A confusing finale to some group restaurant visits is the ritual of determining who ordered what and how much each diner owes. Imagine that process made even more painful with the threat of a $100,000 fine if the divvying up wasn't done correctly.
Healthcare and pharmaceutical companies now face that exact problem, and not only are they concerned with the penalty, but the complexity of assembling sophisticated compliance systems to capture all the required data has proved daunting.
On Feb. 1, the Centers for Medicare and Medicaid Services (CMS) published long-awaited, long-delayed final regulations on Transparency Reports and Reporting of Physician Ownership or Investment Interests, better known as the “Sunshine Act.” It mandates public disclosures for the cost of meals, travel, honorariums, investment interests, and other compensation and perks offered to medical professionals and hospitals from drug companies, medical device makers, and medical suppliers.
“The fact that all of this data is being collected is a big deal,” says Nita Garg, an associate at law firm Barnes & Thornburg and a member of the firm's healthcare department. While most patients probably won't look at the information, she says, “the people who are in a position to make laws and regulate and restrict these relationships will.”
A company that falls within the definition of an applicable healthcare manufacturer must report all payments or transfers of value of at least $10 or more to doctors, teaching hospitals, and other health professionals and academics. The aggregated information, reported annually to CMS, will be made available to the public via a new Website. Provisions are in place, under the new rule, to guide disclosures related to research, allowing them separate, private reporting protocol so that confidential projects are not exposed on the public site.
Many of the regulations deal with the most common exchange of value between drug companies and the doctors they market their products to—food. The new regulations exclude buffets and small snacks, such as a bagel or cup of coffee. Calculations for more substantial lunches and dinners, however, can quickly become complicated. “The most frequent payments aren't going to be $50,000 to act as a consultant, they are going to be small payments—pens, notepads, and food,” Garg says. “How do you get people to go to an event? You provide free food.”
The proposed regulations allocated the value of a meal to any invited physician, regardless of whether or not they actually attended. Companies pushed back and CMS agreed to change the language, but uncertainties remain regarding no-shows. If, for example, there were pre-paid meals for 15 invited physicians, of which just five attended and only four ate, should the total cost be divided among the few who participated, or tallied per-person, per-plate? There is not yet a definitive answer.
Some are wondering if the benefits of the disclosure are worth the trouble and expense of making such determinations. “These food payments may not add up to a large sum, but there is a huge volume of data,' says Christine Bradshaw, an attorney with Porzio, Bromberg & Newman. “Every day at a traditional drug company the folks in the field are bringing food into doctor's offices and hospitals. There are potentially thousands of transactions a week that could be implicated by that one issue. Companies will have to make a decision about their allocation model.”
Deadlines approach
The time to make these decisions is already running short. The Final Rule was published in the Federal Register on Feb. 8, with an effective date of April 9. Those covered by the rule will need to start collecting data on Aug. 1, 2013, and report to CMS by March 31, 2014. The information will be made public, via a Website, by a target date of Sept. 30, 2014.
“The most frequent payments aren't going to be $50,000 to act as a consultant, they are going to be small payments—pens, notepads, and food. How do you get people to go to an event? You provide free food.”
—Nita Garg,
Associate,
Barnes & Thornburg
The regulations made final this month germinated from legislation first proposed in 2007 and later bundled with the Affordable Care Act. On the state-level, disclosure requirements were pioneered back in 1992 by Minnesota (although that first law wasn't truly active for another decade). Dozens of other states have followed that lead, and governments around the world already do, or soon plan to, demand similar reporting.
Mike Bell, CEO of R-Squared, a compliance software firm specializing in healthcare industries says many companies, notably in the medical device space, find themselves scrambling to meet the new requirements. “Surprisingly, a lot of companies did wait,” he says. “Now there's a flurry of activity to catch up,” he adds.
The final regulations are particularly challenging because they cover the entirety of the product life cycle, including preclinical efforts, animal studies, and other aspects of research and development in addition to development, approval, and commercialization of drugs and devices. “Spend occurs virtually in so many departments and so many different areas, not only directly but indirectly through people you contract with,” Bell says. “It can be eye-opening when people start to truly appreciate the scope.”
The difficulty in implementing a system to comply with the Sunshine Act comes not only from the many business units it affects, but also the processes it touches. And many companies are revisiting those processes in light of the regulation, looking for opportunities to create efficiencies. “This isn't just knocking out a policy and a procedure,” Bell says. “This is changing your test and evaluation systems, potentially your clinical trial, auditing, accounts payable, and customer relationship management systems,” he says.
Sarah Canberg, an associate with the law firm Porzio, Bromberg & Newman, says CMS did heed some of the concerns that emerged from the hundreds of comment letters. Among the concerns was whether the public would be able to adequately interpret the data available to them online. In the final language, CMS allows the opportunity to provide context with each interaction.
