Inside the Open Payments Data: Two-Thirds of Transactions Worth $20 or Less; Research and Royalties Account for Majority of Total Value

Yesterday, the Centers for Medicare and Medicaid Services published the second year of Open Payments data, detailing the transfers of value made from pharmaceutical and device manufacturers to physicians and teaching hospitals in 2014. The top line total has received most of the headlines—“docs get $6.5 billion from drug and device companies.” Here, with data courtesy of Open Payments Analytics, we break down some of those payments in detail, with more to follow in subsequent articles.

Small Payments Fill the General Database:

Overall, there were 11.41 million records published, covering 607,000 physicians and 1,121 teaching hospitals. Small “in-kind” transfers of value—mostly meals, some educational materials, and occasional travel—dominated the number of transactions in the Open Payments records, and were often the most cumbersome for companies to track at the individual physician level. As found in the graph below, the majority of the payments in the general database (66 percent) were for transfers of value of $20 and below. Eighty-seven percent of payments were for transfers of $100 or less. We also found that almost 150,000 transactions were under a dollar; 591 were for one penny. 

  Research and Royalties Make Up Majority Of Total Pay

Of the $6.49 billion in transfers of value during 2014, more than $4 billion was attributed to research grants or payments associated with royalties or licenses. For example, the Modern Healthcare article discussing “Which companies disclosed the most to Open Payments,” noted that the vast majority of Genentech’s payment total reflected royalty payments to City of Hope, “the California comprehensive cancer center that holds the patents on research underlying Genentech’s biggest drugs, Avastin, Rituxan and Herceptin.”  Royalties are also paid to, for example, orthopedic surgeons who invent surgical products.  

On the research side, manufacturers spent a total of $3.23 billion on research payments and associated funding. This included $705 million to teaching hospitals and $2.52 billion listed under a specific physician’s name. CMS notes that this physician research payment total includes: “payments where the company making the payment has named a physician as the primary recipient, and payments to a research institution or entity where the [ ] physician is named as a principal investigator on the research project.”

Research payments can be especially prone to misinterpretation given that an entire institutional research grant—covering practice overhead, salaries for research staff, and a host of other expenses—can be attributed to one principal investigator physician who receives a salary. As academics from Johns Hopkins pointed out last year, the cost of donated drugs to clinical trials are also attributed as “research payments.”

Year Over Year Changes

While the first year of Open Payments covered only five months of data (payments from August 2013 – December 2013), and included notable data discrepancies, the year over year fluctuation is interesting. We averaged out the monthly payments for general and research payments for a more easily discernible yearly change. Broadly, it looks like general payments went up about 10 percent (which may be due to the fact that almost 100 more companies are reporting in 2014 over 2013), and research payments went down by about 13 percent. As we noted yesterday, investment holdings by physicians look to have taken a hit in 2013 v. 2014, perhaps as a result of the Open Payments scrutiny. 

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We will be offering research payment related analysis in our next article. A full detailed analysis of the open payment data will be available in the August issue of Life Science Compliance Update.  Thanks to Open Payments Analytics for providing the data for this timely analysis.