covered recipients “agree in writing that the products will be provided to patients, which is commonplace in the industry.”
Short Term Loans: CMS finalized that “this exclusion may include loans for covered devices, as well as those under development.” CMS also “finalized that this will include a supply of disposable or single use devices (including medical supplies) intended to last for no more than 90 days.” CMS said “that these products should be treated similarly to non-disposable devices and, therefore, should be included in the exclusion.”
However, CMS stated that that applicable manufacturers should not be allowed “to provide an unlimited supply of these products and still fall within the exclusion,” so CMS established a 90-day supply as the limit. If an applicable manufacturer provides a specific disposable or single use device for more than 90 days (even if provided over multiple dates), the products provided beyond the 90-day supply will be subject to the reporting requirements.
For a single product, the total number of days for the loan should not exceed 90 days for the entire year, regardless of whether the 90 days were consecutive. CMS stated that this aligns with the intention of the statute to limit the loan period to 90 days and not allow a new loan to start at the end of the previous loan period, thus avoiding the reporting requirements. In the event that the loan of a non-disposable device exceeds 90 days (for the entire calendar year), the applicable manufacturer should start reporting as if the loan began on day 91. CMS said that reporting the prior 90 days as a payment or other transfer of value would not greatly increase the payment value which would be misleading to consumers. Additionally, if a device is purchased within 90 days, the applicable manufacturer does not need to report the loan since the loan was less than 90 days.
Contractual Warranty: CMS agreed with commenters “that it is not materially different for an applicable manufacturer to grant the terms of a contractual warranty before the period expires or afterwards.” Thus, CMS finalized that “as long as the contract warranty specified the terms prior to expiration and the terms do not change, then the exclusions may extend to items and services provided outside the expiration period.” CMS said that “the exclusion should extend beyond the express time period of the warranty, since the warranty terms, and thus the relationship, are the same before or after the expiration period and it will be misleading to consumers to only include a portion of the relationships.”
CMS also finalized that “items and services provided under a contractual service or maintenance agreement will also be subject to the exclusion,” due to their similarity to warranty agreements.
Covered Recipient Acting as a Patient: CMS finalized that “covered recipients participating as a subject (and not in a professional capacity) in a research study is the same as being a patient and, should be included in the exclusion.”
Provision of Healthcare: CMS agreed “that payments to covered recipients for services rendered to family members receiving care under a self-insured plan should also be excluded from the reporting requirements.” Similarly, CMS stated that “the provision of healthcare to employees should extend beyond that offered under a self-insured plan.”
Recognizing that there “is little material difference between the provision of healthcare under a self-insured plan and provision of healthcare outside a self-insured plan,” CMS finalized this category to “encompasses other situations, beyond a self-insured plan, when an applicable manufacturer makes a payment to a covered recipient as part of healthcare services provided to the manufacturer’s employees or their family, such as at an on-site clinic or at a health fair.”
Nonmedical Professional: CMS finalized this exclusion as proposed. Thus, Section 1128G(e)(10)(B)(xi) of the Act excludes “in the case of a covered recipient who is a licensed nonmedical professional, a transfer of anything of value to the covered recipient if the transfer is solely for the non-medical professional services of such licensed nonmedical professional.”
Civil or Criminal Action or Administrative Proceeding: CMS finalized that all “legal relationships” that “require physician involvement will be excluded from reporting “in order to allow for clear, consistent reporting requirements for applicable manufacturers, covered recipients, and consumers.
Indirect Payments or Other Transfers of Value through a Third Party: CMS clarified that “indirect payments or other transfers of value where the applicable manufacturer is aware of the identity of the covered recipient must be reported, and only those where the applicable manufacturer is unaware of the identity are excluded.
CMS rejected the proposal to base exclusion on whether an applicable manufacturer had control over the selection of a covered recipient. CMS stated that “receiving a payment or other transfers of value from an applicable manufacturer could lead to conflicts of interest, even in the event that the applicable manufacturer does not directly control the selection of the covered recipient.”
