FACT SHEET. The Physician Payments Sunshine Act: CMS Proposed Rule

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1 FACT SHEET The Physician Payments Sunshine Act: CMS Proposed Rule Executive Summary: CMS is making rules to implement sections of the Patient Protection and Affordable Care Act that would require eye banks to declare any payment (cash or in-kind) to physicians or teaching hospitals. This would include payments to medical directors and related medical staff or consultants. If total annual payments to an individual or entity exceed $100, each individual payment must be reported. Penalties of up to $10,000 per incident (up to $150,000 total) may be levied for failure to report payments, with additional penalties punitive damages of up to $1 million possible. CMS is accepting comments through February 17; final rule implementation is expected in Summer Reporting will not be required until the final rule is published. Please note: While the language in the rule, and in the more thorough explanation below, refers to applicable manufacturers, this DOES include eye banks because eye banks are involved in the preparation of a biological supply for sale or distribution that is available for payment by Medicare. The Centers for Medicare and Medicaid Services (CMS) published a notice of proposed rulemaking which would make information publicly available about payments or other transfers of value from manufacturers of drugs, devices, biological and medical supplies covered by Medicare, Medicaid, and CHIP to physicians and teaching hospitals (covered recipients). The proposed rule would implement Section 6002 of the Patient Protection and Affordable Care Act (PPACA), Transparency Reports and Reporting of Physician Ownership or Investment Interests, also known as the Physician Payments Sunshine Act (PPSA). This specifies that applicable manufacturers must report annually to the Secretary of Health and Human Services all payments and transfers of value (including gifts, consulting fees, research activities, speaking fees, meals and travel) from applicable manufacturers to covered recipients. In addition to reporting on payments, applicable manufacturers and group purchasing organizations (GPOs) must report ownership and investment interests held by physicians (or the immediate family members of a physician) in such entities. However, the law does not require manufacturers to report ownership or investment interests held by teaching hospitals.

2 The searchable public database is scheduled to be available on September 30, The database will contain the name, business address, specialty, and National Provider Identifier of the covered recipient. Manufacturers will also report the amount and date of payment, cash or cash equivalent, in-kind items or services, stock, stock options, or ownership, interest or dividend, and the nature of payment. If the payment is related to marketing, education, or research specific to a covered drug, device, biologic, or medical supply, the name of the product must also be reported. The law requires CMS to provide applicable manufacturers, applicable GPOs, covered recipients, and physician owners and investors at least 45 days to review and correct the information before posting it on a publicly available website. The information on the website must be easily aggregated, downloaded, and searchable. Implementation Timetable: Comments on the proposed rule will be accepted until February 17, CMS hopes to finalize this rule as soon as possible in calendar year Applicable manufacturers and GPOs will not be required to begin collecting data until after a final rule is published. CMS is considering whether to require the collection and submission of partial year 2012 data to CMS by March 31, Definitions: Applicable Manufacturers CMS defines applicable manufacturer as any entity which is engaged in the production, preparation, propagation, compounding, or conversion of a drug, device, biological, or medical supply for sale or distribution In the United States that is available for payment by Medicare, Medicaid, or CHIP. The statutory definition extends to entities under common ownership with an applicable manufacturer that are involved in manufacturing, marketing, selling, or distributing covered products. Applicable GPO CMS defines applicable GPOs broadly to include entities that purchase and arrange for, or negotiate the purchase of covered drugs, devices, biological, or medical supplies in the United States. This includes traditional GPOs that do not purchase products directly, as well as organizations that purchase products for resale or distribution. The proposed definition would include reporting of ownership and investment interests in physician-owned distributers (PODs). Covered drug, device, biological, and medical supply CMS is proposing that covered drug, device, biological or medical supply includes all drugs, devices, biological, and medical supplies eligible for payment by Medicare, Medicaid, or CHIP, including products paid either separately as part of a fee schedule, or bundled as part of a composite payment system (such as the hospital inpatient prospective payment system).

3 Covered Recipient Covered recipients include a physician, other than a physician who is an employee of a manufacturer or a teaching hospital. Teaching hospital CMS is proposing to define teaching hospital as any hospital that receives either Medicare direct or indirect Graduate Medical Education (GME) payments. Types of Payments Subject to Reporting: The law requires manufacturers to report any transfer of value over $10 in value if the total for the year is at least $100. It does not ban receipt or set limits on items of value, but these transactions will be placed on a public website that patients and others can view. Cash or a cash equivalent In-kind items or services Consulting fees Compensation for services other than consulting Honoraria Gifts Entertainment Food Travel (including specific destination) Education Funding for Research Charitable contribution Stocks or stock options Royalty or License Current or prospective ownership or investment interest Grant Direct compensation for serving as facilitator or speaker for a medical education program Research Payments The proposed rule provides special considerations for research payments since collaboration between physicians and teaching hospitals, and manufacturers is essential to the development of new products. Each manufacturer must designate each research payment or transfer of value as direct research or indirect research. Direct research is a payment/transfer of value provided to a covered entity directly or through a contract research organization. Indirect research includes payments/transfers of value provided by the manufacturer or contract research organization to a clinic, hospital, or other institution

4 conducting the research, which in turn pays the covered recipient(s) serving as the principal investigator(s). CMS is proposing to protect manufacturer s competitive interests by delaying publication of certain research payments until the earlier of FDA approval of the product or four years after the payment date. Are there types of gifts or payments that are exempt? The law exempts educational material provided for the benefit of patients; rebates and discounts; prescription drug and device samples; loans of covered devices for evaluation (less than 90 days);in-kind items for the provision of charity care; payments to physicians who are employees of the manufacturers; interest and dividends in a publicly traded security and mutual fund; transfers of value made indirectly to a covered recipient through a third party when the applicable manufacturer is unaware of the identity of the covered recipient. In addition, the bill exempts transfers of value less than $10, unless the aggregate annual total per company, per covered recipient, reaches $100, at which time all payments (retroactively) must be disclosed. CMS has excluded from reporting any offerings of buffet meals, snacks or coffee at booths at conferences or other similar events where it would be difficult for applicable manufacturers to definitively establish the identities of the individuals who accept the offerings. What impact does this rule have on continuing medical education providers, medical societies and non-profit organizations? Third party payments and transfers of value when the covered recipient s identity is publicly available are required to be reported. CMS gave no guidance as to when awareness of identity matters: before, during, or after the transfer of value or payment. If an applicable manufacturer gives a research or educational grant, or any other kind of payment or transfer of value, to a third party organization who indirectly pays a physician or teaching hospital and the manufacturer is aware of the covered recipient s identity, the manufacturer is required to report how much that organization or group paid the covered recipient. Although CME providers and non-profit organizations are not covered recipients, the manufacturer may contact them to determine the amount of the payment or transfer of value and the nature, magnitude, and extent of payment. What are the penalties to industry for non-compliance? Violators of the reporting requirements are subject to a civil monetary penalty of: $ $10,000 for each payment or transfer of value that is not reported (not to exceed $150,000 annually) $10,000 - $100,000 for knowingly failing to report (not to exceed $1,000,000 annually). Penalties applied will be posted on the public website.

5 Preemption of State laws Section 6002 of the Affordable Care Act preempts any State or local laws requiring reporting of payments or other transfers of value by an applicable manufacturer to a covered recipient. No State or local government may require separate reporting of any payment or transfer of value reported under this statute, unless such information is being collected for public health surveillance, investigation, or other public health purposes. The state law preemption clause takes effect January 1, However, CMS recommends that manufacturers continue to report information to states with reporting requirements until CMS is able to finalize regulations and begin collecting this information.