What the Data Says
Among the biggest concerns for companies, according to Bell, is knowing what the data will say before it is released, so that they can defend it and prepare for any backlash. “All of a sudden, these relationships that were sometimes expressly confidential are going to be made public,” he says. “The enforcement community sees this as a veritable roadmap, and you have whistleblower communities pledging to scour this data for any anomalies. A compliance officer needs to be comfortable that they can defend the spend. They don't want surprises. They need to make sure that these are shored up from an anti-corruption perspective and they are not going to be staring down any secondary allegations of breaking anti-kickback statutes.”
CMMS FACT SHEET
The following is a selection from a fact sheet the Centers for Medicare & Medicaid Services published to accompany a final rule implementing the “National Physician Payment Transparency Program: Open Payments.”
The final rule, which implements Section 6002 of the Affordable Care Act, also will make information publicly available about physician (or immediate family members of a physician) ownership or investment interests in applicable manufacturers and group purchasing organizations (GPOs).
Summary
The law specifies that applicable manufacturers must report annually to the Secretary of Health and Human Services all payments or transfers of value (including gifts, consulting fees, research activities, speaking fees, meals, and travel) from applicable manufacturers to covered recipients. In addition to reporting on payments, applicable manufacturers, as well as applicable GPOs, must report ownership and investment interests held by physicians (or the immediate family members of physicians) in such entities.
However, the law does not require applicable manufacturers or applicable GPOs to report ownership or investment interests held by teaching hospitals. The law requires CMS to provide applicable manufacturers, applicable GPOs, covered recipients, and physician owners and investors at least 45 days to review, dispute and correct their reported information before posting it on a publicly available website. The information on the website must be easily aggregated, downloaded and searchable.
Research payments
Applicable manufacturers are required to report numerous types of payments to physicians and teaching hospitals. These are outlined in the statute and include categories such as consulting fees, food and beverages, and research payments.
In certain instances, research payments or other transfers of value made to a covered recipient by an applicable manufacturer under a product research or development agreement will be delayed from publication on the Website.
Publication of a payment or other transfer of value will be delayed when made in connection with research on or development of a new drug, device, biological, or medical supply, or a new application of an existing drug, device, biological, or medical supply; or clinical investigations regarding a new drug, device, biological, or medical supply.
Opportunity to review and correct information
The law requires CMS to provide covered recipients at least 45 days to review and dispute the information related to them that was submitted by applicable manufacturers and applicable GPOs. CMS will notify the covered recipients when the reported information is ready for review. Any disputed transfer of value will be resolved directly between the covered recipient and the relevant applicable manufacturer or applicable GPO.
In response to public comments requesting additional time to resolve disputes initiated late in the 45-day period, we have finalized a 15-day opportunity to resolve disputes before the information is published publicly, following the 45-day review and correction period.
State law preemption
Section 6002 of the Affordable Care Act also preempts any State or local laws requiring reporting of the same types of information regarding 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 this statute, 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.
Source: Centers for Medicare & Medicaid Services.
The national requirements don't eliminate the need for compliance with individual state laws. “It's only going to get more complicated because neither the federal nor state laws are the same,” Canburg says. “We are going to continue to have multiple requirements that are each individually nuanced, and that makes the practical implications complex.”
Saul Helman, managing director at healthcare-focused business consultant Navigant, urges a global approach to data collection, filtering it as needed to unique jurisdictional requirements. He suggests that Sunshine Act preparations should mirror voluntary compliance program guidance the Office of Inspector General has developed for the healthcare industry and pharmaceutical companies. Among the best practices: ensuring proper oversight; having the right mix of people to oversee the process and what is delivered; and knowing who will ultimately sign-off and take ownership when data is disclosed to the government and public.
There are important questions to ask. Are the right written standards in place? What new or expanded training is needed? What disciplinary and corrective action programs will be put in place for those who fail to adequately and honestly comply?
Helman says the compliance function will be challenged in getting an adequate budget for these expanded initiatives and the improved infrastructure and technology required. “It will be seen as a cost center, and not helping the business,” he says.
With costs, however, there may also be opportunities. More granular reporting will give organizations a much better idea of how they are spending their money, he says. A view across the entire organization—marketing, sales, medical affairs, clinical—can raise questions that have gone unasked: Why are we spending this much money on one facility versus other facilities? Is there a legitimate business need behind a set budget? Are there the same needs at other facilities that have been ignored? “You may need to be able to readjust your strategy,” Helman says.
The penalty for non-compliance are fines that range from $1,000 to $10,000 for each payment not reported, up to $150,000; and from $10,000 to $100,000 for each known failure to report, up to $1,000,000. A manufacturer is subject to a maximum penalty of $1,150,000.
One attorney, who asked not to be identified, said the penalties are not as severe as might have been expected, and could deter compliance: “Let's be honest if you are a big pharmaceutical company that is operating in the billions, even a maximum penalty of $1.15 million might be cheaper than the cost of implementing the technology and hiring the people necessary to abide by this.”
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