On February 8, 2013, the Centers for Medicare and Medicaid Services (“CMS”) published the final rule to implement the federal Physician Payments Sunshine Act. This rule, which stems from Section 6002 of the Patient Protection and Affordable Care Act (“PPACA”), requires pharmaceutical, medical device, biological and medical supply manufacturers whose products may be covered by a federal health care program (i.e., Medicare, Medicaid or the Children’s Health Insurance Program) to report annually to the secretary of the United States Department of Health and Human Services (“HHS”) certain payments and other transfers of value to physicians and teaching hospitals. The Sunshine Act requires reporting of virtually any transfer of value from a manufacturer to a physician or teaching hospital, including consulting fees, honoraria, royalties, gifts and charitable contributions to charities associated with the physician or teaching hospital. All applicable manufacturers and GPOs must begin collecting the required data starting August 1, 2013, and must report the data to CMS by March 31, 2014. All reports will be made publicly available.
The rule requires applicable manufacturers and GPOs to annually report certain payments or other transfers of value to “covered recipients.” The Sunshine Act defines a covered recipient as: “(1) a physician, other than a physician who is an employee of an applicable manufacturer; or (2) a teaching hospital.” Payments or “other transfer of value” made to a covered recipient or his or her designee must be reported. Additionally, the final rule requires applicable manufacturers and GPOs to disclose physician ownership or investment interests in an entity (with “physician ownership” being defined to include immediate family members of the physician). Manufacturers and GPOs must begin collecting the data on August 1, 2013, and must report to CMS no later than March 31, 2014. The disclosure requirements are outlined below. Manufacturers, physicians and teaching hospitals must be provided at least 45 days to review and correct information prior to public disclosure of the information.
Information Included in Manufacturer Reports
- Recipient’s name and business address; if recipient is a physician, the specialty and National Provider Identifier
- Amount of each payment or other transfer of value
- Date of each payment or other transfer of value
- Description of the form of payment or other transfer of value
- Cash or cash equivalent
- In-kind items or services
- Stock, stock options, or other ownership interest, dividend, profit or return on investment
- Any other form of payment or transfer of value as defined by the secretary
- Description of the nature of payment or transfer of value
- Consulting fees
- Compensation for services other than consulting
- Travel (including specified destinations)
- Charitable contribution
- Royalty or license
- Current or prospective ownership or investment interest
- Direct compensation for serving as faculty or a speaker for a medical education program
- Any other nature of the payment or transfer of value as defined by the secretary
- If the payment or transfer of value is related to marketing, education or research specific to a covered drug, device, biological or medical supply, the name of the covered drug, device, biological or medical supply
- Any other information the secretary may require
State Law Preemption
There are an array of state laws that require pharmaceutical and device manufacturers to disclose payments and other transfers of value to physicians. Some manufacturers are also required to make pubic disclosures consistent with an agreement with the government. However, the new federal requirements will generally preempt state law provisions that require manufacturers to disclose the same type of information required for disclosure under the PPACA.
Failure to timely, accurately or completely report the information required may result in civil monetary penalties ranging between $1,000 to $10,000 for each incident not reported timely, accurately or completely. The total penalty amount with respect to failure in reporting an annual submission shall not exceed $150,000. However, if an entity knowingly fails to report in accordance with the rules, it may be subject to civil monetary penalties ranging from $10,000 to $100,000 for each incident not properly reported, capped at $1,000,000. Therefore, the total penalty a manufacturer or GPO may be penalized could be as high as $1,150,000.
For more information on the new requirements or other health care law matters, please contact an attorney in our Health & Life Sciences