Latham & Watkins Corporate and Litigation Departments. CMS Issues Proposed Regulations Interpreting the Physician Payment Sunshine Act

Similar documents
Client Alert. CMS Announces Final Regulations Interpreting the Physician Payment Sunshine Act. A. Definitions and Exclusions

Latham & Watkins Corporate Department

Latham & Watkins Corporate Department

Physician Payment Transparency Provisions of the Affordable Care Act Sunshine 101

SEC Approves Amendments to Rule 15c2-12

Client Alert. Recent Changes to CONSOB Rules on Cash Tender Offers and Exchange Offers for Debt Securities Extended into Italy

Derivatives Under the New Italian Takeover Bids Regulation

Client Alert. CFTC Publishes Guidance on Expansive New CPO and CTA Regulations

Client Alert. Amendments to the Prospectus and Transparency Directives. Summary of Key Changes

Physician Payments Sunshine Act Proposed Rule Published

applicable to the rights of shareholders of listed companies, as outlined below. Scope of the Decree

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

Client Alert. IRS Releases Final FATCA Regulations. Summary. Background

A Series of Fortunate Events

Client Alert. In its Denial of a Power Plant Sale, FERC Sheds Light on the Meaning of Control and the Importance of Mitigation.

Physician Payment Sunshine Provisions in Healthcare Reform Prepared by AAMC Government Relations Revised May 28, 2010

Client Alert. UK Takeovers: Defined Benefit Pension Trustees Gain New Rights. The Introduction of Rules in Favour of Pension Trustees

Client Alert. UAE Funds Update: Arrival of the UAE s New Investment Funds Regulation. Summary of the Key Changes

Latham & Watkins Corporate & Finance Departments

Client Alert. SEC Staff Provides New Guidance Regarding the Rule 15a-6 Registration Exemption for Foreign Broker-Dealers.

SIDE-BY-SIDE OF THE PHYSICIAN PAYMENTS SUNSHINE ACT

Client Alert. Number July Latham & Watkins Tax Department

Client Alert. CFTC Proposes to Exempt Certain Energy-Related Transactions from Derivatives Regulations. Overview

Client Alert. Introduction. The Liquidity Practice

Association of Corporate Counsel January 2012 Teleconference CMS Finally Issues Proposed Sunshine Act Regulations

Latham & Watkins Capital Markets Practice Group

Client Alert. IRS Issues Final Regulations on Noncompensatory Partnership Options

Client Alert. IRS Relaxes Standard of Relief for Failing to File Gain Recognition Agreements. Background

Web Seminar. Physician Payments in the "Sunshine": Implications of CMS Regulations for Business and the Future of American Health Care.

Client Alert. Hong Kong Jurisdiction Relating to Cross Border Insolvency Issues Becomes Increasingly Clear. Background

Rooftop plants with an installed capacity lower than 1 MW.

Client Alert. CFTC Issues Proposals on the Extraterritorial Application of US Swaps Regulations. Overview

Latham & Watkins Litigation Department

Latham & Watkins Distressed Credit Markets Advisory Group

Latham & Watkins Corporate & Finance Departments

Wells Fargo Bank, N.A. as Trustee v. Chukchansi Economic Development Authority, et al., Index No /2013

Client Alert. CFTC Issues a Flurry of No-Action Letters and Guidance as New Swap Regulations Become Effective. Swap Entity Definition Guidance

Final Regulations Adopt Most Proposed Regulations

Latham & Watkins Corporate Department

Latham & Watkins Health Care Practice Group

CMS Proposes New Medicare Reporting and Payment System for Laboratories

Know, Prepare and Comply with the Sunshine Act Phase 2. John A. Murphy, III, Assistant General Counsel PhRMA August 26, 2014

Shedding Light on the Sunshine Act

Transparency reports (Sunshine Act)

CMS ISSUES FINAL RULE FOR IMPLEMENTING SUNSHINE ACT. Executive Summary

Physician Payments Sunshine Act Final Rule ACA Section 6002

FOR PHYSICIANS. CMS will collect the data annually, aggregate it, and publish it on a public website.

