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A new twist on sunshine: Disclosures may also fall under state consumer fraud statutes

From international law firm Arnold & Porter LLP comes timely views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.

Most physicians are aware of the obligations that drug and device manufacturers have to disclose to CMS their financial relationships with physicians as part of the Physician Payment Sunshine Act. The act required collection of payment data as of Aug. 1.

Now a recent state enforcement action has presented a new twist on disclosing these relationships by imposing an obligation on physicians to disclose to their patients their financial relationships with pharmaceutical and device companies.

 

Alan E. Reider

In what is believed to be the first time such an action occurred, the Oregon Department of Justice alleged that the failure of two physicians to notify their patients about potential conflicts of interest arising from their financial relationship with Biotronik, a medical device manufacturer, violated that state’s consumer fraud statute. Rather than challenge the state’s position, the two cardiologists entered into settlement agreements with Oregon. They each paid $25,000 and agreed to disclose to their patients their financial relationships with medical device companies.

 

According to the state attorney general, these physicians “knew or should have known that these payments were something patients receiving Biotronik implants should know about, because they gave rise to an actual or potential conflict of interest which should have been disclosed.” In the view of the Oregon Department of Justice, the failure of a physician to provide such notice to patients constitutes a violation of Oregon’s Unlawful Trade Practices Act, the state’s consumer protection statute.

It is likely that this action was influenced, at least in part, by the requirements of the Federal Sunshine Act. In fact, as part of the settlement agreements, the physicians must provide on their websites a hyperlink to the database to be established under the terms of the Sunshine Act, which will include the information reported to CMS by Biotronik.

While this case was limited to two Oregon physicians, virtually every state has a consumer protection statute that could, in theory, be used to pursue similar action in other states. Although physicians may want to refer patients to the Sunshine Act “Open Payments” website once it goes live on Sept. 30, 2014, in the interim it may be prudent for physicians to consider disclosing their financial relationships with pharmaceutical and device companies to their patients in order to avoid facing a similar challenge.

Alan E. Reider, JD, can be reached at Arnold & Porter LLP, 555 12th St. NW, Washington, DC 20004-1206; 202-942-6496; email: Alan.Reider@aporter.com