CMS also clarified that payemts or other transfers of value “made at the request of or designated on behalf of a covered recipient” is a situation that is “different from one in which a payment is provided to a third party and passed through to a covered recipient.” CMS explained that “In situations where a covered recipient requests that a payment or other transfer of value be provided to a third party, and the third party in turn provides the payment or other transfer of value to the covered recipient, the payment must be reported under the name of the covered recipient.”
CMS acknowledged that there are circumstances where an applicable manufacturer makes a payment to a third party, which will be passed indirectly to a covered recipient, unbeknownst to the applicable manufacturer. For example, an applicable manufacturer could make a payment to a consulting firm for professional services and the consulting firm incidentally employs a physician on the project. The applicable manufacturer’s payment was ultimately transmitted, at least in part, to a physician covered recipient, but not because the applicable manufacturer directed that the payment be made to a specific physician, or to any physician at all.
In these situations, CMS asserted that “it would be misleading to require reporting of the relationship, since the applicable manufacturer did not intend or expect that a covered recipient would receive any portion of the payment or other transfer of value.” In order to address this concern and clarify when an indirect payment must be reported, CMS defined “indirect payments or other transfers of value.” The definition states that an indirect payment or other transfer of value is one that an applicable manufacturer requires, instructs, or directs to be provided to a covered recipient, regardless of whether the applicable manufacturer specifies the specific covered recipient.
For example, if an applicable manufacturer provided an unrestricted donation to a physician professional organization to use at the organization’s discretion, and the organization chose to use the donation to make grants to physicians, those grants would not constitute “indirect payments” because the applicable manufacturer did not require, instruct, or direct the organization to use the donation for grants to physicians. The physician professional association could have used the donation for another purpose at its discretion. In this situation, the applicable manufacturer would not be required to report the donation, even if a portion of the payment or other transfer of value was ultimately provided to a covered recipient as a grant (or some other type of payment or other transfer of value).
However, if an applicable manufacturer gave money to a medical professional society earmarked for the purpose of funding awards or grants for physicians, the awards or grants would constitute indirect payments to covered recipients and would be subject to the reporting requirements.
In another example, an applicable manufacturer may provide a general payment to a clinic for one of its employed physicians to review materials. In this case, the applicable manufacturer directed that the payment be provided to a physician covered recipient, so it would constitute an indirect payment and would be a reportable indirect payment or other transfer of value.
CMS, however, refused to change its definition of “unaware.” CMS finalized that an applicable manufacturer is “unaware” if it does not know the identity of a covered recipient, and that “know” means that the manufacturer has actual knowledge of the identity or acts in deliberate ignorance or reckless disregard of the identity. If a payment meets the definition of an indirect payment or other transfer of value, then the payment can only be excluded from the reporting requirements if the applicable manufacturer did not “know” the identity of the covered recipient.
However, CMS clarified that, for purposes of this rule only, it will not consider an applicable manufacturer to be acting in deliberate ignorance or reckless disregard of a covered recipient’s identity in situations when the reason a payment or other transfer of value is being made through a third party is that the identity of the covered recipient remains anonymous. For example, an applicable manufacturer may hire a market research firm to conduct a double-blinded market research study, which includes paying physicians $50 for responding to a set of questions. The applicable manufacturer clearly intends a portion of the payment to be provided to physicians, but given that the reason for the third party’s involvement is specifically to maintain the anonymity of the respondents and sponsor, CMS does not intend this to be considered a reportable indirect payment or other transfer of value.
CMS stated that its intention in this definition “is to prevent applicable manufacturers from directing payments to a discrete set of covered recipients whose identities the manufacturer may not actually know, but could easily ascertain.” For example, CMS said that “a manufacturer that directs a third party to make payments to the top billing cardiologists in a certain city or the chiefs of staff of a certain class of hospitals should be required to report these payments, even though they do not have actual knowledge of the identities of such individuals.”