Strategic and Operational Challenges Resulting from the New PPACA

Title Final Sunshine Act Arrives: Now the Hard Part

Client Alert. IRS Guidance Tightens Several Provisions Regarding Tax-Free Corporate Transactions

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

Middle East Sovereign and Quasi-Sovereign Bonds in Ltd. Laffan Liquefied Natural Gas Company Limited (3))

PHYSICIAN PAYMENTS SUNSHINE ACT (OPEN PAYMENTS) Mary Evelyn Armstrong MA, CRA Conflict of Interest Officer

The Physician Payments Sunshine Law and you: Building stronger industry - physician interactions

CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS) OPEN PAYMENT FREQUENTLY ASKED QUESTIONS (FAQ) TRACKER

The Physician Payment Sunshine Act Final Rule A Summary Of Key Provisions

Understanding the Forces Driving Disclosure

Client Alert. Two Recent Decisions Highlight Pitfalls in Creating and Implementing Key Employee Incentive Plans for Executives in Bankruptcy Cases

CypressEnergyPartners,L.P.

Latham & Watkins Tax Department

Latham & Watkins Corporate Department

Frequently Asked Questions

Latham & Watkins Finance Department

Latham & Watkins Tax Department

Latham & Watkins Environment, Land & Resources Department

Section 6004: Prescription Drug Sample Transparency. Section 6005: Pharmacy Benefit Managers Transparency Requirements

Latham & Watkins Tax Department. The American Jobs Creation Act of 2004 Affects Domestic Mergers and Acquisitions Tax Issues

Latham & Watkins Greater China Practice

CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS) OPEN PAYMENT FREQUENTLY ASKED QUESTIONS (FAQ) TRACKER. June attorney advertisement

Taxation of Payments Made After the Termination of Employment

Latham & Watkins Tax Department

Client Alert. Bankruptcy Cases Create Challenges for Real Estate Restructurings. Tribune

Physician Payment Sunshine Provisions of the Affordable Care Act Comparison of the Key Provisions Proposed and Final Rule Arnold & Porter LLP

CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS) OPEN PAYMENT FREQUENTLY ASKED QUESTIONS (FAQ) TRACKER

Latham & Watkins Corporate Department

Latham & Watkins Corporate Department

Client Alert. CFTC and SEC Issue Final Rule Defining Certain Swap Products and Triggering Several Dodd-Frank Obligations Relating to Swaps.

MEMORANDUM. Bob Saner, MGMA Washington Counsel and Johanna Michaels Kreisel, Attorneys in the Powers Law Firm

Telecommunications Carriers Eligible to Receive Universal Service Support; Time Warner Cable Petition for Forbearance, WC Docket No.

Patient Protection and Affordable Care Act (P.L ) Titles VI through X

Shedding Light on the U.S. and French Sunshine Laws

Client Alert. The JOBS Act After Two Weeks: The 50 Most Frequently Asked Questions. Determining EGC Status JOBS Act Section 101

Frequently Asked Questions (FAQs) regarding the. National Physician Payment Transparency Program (Open Payments)

Taking Security in Egypt A Comparative Guide for Investors

Shareholders' Rights in a Russian Joint-Stock Company

Latham & Watkins Corporate Department

The Act Amending the Right of Inquiry

HIPAA Privacy Rule and Research

Latham & Watkins Finance Department

Responding to Commercial Bribery Investigations What to Do When the Chinese Administration for Industry and Commerce (AIC) Arrives At Your Door

Welcome to the Lex Mundi Learning Network. Understanding the New U.S. Sunshine Act and Its Impact on Health Care Providers and Industry

SEC Proposes Disclosure Rules for Critical Accounting Policies

Contents. Introduction 4. Directors conflicts duties 4. What is a conflict? 5. Who can authorise? 6. Authorising conflicts 7

Directors and Officers Liabilities in Russia

Taking Security in Uganda A Comparative Guide for Investors

HCCA CLINICAL PRACTICE COMPLIANCE CONFERENCE

Client Alert. UK Bribery Act 2010 Analysis of the Guidance on Adequate Procedures and the SFO Prosecution Guidance. Introduction.

