Sunshine Act ushers in new era of physician-industry transparency

At conferences, in peer-reviewed journals and 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. CMS 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.

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

“I do not think it is 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 am sure the patients do not spend time doing it either. I think it is 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.”

According to Richard L. Lindstrom, MD, Chief Medical Editor of Orthopedics Today’s sister publication Ocular Surgery News, 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 has not been a negative thing in any way for me, personally. My patients, if anything, find it positive that I am 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.

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 are up against in terms of how CMS is going to implement this,” Gustafson said. “It does not remove all uncertainty because you have 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 is 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 does not do anything to prohibit anything,” Gustafson said. “It is all about transparency. There are extensive reporting requirements. They give dates and specifics. They lay out exactly what needs to be reported, what is 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 do not 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 is 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.”

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

Those who make payments to physicians must find a category in which to report, Gustafson 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 does not apply, then your information is going to be up on the website,” he said. “There is nothing wrong or underhanded about that. It is 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 will 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 are 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.”

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 is 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 am 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.

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

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.

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 is going to impose an 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 do not 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 do not 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.

Smaller companies stand to be hit hardest, Lindstrom said.

Representatives of the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Advanced Medical Technology Association (AdvaMed) 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 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.

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 is 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.

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 is our view that the disclosure of this information should also include detail on the context of these relationships, so that it is 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 the impact of industry’s obligation to divulge a minimum of $10 in compensation to physicians on the physician-industry relationship?

A question of practicality and necessity

While we physicians/surgeons all realize the need for transparency, I wonder if $10 is not a bit trivial. We physicians understand our patients, and payers want to be sure we are not unduly influenced by industry on health care decisions. But, will a physician or surgeon be influenced on a major health care decision for $10 or $100 or more? We would hope that no amount of money would influence these important decisions. So the question is one of practicality and necessity.  

I have often wondered if the rest of society is/should be subject to the same requirements. Physicians/surgeons are not the only providers for which transparency is appropriate. If you are building a bridge and are unduly influence by a vendor and select inferior concrete, is that any less worrisome, dangerous or harmful than making a health care decision?

Another interesting aspect of this question is that new products and innovations are based on interaction between industry and physicians. If a manufacturer wants feedback from me as an end user of the product, anything that hampers that exchange of information may be bad for my patients. If I choose not to provide that feedback because of my concerns over the perception of ties to industry, then I have done my patients a disservice. As long as there is no exchange of money/gifts/services, then that is permissible. If a physician/surgeon believes his input, innovation or intellectual property is of value and request a relationship/payment, then a record of that relationship seems to be appropriate. If he gets a hamburger and soda for lunch for providing feedback, that is likely evidence that the pendulum has swung too far. Unless of course, every relationship in every industry is required to do the same.

William R. Beach, MD, is a surgeon with Tuckahoe Orthopedics in Virginia, and an Orthopedics Today Editorial Board member.
Disclosure: Orthopedics Today was unable to determine whether Beach has any relevant financial disclosures.

Transparency in health care

The complex relationship between physicians and the pharmaceutical and medical device industries has long been the subject of intense debate. Recently, these relationships have come under increased scrutiny, and have been cited as a driver of rising health care costs in the United States. The rationale for this argument is that pharmaceutical and medical device companies use gifts, honoraria, consulting arrangements, research and educational funding to influence the prescribing and use of their products by physicians. There is widespread evidence to suggest that these types of financial arrangements have been successful in influencing the adoption and use of new drugs and technologies. In 2007, financial relationships between orthopedic surgeons and orthopedic device manufacturers were investigated by the United States Department of Justice (DOJ). By signing Deferred Prosecution Agreements with the DOJ, the ‘Big Five’ orthopedic device manufacturers agreed not to use financial incentives to influence physician behavior.

The Sunshine Act is an attempt to shed light on relationships between physicians and the pharmaceutical and medical device industries. By publicly reporting anything of value over $10 given to a physician, policymakers hope to provide other interested stakeholders, including hospitals, payors and especially patients, with information that could potentially influence physician behavior. On the surface, the concept of transparency is good, and therefore, these efforts should be supported. However, as always, the devil is in the details. Without information regarding what type of goods or services (if any) were provided in return for these gifts and payments, patients and other stakeholders are left wondering whether the gifts and payments were appropriate, and how (and to what extent) they may influence physician decision making. Furthermore, maintaining this database will be a daunting and expensive administrative task, consuming valuable resources during a time when our public resources are severely constrained.

The physician community, and orthopedics in particular, should embrace transparency. We should work closely with policymakers and other health care stakeholders to ensure that accurate, actionable information is available to those who need it, when they need it. Increased transparency regarding the cost and quality of care, including the costs and comparative effectiveness of medical devices, and provider-specific costs and outcomes, should be a goal we all strive towards. Although not perfect, the Sunshine Act is a first step in that direction. Strong leadership will be needed from the medical profession to advance efforts to increase transparency in health care, and to ensure that these efforts move us further towards our goal of improving the value of care we provide for our patients.

Kevin J. Bozic, MD, MBA, is the William R. Murray, MD, Endowed Chair in Orthopaedic Surgery, Professor and Vice Chair at University of California, San Francisco, Department of Orthopaedic Surgery, and Core Faculty at the Philip R. Lee Institute for Health Policy Studies.
Disclosure: Bozic is a consultant for Pacific Business Group on Health and a visiting scholar at Harvard Business School.

 

Industry will have to lead the way

As I see it, there will definitely be an impact on the relationship between physicians and industry. I believe that industry will have to lead the way. They run the greater risk of penalties. Most physicians are too ingrained in receiving small compensations from vendors who are trying to sell them stuff. Physicians feel that the companies are making good profits and that they can afford to “share the wealth.” If a vendor offers to bring in lunch for the staff as they “educate them” about their product, it will be difficult for physicians to turn it down.

I believe that industry or vendors need to stop making offers, and then the impact may be felt.

I further believe that the influence that a vendor may have on a physician because he offers “compensation” is minimal. Most physicians buy or endorse a product because of their positive experience with the product, not because they have received any goods or favors or compensation. 

In my experience, customer service and a good product is what influences my decision to use a vendor, not any compensation.

Ramon L. Jimenez, MD, is an Orthopedics Today Editorial Board member. He can be reached at Monterey Orthopaedic & Sports Medicine Institute.
Disclosure: Jimenez is a Zimmer consultant for a steering committee regarding health care disparities, not a product.