Sunshine Act ushers in new era of physician-industry transparency

At conferences, in peer-reviewed journals and in medical periodicals, physicians voluntarily disclose financial relationships with industry as a matter of course. Now, a new federal rule requires industry to report payments made to physicians. Detailed disclosures will be available for public scrutiny on a government website.

The National Physician Payment Transparency Program: Open Payments, also implements the Physician Payment Sunshine Act, which is a provision of the Affordable Care Act. The Centers for Medicare and Medicaid Services issued a final rule establishing the program on Feb. 1.

The final rule requires manufacturers of drugs, devices, biologics and medical supplies reimbursed by Medicare, Medicaid or the Children’s Health Insurance Program to disclose to CMS payments, with a few specified exceptions, made to physicians and teaching hospitals. Manufacturers and group purchasing organizations must also report physician ownership and investment arrangements.

Data collection is scheduled to begin Aug. 1, and CMS plans to release the information to the public on a CMS website by Sept. 30, 2014.

Physicians, analysts and industry advocates voiced overall support for transparency, but some are concerned about specific reporting requirements and the cost of compliance, particularly for smaller drug and device companies.

According to Richard L. Lindstrom, MD, OSN Chief Medical Editor, a certain degree of transparency is appropriate and worthwhile.

“I am an advocate of a reasonable Sunshine Act,” Lindstrom said. “We have had such an act in the state of Minnesota for several years. It hasn’t been a negative thing in any way for me, personally. My patients, if anything, find it positive that I’m bright enough and talented enough in the minds of industry that they want me as a consultant and/or have been talented enough or lucky enough to invent something where I might get a royalty.”

However, Lindstrom has reservations about the minimum dollar value of compensation that must be disclosed and the potential impact of additional costs on research and development.

The disclosure requirement is counterproductive, according to B. Sonny Bal, MD, JD, MBA, a member of the Orthopedics Today Editorial Board.

“I don’t think it’s going to have any impact. None of us spend time looking on government websites to see what each other is getting from industry, and I’m sure the patients don’t spend time doing it either. I think it’s a bureaucratic waste of time and resources,” Bal said.

Mechanisms are already in place to discourage and punish inappropriate relationships, he said.

“As in any other field, if there is abuse going on, the federal government would be far better served to use whatever means necessary and to have lots of tools at their disposal, like going after the bad apples and punishing them according to the law,” Bal said. “My plea is that there are ways to control misconduct without this device, which, I think, is poorly structured to control that misconduct.”

Thomas P. Stossel, MD, senior hematologist at Brigham and Women’s Hospital, Boston, said that the Sunshine Act will invite false allegations of abuse from adversaries of drug and device companies.

“The Sunshine Act has to be one of the most intrusive invasions of privacy of a single group in the history of the republic,” Stossel said. “The final report admits that no empiric basis exists for justifying it. It is a stimulus plan for critics of and litigators against the pharmaceutical and medical device industries and physicians who have relationships with them.”

Ultimately, patients will pay little or no attention to disclosures made under the Sunshine Act, Stossel said.

“Vanishingly few patients have the time, interest or competence to interpret the complex and superficially explained disclosures,” he said. “Even if they did, most survey data indicate that patients have few concerns about physicians’ industry relationships.”

Overview of reporting requirements

The original version of the Physician Payment Sunshine Act was introduced in 2007, and an amended version was rolled into the Affordable Care Act, which was signed into law in March 2010.

The final rule mainly clarifies reporting requirements but leaves a few unanswered questions, according to Thomas A. Gustafson, PhD, a public policy advisor with the Washington, D.C., law firm Arnold & Porter. Gustafson summarized key provisions outlined in an advisory posted on the Arnold & Porter website.

“Now we know what we’re up against in terms of how CMS is going to implement this,” Gustafson said. “It doesn’t remove all uncertainty because you’ve got a bunch of lawyers with all kinds of additional questions, and people will be raising those as they unpack this rule and try to figure out what it’s going to mean for them operationally.”

He emphasized that the Sunshine Act does not prohibit proper financial relationships but, rather, provides transparency.

