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Immediate Action Required Under the Open Payments Program (the Sunshine Act)

July 30, 2013

Physician Payments from, and Financial Interests in, Pharmaceutical and Medical Device Companies Must Be Recorded Beginning August 1, 2013

Physicians and teaching hospitals receiving payments from certain pharmaceutical and medical device manufacturers (“Manufacturers”), and physicians and their family members having interests in such entities or certain group purchasing organizations (“GPOs”), will likely soon have their names and certain financial information posted on a searchable public website as a result of the Sunshine Act (defined below). The Sunshine Act requires certain physician payments and financial interests to be recorded starting on August 1, 2013 for 2014 reporting purposes.

Sunshine Act Background

A section of the Patient Protection and Affordable Care Act of 2010 requires Manufacturers and other related entities to electronically report information to the Centers for Medicare & Medicaid Services (“CMS”) regarding various payments and transfers of value to physicians and teaching hospitals (the “Sunshine Act”). The Sunshine Act also requires Manufacturers and GPOs to electronically report information regarding the known ownership or investment interests held in their entities by physicians and physicians’ family members. The purpose of these requirements is to promote transparency in health care provider-industry relationships in an effort to prevent inappropriate influence on medical decision-making and minimize the threat of increased health care costs.

Manufacturers and GPOs must begin reporting March 31, 2014 with respect to information collected from August 1 through December 31, 2013. The 2013 data will be publicly available on a CMS website by September 30, 2014. Failure to comply with the reporting requirements can result in penalties of up to $1,150,000 annually.

What Will Be Reported

Payments/Transfers of Value: Manufacturers reporting payments and other transfers of value to physicians and teaching hospitals must generally report, among other things, the following:

  • Basic identifying information for the recipient and the transfer (e.g., name, business address, license numbers, amount/date of payment).
  • Form of the transfer (e.g., cash, stock, dividends).
  • Nature of the transfer (e.g., consulting fees, travel and lodging, food and beverage, space rental or facility fees, gifts).
  • Contextual information regarding the transfer (optional).

Certain transfers of value, such as those listed below, are generally excluded from the reporting requirement:

  • Transfers of less than $10 in value up to an aggregate $100 annually to a recipient. Where incidental items (e.g., pens and pads) are provided at “large-scale” or public events, they do not need to be reported or tracked for purposes of the $100 aggregate limit.
  • Product samples intended for patient use but not for sale.
  • Certain items for charity care.
  • Buffet meals, snacks or coffee made generally available to all participants of a large-scale conference or similar large-scale event.
  • Payments to speakers at accredited/certified continuing medical education events where the faculty is not paid directly by the Manufacturer and the Manufacturer does not select or recommend individual faculty members.

The information required to be reported may be more limited for payments in connection with research. Such research payments may also be subject to delayed publication.

Known Ownership Interests: Manufacturers and GPOs must report general identifying information and information regarding the type (e.g., stock, stock options, partnership shares, loans, bonds) and value of the interests held in their companies by physicians and physicians’ family members. Interests in publicly traded securities of Manufacturers and GPOs, as well as certain other specified types of investments, are not required to be reported. GPOs will also be required to report payments/transfers to their physician owners/investors who hold an interest at any time during the reporting year.

Publication of Reports and Contesting Reported Information

CMS will make reports available for review by physicians and teaching hospitals prior to publication, at which time they will have 45 days to dispute the reports, in addition to 15 days to resolve any disputes with the Manufacturers or GPOs. Data subject to unresolved disputes will still be published and marked “disputed.” CMS will publish the information on a searchable website database by September 30, 2014, and by each subsequent June 30. The website and related information and documentation is accessible here.

What Physicians, Teaching Hospitals and Manufacturers/GPOs Need to Do Now

If they have not done so already, entities must quickly determine whether they are Manufacturers or GPOs subject to the Sunshine Act, and if so, the scope of their reporting obligations. Manufacturers and GPOs must register with CMS and will likely require systems and processes to ensure they are capable of reporting to avoid significant penalties of up to $1,150,000 annually.

Physicians and teaching hospitals should take immediate steps to assess their relationships with Manufacturers and GPOs and secure themselves the best opportunities to successfully contest erroneous reports. Such steps include detailed recordkeeping of industry relationships and seeking contractual and other assurances of sufficient notification and pre-submission review from Manufacturers and GPOs.

Wolff & Samson is fully prepared to assist clients in complying with the Sunshine Act. Should you have any questions regarding what the Sunshine Act means for you and/or your business, please do not hesitate to contact an attorney in our Health Care and Hospital Group.

For more information, please contact:

Nicole DiMaria
Member of the Firm | (973) 530-2111 | ndimaria@wolffsamson.com
David M. Hyman
Member of the Firm | (973) 530-2009 | dhyman@wolffsamson.com  
Daniel A. Schwartz
Member of the Firm | (973) 530-2090 | dschwartz@wolffsamson.com  
William J. Cannici Jr.
Associate | (973) 530-2183 | wcannici@wolffsamson.com