Understanding the Sunshine Act: Dispersing the Cluds f Cnfusin Christine Bradshaw, Esq. Sandra Gnzález, Esq. On March 23, 2010, President Obama signed int law the Patient Prtectin and Affrdable Care Act. Sectin 6002 f the Act, entitled Transparency Reprts and Reprting f Physician Ownership r Investment Interests, is cmmnly knwn as the Sunshine Act. Pursuant t the Sunshine Act, certain pharmaceutical, medical device, bilgical prduct, and medical supply cmpanies are required t disclse annually gifts and payments prvided t cvered recipients, and wnership and investment interests in the cmpany that are held by cvered recipients. On December 19, 2011, the Department f Health and Human Services published in the Federal Register the much-anticipated draft regulatins fr the Sunshine Act. The draft regulatins prpse varius definitins, clarificatins and requirements fr implementing the law, and will be fllwed by final regulatins befre they becme effective. In the draft regulatins, the Centers fr Medicare & Medicaid Services ( CMS ) requested that the public submit cmments n many f the prpsed requirements, definitins, and methds suggested fr implementing the law. The public cmment perid fr the draft regulatins clsed n February 17, 2012. T date, the final regulatins have nt been published. While the Sunshine Act and the prpsed regulatins include many details related t disclsure bligatins and pen questins abut hw t cmply, it is essential t begin preparing fr the Sunshine Act disclsure requirements. Belw we prvide infrmatin abut the requirements and sme cmmnly asked questins. When d cmpanies have t file their first reprts and what time perid will be cvered? Under the law, cmpanies were t begin capturing data fr reprting n January 1, 2012. In the prpsed regulatins, hwever, CMS recgnizes that cmpanies need directin and guidance frm CMS n what data t capture and hw, as well as time t prepare fr cmpliance. The draft regulatins prpse t delay the start f data capture fr reprting until 90 days after publicatin f the final regulatins. Cmments submitted by interested parties request even mre time, such as 120 r 180 days, t implement the requirements after publicatin f the final regulatins. The cmment perid clsed n February 17, 2012, and currently CMS is reviewing the cmments, meeting with stakehlders, and revising the regulatins. The materials cntained herein represent the pinins f the authrs and editrs. Nthing cntained herein is t be cnstrued as the rendering f legal advice fr specific cases, and readers are respnsible fr btaining such advice frm their wn legal cunsel. These materials are intended fr educatinal and infrmatinal purpses nly.
What will cmpanies actually file? Cmpanies subject t the law will file tw reprts: the Payment and Other Transfers f Value Reprt ( Payment Reprt ), and the Ownership and Investment Interest Reprt ( Ownership Reprt ). Bth reprts will be submitted electrnically as cmma-separated value ( CSV ) files. The prpsed regulatins suggest allwing cmpanies t als submit an assumptins dcument, which wuld prvide infrmatin t CMS n hw the cmpany interpreted varius terms, calculated payments r ther transfers f value, certified data, etc. The chief executive fficer, chief financial fficer, r chief cmpliance fficer will be required t certify that the data submitted is true, crrect, and cmplete. Wh is subject t the law? Applicable manufacturers must submit Payment Reprts; applicable manufacturers and applicable grup purchasing rganizatins ( GPOs ) must submit Ownership Reprts. An applicable manufacturer is an entity that: Engages in manufacturing a cvered prduct, r Is under cmmn wnership f an entity engaged in manufacturing a cvered prduct and that prvides assistance r supprt t that entity in its manufacturing, marketing, prmtin, sales r distributin activities fr that prduct, r Hlds FDA apprval, licensure, r clearance fr a cvered prduct, and Has a cvered drug, device, bilgical, r medical supply that is sld r distributed in the United States. What cnstitutes cmmn wnership? Cmmn wnership ccurs when the same individual, individuals, entity, r entities, directly r indirectly, wn any prtin f tw r mre entities. The prpsed regulatins requested cmments n whether the definitin shuld be limited t circumstances where the same individuals r entities wn 5% r mre f ttal wnership. An applicable GPO is an entity that: Operates in the United States r its territry, pssessin r cmmnwealth, and Purchases, arranges fr, r negtiates the purchase f a cvered drug, device, bilgical r medical supply, r Purchases a cvered prduct fr resale r distributin. The prpsed regulatins clarify that if a cmpany has any ne cvered prduct, it is subject t the law and must reprt all payments, whether related t the cvered prduct r nt. What is a cvered prduct? A cvered prduct is a cvered drug, device, bilgical r medical supply. Cvered means that payment is available fr the prduct under Medicare, Medicaid, r CHIP. Under the draft regulatins, CMS prpsed t limit cvered drugs and bilgical prducts t thse that require a prescriptin. Similarly, cvered devices and medical supplies wuld be limited t devices and supplies that require premarket apprval by r ntificatin t FDA, excluding certain Class I and Class II devices.
