KEY CHANGES IN THE FINAL PHYSICIAN PAYMENT SUNSHINE ACT REGULATIONS. Association of Corporate Counsel Legal Quick Hit May 30, 2013.

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1 1 KEY CHANGES IN THE FINAL PHYSICIAN PAYMENT SUNSHINE ACT REGULATIONS Association of Corporate Counsel Legal Quick Hit May 30, 2013 Maria E. Gonzalez Knavel Partner Foley & Lardner LLP Margaret Mary Kozik Richardson Vice President, Legal Qualitest Overview I. Background II. Revised Reporting Deadlines III. IV. Key Clarifications and Revisions Payment Categories V. Practical Tips VI. Questions 1

2 3 Background Physician Payment Sunshine Act Section 6002 of the Patient Protection and Affordable Care Act ( ACA ) Requires disclosure of payments made by pharmaceutical and device manufacturers and group purchasing organizations to physicians and teaching hospitals ( Covered Recipients ) Required reporting of payments or transfers of value to start on March 31, 2013 for calendar year 2012 and subsequent reports due on the 90 th day of each calendar year thereafter Payment or other transfer of value broadly defined with a very low threshold anything over $10 Failure to report results in monetary penalties varying on whether the failure to report was knowing Only applicable to payments made for ( Covered Products ) Covered Products are drugs, devices, biologicals or medical supplies covered under Medicare, Medicaid or the Children s Health Insurance Program 4 Background (cont.) CMS issued Proposed Regulations on December 19, 2011 (76 Fed. Reg to be codified at 42 C.F.R. Parts 402 and 403) CMS requested commentary from all interested parties Address certain pertinent details but left many unanswered questions and ambiguities 2

3 5 Background (cont.) Final Regulations CMS issued Final Regulations on February 8, 2013 CMS failed to meet the ACA s deadlines required to enforce reporting as of March 31, Revised Reporting Deadline Final Rule changed the start date for the reporting of calendar year 2013 data to August 1, 2013 instead of the statutory start date of January 1, 2012 Manufacturers and GPOs are required to report information for 2013 to CMS by March 31, 2014 All reported information will be published by CMS on a searchable public website 3

4 7 Key Clarifications and Revisions Definition of Applicable Manufacturer Applicable manufacturer means an entity that is operating in the United States and falls within one of two categories: (1) An entity that is engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply but not if such covered drug, device, biological, or medical supply is solely for use by or within the entity or by the entity s own patients. This definition does not include distributors or wholesalers (including, but not limited to repackagers, relabelers, and kit assemblers) that do not hold title to any covered drug, device, biological or medical supply. 8 Key Clarifications and Revisions (cont.) (2) An entity under common ownership with an entity in paragraph (1) of this definition, which provides assistance or support to such entity with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug device, biological, or medical supplies 4

5 9 Key Clarifications and Revisions (cont.) Common Ownership with an Applicable Manufacturer CMS declined to increase the percentage of ownership required to determine whether an entity had common ownership with an applicable manufacturer 5% ownership is sufficient for common ownership to exist CMS permits entities under common ownership to submit individual or consolidated reporting 10 Key Clarifications and Revisions (cont.) Limitations on Reporting Applicable manufacturer for whom total gross revenues from Covered Products constitute less than 10% of its total gross revenue during the fiscal year preceding the reporting year are only required to report payments that are related to Covered Products Applicable manufacturers that qualify under common ownership by owner are required to only report payments that are related to Covered Products for which the entity provided assistance or support to the producers of the Covered Products Applicable manufacturers that do not manufacture the Covered Product or do so only under a written agreement to manufacture the Covered Product for another entity and do not hold FDA approval, license or clearance are only required to report payments related to Covered Products 5