“The Sunshine Act doesn’t do anything to prohibit anything,” Gustafson said. “It’s all about transparency. There are extensive reporting requirements. They give dates and specifics. They lay out exactly what needs to be reported, what’s excluded from being reported.”

Physicians and teaching hospitals will not be required to disclose payments made to them, but they should check the website to make sure reports of those payments are accurate, Gustafson said.

“CMS says there will be an opportunity for physicians to register and receive information about what is being reported before it is made public. You don’t have to wait passively for it to go up somewhere and find out about it,” he said. “They have a 45-day window after CMS makes the information available for review to look at what’s there and to raise a dispute if they see that something is wrong. That can be as simple as a matter of somebody slipping a digit and reporting a $5,000 payment as a $50,000 payment. It could be that somebody has got John Smith, MD, confused with some other John Smith, MD, so you might not have received consulting payments when you’re listed as having done so.”

The rule requires eligible entities to report consulting fees and other compensation, honoraria, gifts, entertainment, food and beverages, travel, lodging, education and research. All payments of $10 or more must be reported.

“It’s basically a $10 standard with, plausibly enough, the notion that they’ll inflate it in the future, so it’s not like it’s going to be $10 for the next 100 years. It’ll grow up over time,” Gustafson said. “The minimum standards are statutory for 2013. I don’t know the degree to which they can do more than inflate it. … They’ll redo it on a regular basis.”

Those who make payments to physicians must find a category in which to report, Gustafson said.

“You have to fit in one of those. It’s not like, ‘Oh, I can’t find one that matches me, so I don’t have to report.’ You’ve got to shoehorn yourself in there somehow or other, insofar as you’re providing something of value to one of the covered recipients,” he said.

Some provisions are more subtle. For example, when a physician has an ownership interest in a manufacturer or group purchasing organization, the manufacturer or group purchasing organization must report that arrangement, he said.

Reporting of physician stock holdings in publicly owned companies is not required. Physicians who invent products and have a vested financial interest in companies developing and marketing those products, however, will see those arrangements reported.

Physicians involved in research paid for by manufacturers will also see that information posted. However, manufacturers may defer public reporting of some research-related information for up to 4 years, Gustafson said.

“At the end of the 4 years, or if the deferral doesn’t apply, then your information is going to be up on the website,” he said. “There’s nothing wrong or underhanded about that. It’s just that information that used to be more private is more public. We expect that some companies are going to find this pretty interesting because they’ll be able to see what their competitors are doing at a more detailed level than they had previously in terms of the kinds of investigations that they’re undertaking.”

Stossel said that disclosures posted on the website will be weighed down with small details.

“Anyone reading the final report and its elaboration of detailed provisions and responses to comments by diverse stakeholders will be struck by its extensive minutiae,” he said. “A partial list of such content, in addition to detailed catalogues of types of payments, includes definitions of a ‘covered entity,’ of whether a global company has a sufficient U.S. presence to have to report, of the tipping point for exclusion of entities with less than 10% of their business being manufacturing or less than 5% involved in common ownership with other entities, how to estimate device-related payments bundled into hospital charges, how to deal with parsing out individual payments within consolidated reports and how to determine if ‘research’ payments satisfy criteria for a 4-year reporting delay because of competitive considerations. Several pages deal with the small details, such as to how to calculate food provided to physicians.”

Concerns about context

The required disclosures will not tell the whole story of relationships between industry and physicians that are inherently appropriate and productive, Bal said.

“There are surgeons who consult with industry. It’s a necessary thing we do,” he said. “Many surgeons own patents. Many of them develop products with industry. They deserve to be compensated for their time, for intellectual property. Until the context of what the compensation is for is understood, I think the mere listing of what somebody got from a company is misleading at best. I’m just not sure what purpose it serves.”

Additionally, the Sunshine Act does not require physicians to disclose the actual tasks that they perform to earn payments from industry, Bal said.

“It asks disclosure of something of value given to a doctor. It does not mandate a listing of what went the other way — 100 hours of work, 200 hours of work, intellectual property, 10 years of research, product development, testing, risk, capital. That’s lost in translation,” Bal said.