However, CMS does not require reporting of every payment that an applicable manufacturer makes through a third party that is ultimately provided to a covered recipient; rather, the intent is to require reporting of indirect payments where applicable manufacturers know or should know the identity of the covered recipients who receive them.
CMS also finalized as proposed the requirements regarding awareness of an agent of an applicable manufacturer of the identity of a covered recipient. CMS stated that such reporting is warranted because otherwise, “applicable manufacturers could structure their business model, so that payments are funneled through an agent that selects the recipients.” However, CMS clarified that the concept of an agent of the applicable manufacturer does not mean merely any third party with a connection to the applicable manufacturer. Instead, CMS stated that agent refers “to legal agents acting on behalf of the applicable manufacturer.”
Finally, CMS agreed that applicable manufacturers should not be responsible for tracking and reporting indirect payments or other transfers of value indefinitely. However, CMS expressed concern that allowing a time period for awareness would “allow applicable manufacturers to funnel payments or other transfers of value to third parties, and thereafter direct them to specific covered recipients, thus potentially avoiding the reporting requirements.”
Accordingly, CMS finalized that for the purposes of this exclusion, an “applicable manufacturer must be unaware of the identity of a covered recipient during the reporting year and the second quarter of the subsequent year following the transfer of the payment from the third party to the covered recipient.” Therefore, if an applicable manufacturer becomes aware of the identity of a covered recipient on or before June 30th of the year following the year in which the payment is made by the third party to the covered recipient, then the payment or other transfer of value must be reported.
For example, an applicable manufacturer makes a payment to a medical professional society in March 2013 with instructions to use the money to provide grants to physicians. This payment meets the definition of an indirect payment, since the applicable manufacturer earmarked the payment for the physician grants. The professional society selects and makes payments to the grantees in April 2013 and alerts the sponsoring applicable manufacturer to the grant recipients in June 2013.
Since the applicable manufacturer became aware of the identity of the covered recipients receiving the grants during the reporting year in which the payment was made, the payment or other transfer of value must be reported. Similarly, if the payment was made in November 2013, and the professional society provided the names of the grantees to the applicable manufacturer in April 2014, the payment would be reportable as part of the applicable manufacturer’s report for CY 2014.
CMS also clarified the situation when multiple applicable manufacturers provide a payment or other transfer of value to a covered recipient through a third party. CMS said it will allow for flexibility because it wants to ensure that no payment or other transfer of value is captured twice. Thus, applicable manufacturers and third parties may work together to determine the best method for reporting the payment or other transfers of value, as long as the payment or other transfer of value gets reported.
CMS, however, noted that payments or other transfers of value made through a third party to a covered recipient using funds from multiple applicable manufacturers will be limited, since the companies will be required to report only those payments or other transfers of value directed to covered recipients and not unrestricted, non-earmarked payments.
Report Submission and Review
Prior to Submission: In the proposed rule, CMS considered that prior to submission of data to CMS, applicable manufacturers and applicable GPOs would provide each covered recipient or physician owner or investor with information regarding the information that the applicable manufacturer plans to report to CMS on the covered recipient’s or physician owner or investor’s behalf. CMS finalized that it will not administer or manage a pre-submission review process and will not make it mandatory. CMS recommended that applicable manufacturers voluntarily provide covered recipients the opportunity to review the data prior to submission.
Report Submission: Reports, including 2013 data—from August 2013 through December 2013, will not be due until March 31, 2014.
Registration: CMS finalized that only applicable manufacturers that have payments or other transfers of value and/or physician ownership or investment interests to disclose for the previous calendar year must register and submit reports. CMS stated that it will not require action by entities without payments or other transfers of value to report.
Applicable manufacturers that are submitting data as a part of a consolidated report under another applicable manufacturer may indicate during registration that they intend to be part of the consolidated report to be submitted by another applicable manufacturer, allowing CMS to approximate the number of consolidated reports to anticipate. The reporting entity submitting a consolidated report must indicate all the applicable manufacturers for which it is reporting.
