Understanding the Sunshine Act—Part One

Industry Insights from Kristen Smithwick

Albeit a bit late, the U. S.  Centers for Medicare and Medicaid Services (CMS) issued a proposed rule on the Patient Protection & Affordable Care Act’s Physician Payments Sunshine Provision (also known as the “Sunshine Act”) to implement it as law.

CMS invited comments on the proposed rule through mid-February 2012, and a recent webcast, sponsored by PharmaLive’s Pharmalot, featured key facts and summaries of comments on the proposed rule. Working for a provider of research and consulting to the biopharmaceutical, medical device, and diagnostics industries on relationships with physicians and other health care providers, I enjoyed the opportunity to join the webcast, led by experts from Buchanan Ingersoll & Rooney, P.C., and am eager to share some of my key takeaways.

As mentioned in previous Thought Leader Select Blog posts, the Sunshine Act, as with many laws and regulations, is full of unintended consequences – some positive and some negative. Lance K. Stell, medical ethics teacher at Davidson College and Carolinas Medical Center, reports in his USA Today op-ed piece that the “Sunshine Act will cost far more than the $224 million estimated for just the first year of compliance” and that “the biggest cost will be the valuable, socially useful physician-industry collaborations that simply won’t occur.” Of course, the idea of transparency doesn’t belong to the U.S. alone. Australia already requires health care practitioners (HCPs) to report payments received from biopharmaceutical companies twice a year. The UK plans to have transparency regulations in place by 2013, including for UK HCPs  working outside the UK. And, France began requiring payments made to HCPs to be reported at the end of 2011. Although the United States may be in good company as it tackles the issue of transparency, it is imperative that we examine as many potential pitfalls as possible before publishing a final rule and enacting the law.

Of all the interested parties who provided comments to CMS’ proposed rule, HCPs, providers and hospitals submitted the most comments, followed by members of the drug, device and private industry. Industry advocacy organizations – the Pharmaceutical Research and Manufacturers of America (PhRMA), the Advanced Medical Technology Association (AdvaMed), and the Biotechnology Industry Organization (BIO) – have made formal comments and suggested changes on a variety of issues. Most notably, these bodies have commented on the following areas:

The requirements of applicable manufacturers who are foreign entities to report HCP paymentsPhRMA suggests that entities outside the U.S. who are selling in the U.S. and engaging U.S. HCPs should not have to report. AdvaMed expressed concerns that not requiring foreign entities to report payments may give companies outside the U.S. a competitive advantage.


Distinguishing covered recipients, particularly physicians, in required reports CMS should accurately distinguish physicians using the National Plan and Provider Enumeration System (NPPES) on the CMS website. AdvaMed recommends that the list of covered recipients be published at least 90 days prior to the beginning of each reporting year. PhRMA and BIO want to allow state license numbers to be used as identifiers and want applicable manufacturers to be able to use their internal databases to determine physician specialties. PhRMA and BIO also want to remove veterinarians and veterinary schools from the reporting regulations.


Limiting covered drugs and biologicals to those that require a prescriptionCMS’ proposed rule does not require applicable manufacturers of over-the-counter (OTC) drugs to report HCP payments. AdvaMed and PhRMA support this definition; however, AdvaMed has expressed concern that the proposed rule does not adequately address probable inequities that result from a strict read of the current statutory language. For example, some companies have both OTC and prescription drug divisions, while others are purely OTC manufacturers. According to the current rule, companies producing both OTC and prescription drugs – even via separate divisions – would be required to report physician payments, while those only manufacturing OTC products would not.

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