Understanding the Sunshine Act—Part Two

Industry Insights from Kristen Smithwick

Last week proved to be another interesting week for the developing Sunshine Act. Senators Chuck Grassley (R-IA) and Herb Kohl (D-WI) sent a pivotal memo to Acting CMS Administrator Marilyn Tavenner. The senators urged the agency to publish a final rule no later than June 2012 and to respond to several questions related to implementation.

Senators Grassley and Kohl want the agency to begin gathering transparency data this year, and they’re not willing to give CMS any wiggle room for delays. To meet the senators’ timeline, CMS will need to address comments and recommendations from numerous interested parties, especially the Pharmaceutical Research and Manufacturers of America (PhRMA), the Advanced Medical Technology Association (AdvaMed), and the Biotechnology Industry Organization (BIO). We covered a number of areas questioned in Part 1 of this blog. In this post, we’ll mention just a few additional areas of concern.

Definition of Applicable Manufacturer and Separate vs. Consolidated Reporting – Questions and concerns abound when it comes to defining applicable manufacturers, especially as the definition impacts requirements for separate vs. consolidated reporting for entities with common ownership. The challenge for CMS will be to ensure the definitions of applicable manufacturers and common ownership are broad enough to meet the public’s demand for transparency, while being specific enough to protect the competitive advantage of U.S. vs. foreign companies and to keep the playing field fair for companies with prescription and over-the-counter (OTC) divisions.

Direct and indirect research payments – The current proposed rule defines direct payments or transfers of value as those made to covered physicians and teaching hospitals by applicable manufacturers or contract research organizations (CROs) should be reported. It further states that indirect research payments and transfers of value are those made to clinics, hospitals, and institutions (other than teaching institutions) that in turn pay physician investigators/researchers. Comments from several interested parties suggest that CMS needs to consider carefully its requirements for reporting indirect research payments and transfers of value, as they do not necessarily end up in the hands of physicians. Often institutions conducting research will use payments and transfers of value for a variety of purposes – clinical trial recruitment, project management, etc. – not just to compensate physician investigators. PhRMA is also concerned that reporting indirect research payments may result in double reporting for teaching institutions as they will be required to report all research payments (direct and indirect), and under the current proposed rule, would have to report indirect payments a second time.

Questions of indirect payments made to unknown recipients – The proposed rule excludes the reporting of indirect payments made by third parties to covered recipients who are unknown to an applicable manufacturer. However, the rule suggests that applicable manufacturers should be considered to be “aware” of a covered recipients’ identity if the applicable manufacturer has actual knowledge of or acts in “deliberate ignorance or reckless disregard of” the covered recipient’s identify. This “knowledge standard” as PhRMA refers to it leaves an open door to expensive and time-consuming challenges of an applicable manufacturer’s prior knowledge of covered recipients’ identities. Certain third-party services, such as Continuing Medical Education (CME) planning and market research, are best executed “from a distance”, such that manufacturers are not involved in the selection, engagement or payment of physicians. Certainly, the biopharmaceutical industry needs these and other vital third-party services to understand market dynamics, fairly promote their wares, and respond to market feedback. We, too, encourage CMS to revise its “knowledge standard” to more clearly define prior knowledge and not hurt the industry’s ability to seek third-party services that involve physician engagement.

Security concerns for providers – Some responders have voiced concerns about reporting names and other contact details of covered recipients. Entities, such as Planned Parenthood, want to protect physicians who may be engaged in activities that are publicly controversial, such as abortions.

While many of us in the industry, including Thought Leader Select, have shaped their business offerings and efforts in the healthcare space to promote the highest levels of transparency, it appears from our perspective that the Physician Payments Sunshine Provision still has a long way to go to be effective. We appreciate our partners in the biopharmaceutical, medical device, and diagnostics industries working alongside HCPs and healthcare institutions to achieve a balanced, ethical approach to full disclosure of inter-industry collaborations.  Visit the sites linked below for more information on comments from AdvaMed, PhRMA and BIO.

PhRMA Comments

AdvaMed Comments

BIO Comments

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