Lindstrom said there is potential confusion over whether the organizers or sponsors of a continuing medical education conference must disclose compensation to physicians.

“There is some confusion there, in my mind, as to whether the responsible party will be the sponsor or whether the responsible party is going to be [the organizer],” Lindstrom said. “That will need to be sorted out. But one or another of those will need to bear the expense of reporting what is a relatively insignificant amount of money.”

The threshold for reporting may be too low, to the point where relatively inexpensive items such as breakfasts and lunches for physicians at continuing education meetings must be reported, Lindstrom said.

“Every doctor in America receives something from industry every year. It doesn’t make sense to me that that’s logical and appropriate,” Lindstrom said. “It makes more sense to me that meaningful consulting may be more appropriately disclosed than a simple breakfast or lunch. But we all know that when we do a meeting in Hawaii or do a meeting in New York or do a meeting in Chicago that a meal is expensive at the convention centers and convention hotels. Often just a simple breakfast or lunch is $50 to $100 per setting. So, all of those doctors who attend all of those meetings will have that disclosed, so their names will be on the rolls.”

Potential impact on research

While designed to close loopholes that may lead to abuse, the Sunshine Act places an inordinate burden on industry and government, Gustafson said.

“The whole rule, I think, is set up in a comparatively reasonable way to try to avoid loopholes that would allow people to avoid their responsibilities, at least in some obvious ways. But it’s going to impose a very expensive reporting burden for those reporting and for CMS on receiving all these reports and translating them into what needs to go into a Web presentation,” he said.

Stossel said that the annual cost of implementation is estimated at $269 million in the first year and $180 million the second year.

“These estimates depend entirely on guesses regarding compliance management by individual physicians and industry and corporate accounting officials,” Stossel said. “It makes no mention of the predictable requirement for far more expensive legal advice that will be necessary to navigate the minutiae. Most importantly, the estimates do not take into account the opportunity costs of diverting resources from research, development and education to compliance activities. Dollars far better applied to innovation and education will shift to Sunshine management. This regulatory burden disproportionately compromises small companies at the cutting edge of innovation.”

The Sunshine Act may ultimately hinder product development and innovation, Bal said.

“It may prove to be chilling in terms of product development and innovation, as surgeons want to steer clear of relationships with industry and are concerned about their own safety and reputation and don’t want to deal with these things,” he said. “I see a diminished level of otherwise helpful and productive relationships between industry and orthopedic surgeons. I don’t see anything really good coming out of this.”

The act places a disproportionately heavy burden on the device industry, Lindstrom said.

“These additional regulations and taxes that are now coming down on the device side … just increase expense,” he said. “It turns out that our industry that supports ophthalmology … they basically have a budget, and the more they have to spend on these kinds of things, the less they have in their research and development budgets. This will be part of their educational expense and some may put it in their promotional budgets, but in any regard it will be increased expense. Every dollar that goes to this type of regulation is a dollar that doesn’t go to develop a new drug, device or surgical agent.”

Smaller companies stand to be hit hardest, Lindstrom said.

“In America, it is usually the smaller businesses that are the engine or driver of new jobs. And often a lot of the newer innovations come out of smaller startup companies. If you make it so expensive and so difficult and so overburdened with regulation that it’s impossible for them to survive, then that will not be in the best interests of anyone,” he said.

Industry advocates

Representatives of the Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry’s largest advocacy organization, and the Advanced Medical Technology Association (AdvaMed), the device industry’s leading advocate, voiced overall support for the Sunshine Act but had a few basic concerns.

“We support the Physician Payment Sunshine Act because we think transparency is important,” Marjorie Powell, PhRMA senior assistant general counsel, said. “We, frankly, are very pleased with some aspects of the final rule. We think CMS drastically streamlined the reporting of research. That will make it much more accurate and comprehensible. So, rather than doing all of the direct and indirect payments, you just send the entity to whom the payment goes and you identify the principal investigator.”