Payments t whm must be reprted? Payments by an applicable manufacturer t a cvered recipient must be reprted. Cvered recipients are physicians and teaching hspitals. Physicians are dctrs f medicine, stepathy, dentists, pdiatrist, ptmetrists, and licensed chirpractrs. If the individual is an emplyee f the applicable manufacturer, the individual is excluded frm the definitin. Cmpanies shuld use the Natinal Plan & Prvider Enumeratin System ( NPPES ) t identify physicians and find their Natinal Prvider Identifier ( NPI ) and business address fr reprting. Teaching hspitals are institutins that receive Medicare graduate medical educatin payments. CMS will publish annually n its website a list f institutins qualifying as teaching hspitals. What must applicable manufacturers reprt? Applicable manufacturers must reprt all payments and transfers f anything f value prvided t cvered recipients. This includes payments r ther transfers f value prvided indirectly t cvered recipients thrugh third parties, if the applicable manufacturer is aware f the cvered recipients identities. Sme f the infrmatin that must be included is: Name f the reprting entity; Name f the cvered recipient; Business address f the cvered recipient; Specialty (nly fr physicians); NPI number (nly fr physicians); Amunt f payment; Date f payment; Frm f payment; Nature f payment; and Name f assciated cvered drug, device, bilgical r medical supply (if any). Under the law and prpsed regulatins, the Frm f the payment will be selected frm the fllwing: Cash r a cash equivalent; In-kind items r services; r Stck, a stck ptin, r any ther wnership interest, dividend, prfit, r ther return n investment. The Nature f the payment describes the purpse and manner f the payment r transfer f value. The prpsed regulatins prvide several pints f clarificatin and requests fr cmments, and as such the list f pssible chices may change with publicatin f the final regulatins. Currently, the Nature wuld be selected frm the fllwing list: Cnsulting fees; Cmpensatin fr services ther than cnsulting; Hnraria; Gift; Entertainment; Fd; Travel;
Educatin; Research; Charitable cntributin; Ryalty r license; Current r prspective wnership r investment interest; Direct cmpensatin fr serving as faculty r as a speaker fr a medical educatin prgram; Grant; r Other. What is excluded frm the payment r transfer f value disclsure reprts? The law and draft regulatins prvide several types f payments and transfers f value that are excluded frm the disclsure requirements, which include: Payments less than $10, unless the aggregate amunt fr the cvered recipient exceeds $100 in the calendar year; Prduct samples (nte that drug samples must be disclsed under a separate sectin f the Patient Prtectin and Affrdable Care Act); Educatinal materials that directly benefit patients r are intended fr patient use; In-kind items fr the prvisin f charity care; and Payments thrugh a third party when the manufacturer is unaware f the cvered recipient s identity. What wnership infrmatin must applicable manufacturers and GPOs reprt? Applicable manufacturers and GPOs must reprt wnership r investment interests held by physicians r the immediate family members f physicians in the applicable manufacturer r applicable grup purchasing rganizatin. The exemptin fr physician emplyees frm the payment r transfer f value reprts is nt applicable t the wnership and investment interests reprts. An wnership r investment interest may be direct r indirect, including: Stck; Stck ptins; Partnership shares; LLC memberships; Lans; Bnds; and Other financial instruments secured with the entity s prperty r revenue. Retirement plans, stck ptins and securities received as cmpensatin, and unsecured lans are nt cnsidered wnership f investment interests. These interests are excluded frm the wnership r investment interest reprts. Sme f the infrmatin that must be included is: Reprting entity name; Recipient name; Business address f the wner/investr; Recipient Specialty (nly fr physicians); Recipient NPI number (nly fr physicians);
Identificatin f whether the interest is held by a physician s immediate family member; Dllar amunt invested; Value f interest; and Terms f interest. Will the data reprted by applicable manufacturers and GPOs be publicly available? The data reprted by applicable manufacturers and GPOs will be published n a publicly available website. Accrding t the draft regulatins, the data n the website will be searchable, understandable, dwnladable, and easily aggregated n varius levels. When will the data be published? Under the law, all 2012 data reprted by applicable manufacturers and GPOs must be publicly available by September 30, 2013. Fr each year after 2012, the data fr the preceding calendar year will be published by June 30 th. Publicatin f clinical data related t research r develpment f new cvered prducts will be delayed. This data will be made publicly available n the first publicatin date after the earlier f either: the apprval, licensure r clearance by the FDA f the cvered drug, device, bilgical r medical supply; r fur calendar years after the date f payment. Are there penalties fr failing t cmply with the law? There are tw classes f penalties: failure t reprt, and knwing failure t reprt. Failing t prvide accurate and cmplete infrmatin will subject a manufacturer r GPO t a penalty between $1,000 and $10,000 fr each payment r wnership interest nt reprt as required. The maximum penalty in any ne year is $150,000. Knwing failure t prvide accurate and cmplete infrmatin as required under the law will subject a manufacturer r GPO t a penalty between $10,000 and $100,000 per vilatin. The maximum penalty in ne reprting year is $1,000,000. Christine N. Bradshaw is an Assciate in Przi, Brmberg & Newman s Life Sciences Cmpliance & Cmmercializatin Department. 973.889.4012 cnbradshaw@pbnlaw.cm Sandra Gnzález is an Assciate in Przi, Brmberg & Newman s Life Sciences Cmpliance & Cmmercializatin Department. 973.889.4114 sgnzalez@pbnlaw.cm Abut Przi, Brmberg & Newman P.C. Funded in 1962, Przi, Brmberg & Newman P.C. maintains ffices in Mrristwn and Princetn, New Jersey, New Yrk City, and Westbrugh, Massachusetts. With mre than 80 lawyers, the firm is cmmitted t serving clients, dedicated t prviding high quality wrk and fcused n achieving results. Przi prvides a brad array f litigatin, crprate, transactinal and cunseling services t clients ranging frm Frtune 500 crpratins t individuals t public entities. Fr additinal infrmatin, please visit www.pbnlaw.cm.