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Sunshine Act ushers in new era of physician–industry transparency

Issue: July 2013

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Starting Aug. 1, the federal government, in its desire for transparency and accountability, is requiring industry to report payments to physicians.

The Physician Payment Sunshine Act requires the manufacturers of drugs, devices, biologics and medical supplies to disclose payments of at least $10 to physicians and teaching hospitals. Disclosures will be posted on a federal website in late 2014.

“We, frankly, are very pleased with some aspects of the final rule,” said Marjorie Powell, senior assistant general counsel for the Pharmaceutical Research and Manufacturers of America (PhRMA). However, she expressed concern about a requirement that companies track grant payments to physicians.

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

Richard F. Jacobs, MD, Infectious Diseases
In Children Chief Medical Editor, said the
Sunshine Act may provide more research funds.

Photo courtesy of Cooper K/Arkansas Children’s Hospital

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 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 also must 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 Paul A. Volberding, MD, director of the AIDS Research Institute at the University of California, San Francisco, most physicians are advocates of transparency and disclosing relationships. However, the act does not focus on disclosing the nature of relationships.

“The focus is too much on the money and not enough on the nature of the relationship,” said Volberding, who also is an Infectious Diseases in Children Editorial Board member. “Many physicians have relationships with industry that are solely based on science and helping to facilitate drug development. However, there is no way to differentiate between those physicians and physicians who are conducting promotional lectures for drug companies. The two physicians could be paid the same amount, but the nature of the relationships is vastly different. The type of relationship needs to be disclosed, not just the dollar amount received.”

Thomas P. Stossel, MD, senior hematologist at Brigham and Women’s Hospital, Boston, said 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.

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 adviser 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 said the Sunshine Act does not prohibit proper financial relationships but, rather, provides transparency.

“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,” Gustafson said.

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 payments of $10 per instance or $100 per year. However, some exclusions apply, including most honoraria to speakers in accredited continuing medical education programs and any product samples or gifts that primarily benefit patients. Penalties of $1,000 per instance and up to $150,000 per reporting period will be issued for not reporting.

“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.

Volberding said the new reporting requirements, as well as the extremely low threshold of $10, will lead to some confusion about what physicians themselves have to report.

“There is a real risk that if we don’t know how to report something, then our reports appear to be inconsistent with the reports that the drug companies are providing,” Volberding said. “It can make innocent people appear guilty.”

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.”

One problem is that there are reporting requirements for a variety of entities, and there is no universal reporting policy. Different entities have different requirements, and this leads to confusion about what must be reported.

“We should be pushing for consistency, in the form of a single, national reporting mechanism,” Volberding said. “Some reporting mechanisms are really complex and confusing. This increases the risk of inconsistency across the board.”

Potential effect on research

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

“The whole rule 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 the annual cost of implementation is estimated at $269 million in the first year and $180 million the second year.

Paul A.
Volberding

“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.”

There is some concern that the Sunshine Act may ultimately hinder product development and innovation. In infectious diseases, the development of new antimicrobials for the significant increase in drug-resistant infections requires collaboration between the industry and physicians.

“When it comes to antibiotics, we have a distinctive circumstance compared to other specialties,” said William Schaffner, MD, professor and chairman of the department of preventive medicine and professor of medicine in the division of infectious diseases at Vanderbilt University School of Medicine, Nashville, Tenn. “We have been working with industry and Congress to create an environment in which it will be financially attractive for industry to devote substantial resources to developing new antimicrobials. We are working together closely as partners for the benefit of public health.”

In addition, industry–physician relationships are important for the development of vaccines. According to Schaffner, the United States has the best infant, childhood and adolescent immunization program in the world, which would not be possible without the collaboration between industry and physicians.

“Our colleagues in the industry do a lot of basic research and, more importantly, to work through all of the regulatory mechanisms necessary to bring vaccines to market,” Schaffner said. “When we give educational talks about vaccines, we always confine ourselves to the indications recommended by the Advisory Committee on Immunization Practices. To that extent, there is no opportunity for the abuse of industry relationships that might exist in other pharmaceutical areas.”

Industry advocates

Representatives from PhRMA, the drug industry’s largest advocacy organization, 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,” Powell 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.”

She 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, she said she 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 [physician] to come and [treat] 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, she 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,” Powell said.

Richard F. Jacobs, MD, FAAP, Infectious Diseases in Children Chief Medical Editor, and chairman, department of pediatrics, Robert H. Fiser Jr., MD, Endowed chair in pediatrics, University of Arkansas for Medical Sciences, Little Rock, Ark., said there are positives that will come out of the establishment of the Sunshine Act.

“More investment in [research and development], discovery, [and] new drug development would be a welcome result of this new relationship,” he said. “Industry-sponsored clinical trials from [pharmacokinetic] studies in children to determine dose and dosing interval to well-designed and appropriately performed clinical trials are needed to enable new drugs to be available for children. The ‘ugly side’ of physicians and industry and financial conflicts of interest has proven that transparency and honest accountability is required. The Sunshine Act could help with the latter, and my hope is that it will encourage the former opportunities.” – by Amber Cox, Matt Hasson and Emily Shafer

Disclosure: Jacobs, Gustafson, Schaffner, Stossel and Volberding report no relevant financial disclosures. Powell is senior assistant general counsel at PhRMA.