Proposing Sunshine for Pharma

December 19, 2011

HealthcareCMS has finally issued its proposed rule to require manufacturers of drugs, devices, biologicals, or medical supplies covered by Medicare, Medicaid, or CHIP to report payments or transfers of $10 or more made to physicians or teaching hospitals.

Introduced in 2009 as the Physician Payment Sunshine Act, the requirements ultimately became Section 6002 of the Affordable Care Act (ACA). Section 6002 added Section 1128G to the Social Security Act.

Although collaboration between manufacturers and physicians is necessary to develop life-saving drugs and devices, there is no question that payments from manufacturers to physicians and teaching hospitals can result in conflicts of interests that compromise clinical integrity and patient care.

Allegations that manufacturers pay physicians to promote their drugs or devices are common:

  • In March 2011, a suit alleging Bristol Myers paid doctors to prescribe its pharmaceuticals and even gave rewards to “high prescribers” was unsealed;
  • St. Jude Medical paid $16 million to settle allegations that it paid physicians kickbacks through post-market studies to use its pacemakers and implantable defibrillators;
  • Kos Pharmaceuticals and Novartis Pharmaceuticals settled with North Carolina over allegations that they were paying kickbacks to physicians to prescribe their drugs; and
  • Medtronic paid $23.5 million to settle allegations that it used post-market studies and registries to pay kickbacks to doctors to implant its pacemakers and defibrillators.

In order to promote transparency and avoid conflicts, the proposed rule requires manufacturers to disclose detailed information about payments or transfers including the identity of the recipient; date of payment; associated drug, device, biological or medical supply; and the form and nature of payment.

The payment types include consulting fees, honoraria, gifts, entertainment, food, travel, education, research, charitable contributions, royalties or licenses, ownership or investment interests, and grants.

There are some payment types that that are excluded from reporting, for example: product samples or educational materials that benefit of patients; loans of covered devices for trial periods of 90 days or less; discounts, including rebates; and payments or transfers of less than $10 unless multiple payments total more than $100.

Because the proposed rule was delayed, the final rule will not be published in time for data collection to begin by the ACA deadline of January 1, 2012.  Manufacturers are not required to begin data collection until after the final rule is published and CMS proposes to require reporting of partial data for 2012 by March 31, 2013. CMS will then publish the disclosed information on a public website.

Manufacturers failing to comply with the reporting requirements risk civil monetary penalties.

If you just can’t wait, a few manufacturers are already voluntarily releasing payment information.  ProPublica maintains a searchable database for 12 companies disclosing $761.3 million in payments.  However, these voluntary disclosures are not nearly as detailed as the ACA requires.

It remains to be seen whether a little “sunshine” can actually prevent manufacturers from paying physicians to promote their drugs and devices or if it will simply result in more covert arrangements.

Thanks to Robert White, a compliance attorney with Thomson Reuters Accelus, for our discussions on this issue.