Powell said PhRMA appreciates that the final rule does not require companies to report the cost of producing and distributing items that are used for patient education, such as anatomic models and brochures used in physicians’ offices.

“We think those things are very helpful for patients,” Powell said.

However, Powell is concerned about a requirement that a company providing a grant must track the grant payment for the remainder of the year and an additional 6 months.

“In case the grantee makes the decision to spend some of that money by hiring a doctor to come and doctor their people, the pharmaceutical company has to know that and report that as a payment from the company to the doctor. We think that’s sort of a false statement that the pharmaceutical company pays the doctor because the doctor may not even know where the money came from,” Powell said.

Questions remain about how CMS will post the information on its website and what kinds of contextual details will be provided, Powell said.

“We think that’s vitally important because, in order to understand the importance of research and physicians’ involvement in research, the public and patients are going to need a lot of information,” she said.

The Sunshine Act will enhance public understanding of industry-physician relationships, according to Christopher White, AdvaMed general counsel and senior executive vice president.

“We think it helps the public to better understand the benefit of these relationships. Relationships are based in research, consulting and education. They lead to advances in medical technology and benefit patient care,” White said.

“It’s our view that the disclosure of this information should also include detail on the context of these relationships, so that it’s not simply a name and a dollar amount but, instead, the type of information that leads patients and the public to understand the reasons for and the benefit of these important relationships,” he said.

White said that AdvaMed will submit comments to CMS addressing the need to provide more detail on relationships. – by Matt Hasson

What will be see as the impact on the relationship between physicians and industry as a result of the obligation of industry to divulge a minimum of $10 in compensation to physicians?

Industry, not physicians, bear heaviest burden

Actually, I see very little impact of any kind. There are some positive results: improved transparency and improved physician confidence in clinical research.

Our current conflict of interest attestations at the start of a clinical talk are useless. The listing of a conflict as an “industry consultant” or “member of a company’s speakers bureau” may be a benign relationship or one with six-figure revenues. The new rules will clarify meaningful financial conflicts.

Many young ophthalmologists have become very cynical when listening to talks dealing with new techniques, drugs or devices. The more meaningful revelation of financial involvement will help clear this pervasive cynicism. Physicians who have had a major role in the development of a device or drug should be proud of that relationship and have no qualms about revealing any monetary benefit that has been earned.

I see little downside for practitioners but an onerous reporting burden for our partners in industry.

William L. Rich III, MD, is medical director of health policy for the American Academy of Ophthalmology. Disclosure: Rich has no relevant financial disclosures.

Physicians have incentive to consult for industry

The crux of the issue is the trust between doctor and patient. To disclose financial relationships between medical industry and an individual physician creates a level of transparency that can increase trust because that relationship can be discussed between the doctor and the patient, often increasing the patient’s appreciation of the doctor’s honesty and clinical, research and business activities. Of course, if financial matters are not discussed, negativity may cloud disclosure, with patients becoming suspicious that their doctor is being bribed or bought. After all due consideration and analysis, patients express their confidence in the knowledge and ethic of the physician when they follow the doctor’s recommendation. 

On the professional side, disclosure may create jealousy because some doctors have developed research skills, talent in business consultation, and teaching abilities that deserve compensation from industry when applied properly. Others, devoid of such skills, may be jealous that their colleagues are so rewarded. Doctors cannot function without medical industry and the medical industry cannot function without doctors; the two are interdependent and must develop productive cooperative relationships. Disclosing these relationships is likely to increase the respect that a patient has for their doctor who is active in the business side of their profession.

Most doctors do not share the financial details of their medical practices with each other, such matters being considered appropriately confidential. Sunshine laws do not require full financial disclosure concerning a doctor’s financial life but only disclosure of compensation paid from individual companies to the individual doctor.

Contemporary podium presentations include disclosures of potential conflicts of interest, but these are seldom informative. Sunshine laws answer a broader question of not only with what commercial firms a doctor may have a conflict of interest, but also “how much.”

George O. Waring III, MD, FACS, FRCOphth, is clinical professor of ophthalmology, Emory University, Atlanta. Disclosure: Waring has no relevant financial disclosures.