It’s Getting Hot in Here: Sunshine Act Reporting Trends, Enforcement, and Best Practices

On July 20, Abraham Gitterman of Arnold & Porter LLP joined Mark Linver and Paul Silver of Huron Life Sciences to discuss Sunshine Act updates and the technical, regulatory, and legal challenges associated with the posting of information by CMS on the Open Payments website in June 2015. As the government continues to push for transparency in many areas covering federal healthcare programs, increased attention and scrutiny may be given to Open Payments information by federal and state authorities, institutional employers, and private plaintiffs. In addition to the Civil Monetary Penalties that companies may face for non-compliance with the Sunshine Act, a company’s underlying data may garner off-label promotion and kickback scrutiny. The webinar helped answer two important questions: what does the Open Payments data mean and where does it go from here?

On June 30, CMS published the second year of program data containing transactions for the period between January and December 2014. It contains nearly 11.4 million transactions attributed to over 600,000 health care professionals and teaching hospitals. Spend totaled $6.4 billion in transfer-of-value to these groups. The information collected by CMS, as noted in the webinar, can be shared with other government agencies, like the DOJ and HHS-OIG, when disclosure is “reasonably necessary” by CMS for purposes to combat against fraud, waste, and abuse.

Manufacturers must maintain all books, contracts, records, documents, and other evidence, sufficient to enable the audit, evaluation and inspection of compliance with reporting requirements to timely, accurately, or completely submit the information. Records must be maintained for 5 years from the date the payment or transfer-of-value is published on Open Payments.

Early on, when Sunshine was starting, manufacturers considered building their own database and systems. But as the requirements became too large, costs encouraged them to consider “off the shelf” applications. As CMS starts to complete audits, the agency may examine these systems capturing the spend to a physician. Infrastructure will be important to illustrate compliance with the law. However, it is unclear at this point what CMS’s strategy might be as the agency has not issued any guidance.

Additionally, failure to record timely, accurate, and complete information could result in civil monetary penalties (CMPs). Gitterman noted that CMS specifically states it will be able to use funds collected from CMPs assessed to support the Open Payments program.

The webinar turned to fraud and abuse implications, describing the Federal Anti-Kickback statute. Reporting information under the Sunshine Act does not exempt applicable manufacturers from potential liability associated with payments or other transfers of value, or ownership or investment interests under, for example, the Federal Anti-Kickback statute or the False Claims Act. The webinar pointed out the OIG’s emphasis on this issue, citing Mary Riordan, OIG Senior counsel: “Just the sheer number of (Kickback) cases suggests it’s an area that we should reconsider … It’s not something that we have seen in the past years.” State and federal agencies have already announced their plans to examine reported data to identity suspicions of violations related to anti-kickback laws and false claims.

The webinar highlighted a number of examples of potential risks that could trigger an investigation, including a large number of consultants, or too many advisory boards and speaker programs. Such practices may suggest there is no legitimate need, off-label promotions, or that payments are not fair market value or are kickbacks. Reported meals also present risks, such as a meal or marketing presentation that may implicate the Federal Anti-Kickback statute if any one purpose of the arrangement is to generate business for the drug company. And in some cases, state laws may be violated if there are gift bans and limits that extend to meals.

The webinar further discussed transparency implications beyond just the Sunshine Act, noting the increased interest on industry interactions and added data available to the public. Examples include Pro Publica’s “Prescriber Checkup” website and the American Medical Student Association’s data on medical schools and conflict of interest policies.

All of this asks an important question: with the increasing risk that transparency data will trigger a government investigation and potential penalties, what steps should stakeholders be taking? The webinar hosts suggested the creation of aggregate spend or compliance committees, possibly meeting quarterly or more to analyze spending trends and flag certain areas for follow-up and investigation. They also stressed the need for continued training and messaging to employees of the importance in tracking spend and understanding the potential risks of Sunshine data.

To manage relationships with health care professionals, the speakers spoke to the need for formal processes and infrastructure to manage these interactions, the lack of which increases the potential perception of kickbacks and unsubstantiated payments. Stakeholders should ensure they have sufficient documentation to support the final work product of consultants and meet all requirements of the personal service safe harbor of the Anti-Kickback statute. Additionally, manufacturers should also establish robust fair market value processes, screen their consultants, ensure consultants receive compliance training, and monitor and audit consultant arrangements as needed. The webinar further addressed best practices for meals, indirect payments, and research—all stressing the importance of analyzing data, evaluating long-term arrangements, the establishment of clear internal rules, and training for all relevant employees.

Concluding the webinar, the hosts noted the October 2014 Final Rule changes to reporting. Perhaps most important was the removal of the so-called “CME exemption,” which now subjects all CME-related payments to the indirect payment exclusion. Under the new landscape, CME-related payments and transfers-of-value are reportable only if the applicable manufacture determines the payment or transfer-of-value is an “indirect payment” and they know or can determine the identity of the physician by Q2 of the following reporting year. CME-related payments do not meet the definition of an indirect payment when a manufacturer: does not condition financial support on the participation of particular physician speakers or faculty; either selects or pays the covered recipient speaker directly; provides the CME provider with a distinct, identifiable set of covered recipients to be considered as speakers; or causes subsidized tuition fees to go to specific physician attendees. The manufacturer must convey “full discretion” to the CME provider.

Finally, the speakers touched on the 21st Century Cures legislation, which just passed the House of Representatives. Language included in the act would exempt from transparency reporting certain transfers used for educational purposes, including peer-reviewed journals and medical texts. It would also exclude indirect payments to covered recipients for speaking at, or preparing educational materials for an educational event for physicians or other health care professionals that does not commercially promote a covered drug, device, biological, or medical supply. The program must serve the sole purpose of providing the covered recipient with medical education, such as by providing the covered recipient with the tuition required to attend an educational event or with materials provided to physicians at an educational event.