CMS finalized that applicable manufacturers and applicable GPOs must indicate two points of contact when they register to allow for a primary and backup point of contact for each reporting entity. In order to ensure that the points of contact are up to date in the CMS system, applicable manufacturers and applicable GPOs will be able to change them as appropriate (subject to CMS user security protocols).
Applicable manufacturers or applicable GPOs with payments or other transfers of value to report must register prior to the deadline for data submission for data for the preceding calendar year for every annual reporting cycle. Applicable manufacturers or applicable GPOs will be able to choose to submit the data immediately after completing the registration process successfully. CMS proposed to open the registration process at the beginning of the calendar year, giving applicable manufacturers and applicable GPOs time to register and submit their data; however, it “may open registration earlier to allow additional time.”
Registration is required once, but upon filing the annual reports the system will prompt applicable manufacturers and applicable GPOs to confirm that the registration information (for example, points of contact) is still accurate. If it is not accurate, the applicable manufacturers and applicable GPOs will be prompted to provide updated information.
File Format: CMS agreed to provide applicable manufacturers and applicable GPOs with reporting templates and more details on reporting, however, not through the regulation so that CMS can have more flexibility to make changes in response to feedback from stakeholders. Accordingly, if CMS intends to make changes to the reporting template or other details for reporting (which CMS envisions could happen particularly as the program evolves in early years), CMS will provide them at least 90 days prior to first day of data collection for the next reporting year.
In providing revised templates, CMS will also comply with the requirements of the Paperwork Reduction Act to seek public comments on the proposed changes to the information collections, as required by law. This will allow applicable manufacturers and applicable GPOs to make any necessary changes to prepare for the next reporting year. This is the same time as the date by which CMS will publish the list of teaching hospitals.
CMS stated that it “will not be accepting ongoing or quarterly submissions” of payment data. CMS also stated that “submission extensions will not be granted.” Instead, CMS clarified that “Late data will be considered failure to report and may be subject to penalties.”
CMS also clarified that “applicable manufacturers and applicable GPOs should not aggregate any payments or other transfers of value, or ownership or investment interests (except as described for small payments or other transfers of value). All reported transactions must be at the individual payment or other transfer of value, or ownership or investment interest level and do not intend applicable manufacturers or applicable GPOs to organize or group specific transactions.
Attestation Process: Recognizing that applicable manufacturers and applicable GPOs may have different business structures, CMS finalized that “other officers will be allowed to attest, as designated by the company.” In addition, “Applicable manufacturers and applicable GPOs must provide an attestation for their data at the time of original submission for it to be considered submitted; however, they will also be required to provide an attestation any time the data is changed or updated. The most recent data for which there is an attestation will be considered the official data submission from the applicable manufacturer or applicable GPO. Data without such attestation will not be considered an official submission for purposes of reporting.
There must also be a separate attestation for applicable manufacturers for which covered drugs, devices, biologicals, or medical supplies represent less than 10 percent of total (gross) revenue for the preceding year that have payments or other transfers of value to report.”
For consolidated reports, the applicable manufacturer that submitted the consolidated report will be required to attest on behalf of all the entities included in the consolidated report.
Annual Reports
The Sunshine Act requires CMS to submit annual reports to the Congress and the States. CMS agreed that the annual Congressional report should include summary statistics on the annual aggregate totals across applicable manufacturers and applicable GPOs. CMS also agreed that inclusion of the aggregate total of payments or other transfers of value would be useful for oversight of the program. CMS plans to include this information in its annual Congressional report; however, in generalCMS said it “should not include specific details in the final rule to allow” flexibility to include and present information as appropriate.
CMS said it also plans to work closely with other Federal agencies that “are involved in similar activities.” However, CMS recognized that “the purpose of this program is not to prosecute reporting entities, but to promote transparency.”
