The Centers for Medicare & Medicaid Services proposed rules last month that will require pharmaceutical companies and medical device makers to reveal what they pay medical professionals, including any financial support paid to doctors for consulting, to help with research, and travel to conferences or similar events. The rules implement the “sunshine provisions” in Section 6002 of the Patient Protection and Affordable Care Act.

Under the proposal, drug companies will also be required to report how much of their stock is owned by doctors and hospitals will also be required to report any payments or “transfers of value,” from drug and medical device companies. CMS will create an electronic system for covered entities to register and report the form and nature of these payments. 

CMS estimated in the proposed rule that 1,150 manufacturers—150 drug and biologic manufacturers, and 1,000 device and medical supply manufacturers—will be required to submit reports.

New Requirements

The proposed rule would include a number of new requirements not described in the Affordable Care Act's sunshine provisions. These include:

The ability for manufacturers to provide CMS with the assumptions they used in preparing their disclosures;

New reporting guidance for payments made by entities under common ownership;

Reporting of direct and indirect research payments;

Procedures for the 45-day pre-publication period for review of disclosed payments and for the resolution of disputes; and

Procedures for delayed publication of payments pursuant to product research, development agreements, and clinical investigations.

The proposed rule also provides new limitations on the definition of a “covered drug, device, biological or medical supply” to include only drugs or biologics that require a prescription to be dispensed and medical devices or supplies that require premarket approval by, or premarket notification to, the Food and Drug Administration.

Penalties for violations under the Affordable Care Act can reach up to $10,000 for each failure to report a payment or transfer of value; up to $150,000 per annual submission; and up to $1 million per annual submission for each “knowing failure to report.”

The proposed rule seeks comments on factors to be considered in determining the amount of a penalty.

CMS is particularly seeking comments on how it can better estimate compliance burdens. In particular, CMS said it particularly welcomes comments that can provide not only better methods implementing the law's reporting requirements, “but also ways to quantify the potential savings from those methods.”

“Of immediate concern for all affected parties is when the initial report will be due,” stated a client alert by law firm Cooley.  The proposed rule clarifies that compliance with the law's data collection elements will not be required until 90 days following publication of the final rule.

“CMS is seeking comments on the challenges of data collection, which leaves open the possibility that CMS may conclude that a 90-day preparation period is inadequate—thereby further delaying the first date compliance is required,” the Cooley alert stated.

Legal experts say it is also of concern to pharmaceutical and healthcare companies that the proposed payment reporting requirements are separate and apart from those already required under various state laws—such as those of Massachusetts, Vermont, and Minnesota. Furthermore, prescription drug manufacturers must already make annual reports to CMS by April 1 of each year beginning in 2012 under a different section of the Affordable Care Act.

At an earlier teleconference between Compliance Week and representatives of the life sciences industry, those who will be affected by the rules labeled their interactions with regulators as more hand-wringing among companies than actual progress with regulators. As with all regulatory reform, industry participants need guidance such as a proposed rule to help them navigate the course of compliance actions they have to set in place.