6 11 Key Clarifications and Revisions (cont.) Reporting of Food and Beverages Values CMS declined to increase a de minimus payment exclusion from a value of less than $10 and an aggregate threshold of $100 in calendar year 2013 Applicable Manufacturer must calculate the value per person divided into the entire cost of food and beverage by the total number of individuals who partook in the meal including non-covered recipients 12 Key Clarifications and Revisions (cont.) The manufacturer must report the per person value of the meal for Covered Recipients who partook in the meal Applicable manufacturer is not required to track or report the value of meals, snacks, soft drinks or coffee made generally available to all participants at a large scale conference or similar event 6

7 13 Key Clarifications and Revisions (cont.) Payment or Other Transfer of Value through a Third Party Indirect payment or transfer of value means payments or transfers where the applicable manufacturer requires, instructs, directs or otherwise causes the third party to provide such payment or transfer of value to a Covered Recipient Important to know that even if the manufacturer is aware of the identity of the covered recipient, the payment made by a third party will be imputed back to the applicable manufacturer and is reportable 14 Research Payments CMS broadened the applicability of the research payment category by requiring that payment under this category may be made under either a written agreement or a research protocol Research is defined as a systematic investigation designed to develop or contribute to generalized knowledge relating to public health, including behavioral and social sciences research. The term encompasses basic and applied research and product development. 7

8 15 Research Payments (cont.) Includes pre-clinical research, FDA Phase I-IV research and investigator initiated research Research related payments are reportable whether made directly or indirectly to a Covered Recipient Payments made indirectly through a third party must be reported separately from other payments Research payments will be listed separately on the public website to address concerns regarding appearance of significant payment amounts related to research 16 Research Payments (cont.) Applicability of Delayed Publication CMS granted delayed publication of research related payments that are made pursuant to a written research agreement for research related to new products Addressed concern from industry regarding protection of intellectual property 8

9 17 Payment Categories CMS Requires Payment to be Reported by Category Charitable contribution Compensation for services other than consulting Consulting fees Current or prospective ownership or investment interests Direct Compensation for speaker or faculty for medical education program Education Entertainment Food and beverage Gift Grant Honoraria Research Royalty or license Travel and Lodging 18 Practical Tips Manufacturer and Covered Recipients should negotiate how payment or transfer of value will be characterized and reported to CMS Developed tools to consolidate information of payments made by various divisions or subdivisions of an applicable manufacturer to a particular Covered Recipient Look for all relationships with Covered Recipients, not just the obvious ones Create a FMV tool for internal use in setting compensation Do current FMV Set up system to contemporaneously capture and categorize payment or transfer of value 9

10 19 QUESTIONS Maria E. Gonzalez Knavel Partner Foley & Lardner LLP Margaret Mary Kozik Richardson Vice President, Legal Qualitest Additional Resources Exhibit 1 Aggregate Spend Sample Survey Exhibit 2 HCP Consultant Invoice Template Exhibit 3 Copy of Aggregate Spend Checklist Exhibit 4 Template Expense Report 10

11 21 Additional Resources (cont.) SCOTUS PPACA DECISION: For Benefit Plan Sponsors, Supreme Court Decision on PPACA is a Whimper, Not a Bang REVISIONS TO ADVAMED OR PHRMA CODES FOR DEALING WITH HEALTH PROFESSIONALS: Revisions to the AdvaMed Code of Ethics PhRMA Introduces Revised Principles on Conduct of Clinical Trials and Communication of Trial Results STATE PROHIBITION OF GIFTS TO HEALTH PROVIDERS: Physician Relationships Remain the Focus: Revisions to the AdvaMed Code of Ethics on Interactions With Health Care Professionals Testimony Confirms OIG's Ongoing Focus on Vendor Relationships With Physicians 22 Additional Resources (cont.) PHYSICIAN SUNSHINE ACT: Supreme Court Rules on Affordable Care Act: Initial Insights and Implications Physician Relationships Remain the Focus: Revisions to the AdvaMed Code of Ethics on Interactions With Health Care Professionals Massachusetts Loosens Gift Ban Law Revisions to the AdvaMed Code of Ethics 11

12 23 Exhibit 1 24 Exhibit 1 Page 2 12

13 25 Exhibit 1 Page 3 26 Exhibit 2 13

14 27 Exhibit 3 Exhibit