Based on the timing of the publication of the final rule CMS finalized that the Report to Congress will be submitted annually on April 1st, beginning April 1, 2015, and will include aggregated information submitted by each applicable manufacturer and
applicable GPO submitted during the preceding calendar year (that is, data collected in CY 2013 and submitted in March of 2014), as well as any enforcement actions taken and any penalties paid.
Relation to State Laws
The Sunshine Act preempts any State or local laws requiring reporting, in any format, of the same type of information concerning payments or other transfers of value made by applicable manufacturers to covered recipients. No State or local government may require the separate reporting of any information regarding a payment or other transfer of value that is required to be reported under section 1128G(a) of the Act, unless such information is being collected by a Federal, State or local governmental agency for public health surveillance, investigation, or other public health purposes or health oversight.
Although CMS provided additional guidelines to clarify the preemption requirements, the agency noted “that preemption determinations will need to be analyzed on a case-by-case basis.”
CMS clarified that “type of information” for purposes of the preemption clause, refers to “the categories of information for each payments or other transfer of value required to be reported. Under this definition, CMS clarified that “State and local entities may require reporting of nonrequired categories of information for payments or other transfers of value reported to CMS, which are not required under Federal law. This includes payment categories excluded by the Federal law (including those listed at section 1128G(e)(10)(B) of the Act), with the exception of those that do not meet the minimum dollar threshold ($10).
CMS also noted that “States and localities may require reporting of payments or other transfers of value not required to be reported at all under the Federal law. For example, they may require the reporting of payments to non-covered recipients or by non-applicable manufacturers.
CMS also clarified that “public health and oversight activities” “cannot be used to avoid preemption.” Thus, if a Federal, State or local government agency seeks to collect information reportable under this regulation for public health and/or oversight purposes and specifically needs the information for a purpose other than transparency, then such collection will not be preempted. However, if the purpose of the collection does not meet this exception and in actuality seeks to achieve the same transparency goal as the collection required under section 1128G of the Act, CMS said that “such a collection would be preempted, and the States or localities can obtain the information they want from the Federal program.”
Lastly, CMS finalized that “public health agencies” “include those that are charged with preventing or controlling disease, injury or disability and/or with conducting oversight activities authorized by law, including audits, investigations, inspections, licensure or disciplinary actions, or other activities necessary for oversight of the health care system.”
Public Availability
Under the statute, CMS is required to publish on a publicly available website the data reported by applicable manufacturers and applicable GPOs for CY 2012 by September 30, 2013. For each year thereafter, CMS must publish the data for the preceding calendar year by June 30th. No data will be collected for CY 2012, so the first data publication will be in 2014 for data collected in 2013.
CMS plans to engage stakeholders regarding the content of the website. CMS agreed that it is important that the final website is user-friendly and provide accurate and understandable information to the public. In order to regain flexibility over the details of the website and allow the opportunity to work with stakeholders on development, CMS only provided general information on the public website in the final rule so that it can have flexibility to make changes to the website as they are identified. CMS said it will “release additional information about the website through education and outreach to the stakeholder community.”
CMS stated that it will “ensure that the public website accurately and completely describes the nature of relationships between physicians and teaching hospitals, and the industry, including an explanation of beneficial interactions.”
In addition, CMS said it will “provide information to stakeholders regarding the data submission, review, dispute, dispute resolution and other applicable operational processes.”
As proposed, “the website will clearly state that disclosure of a payment or other transfer of value on the website does not indicate that the payment was legitimate nor does it necessarily indicate a conflict of interest or any wrongdoing.” CMS also said it will provide Frequently Asked Questions (FAQs) and other methods to help users find and understand this important contextual information.
CMS, however, stated that it wants to “reduce the promotional or company specific information on the website” that company’s want to provide; as a result, CMS will “assess the best way to include this information, if at all.”
CMS explained that data will be aggregated and published on a website that is searchable across multiple fields and available for downloads. In addition, CMS plans to establish mechanisms for researchers who may want information that is not publicly available. CMS stated that while the data “provides numerous opportunities for research on provider-industry relationships.”