MiFID II 18 January MiFID II

Firms will be required to appoint a single officer with specific responsibility for client assets

Taking Security in Mozambique A Comparative Guide for Investors

Transcription:

Number 1266 December 19, 2011 Client Alert Latham & Watkins Corporate and Litigation Departments CMS Issues Proposed Regulations Interpreting the Physician Payment Sunshine Act CMS estimates the average cost per organization to comply with the Act to be roughly $170,000 in Year 1. On December 14, 2011, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule interpreting the sunshine provisions of the health care reform law that require drug and device companies to report any payments or transfers of value made to physicians or teaching hospitals. The Physician Payment Sunshine Act provisions were included in the Patient Protection and Affordable Care Act of 2009 (H.R. 3590, section 6002), which was signed into law on March 23, 2010. The Sunshine Act provides that any manufacturer of drugs or devices reimbursable by a federal health care program that provides a payment or other transfer of value to a covered recipient (defined as a physician or a teaching hospital) must submit annually to the Department of Health and Human Services (DHHS) certain information regarding the transfer. That required information includes the name and address of the covered recipient, the amount of value paid, the date of the transfer, whether the payment was tied to a specific product, and the nature and form of the payment. The purpose of the law is to create transparency and shed light on the nature and extent of the relationships between manufacturers and physicians, as well as to dissuade inappropriate relationships from forming. In the proposed regulations interpreting the Sunshine Act, CMS sought to clarify parts of the Act that were ambiguous or unclear in the statutory language itself. In addition, CMS provided instructions for companies attempting to comply with the Act s reporting requirements. Finally, CMS set forth its estimates of the potential costs to manufacturers to comply with the Act. Below we have set forth key aspects of the Act and the proposed regulations. 1 What is an Applicable Manufacturer Under the Law? CMS indicated that it will interpret the phrase applicable manufacturer to mean any entity that is engaged in the production, preparation, propagation, compounding, or conversion of a covered drug or device, or an entity that is under common ownership with such an entity. CMS also clarified that as long as a manufacturer sells or distributes at least one covered drug or device in the United States, the company must report all transfers of value to covered recipients under the Act, even if the transfer of value is associated with a different product that is not federally reimbursable. Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United Kingdom, France, Italy and Singapore and an affiliated partnership conducting the practice in Hong Kong and Japan. Latham & Watkins practices in Saudi Arabia in association with the Law Office of Mohammed A. Al-Sheikh. Under New York s Code of Professional Responsibility, portions of this communication contain attorney advertising. Prior results do not guarantee a similar outcome. Results depend upon a variety of factors unique to each representation. Please direct all inquiries regarding our conduct under New York s Disciplinary Rules to Latham & Watkins LLP, 885 Third Avenue, New York, NY 10022-4834, Phone: +1.212.906.1200. Copyright 2011 Latham & Watkins. All Rights Reserved.

What is a Covered Drug, Device, Biological, or Medical Supply Under the Law? The Act defines a covered drug, device, biological, or medical supply as one for which payment is available under Medicare, Medicaid, or the Children s Health Insurance Program (CHIP). CMS s proposed regulations clarified that payments are considered available under federal health care programs for both items that are separately reimbursable and items included in a composite payment rate such as the Inpatient Prospective Payment System (IPPS), the Outpatient Prospective Payment System (OPPS) or the End Stage Renal Disease (ERSD) prospective payment system. CMS clarified that over-the-counter drugs and biologicals are excluded from the Act and manufacturers of over-the-counter drugs need not report. Similarly, CMS proposed an additional limitation to the definition of covered medical supplies, excluding Class I and Class II devices which are exempt from the FDA s premarket notification requirements. Thus, only companies that manufacture devices requiring premarket approval by or notification to FDA are required to report under the Act. What is a Payment of Other Transfer of Value Under the Law? The Act defines payment of other transfer of value broadly to capture anything of value given to a physician or teaching hospital. CMS clarified that payments made to a physician group, as well as to an individual physician, must be reported under the Act, and CMS proposed that payments to physician groups should be reported individually under the name of each physician in the group. The regulations do not specifically address how all transfers of value should be allocated among group members, though CMS s comments regarding food and beverages (discussed below) suggest that payments should be divided among all members of the group and reported separately (e.g., a transfer of value of $100 given to a group with four members will likely have to be reported as four $25 payments). CMS also explained that where a physician requests a transfer of value on behalf of someone or something else, the manufacturer must report the payment under the name of the physician who made the request. What Does a Manufacturer Need to Report to DHHS? CMS stated that the following categories of information are required to reported for each payment or transfer of value provided to a physician or teaching hospital: Physician s Name Physician s Business Address Physician s Specialty and National Provided Identification (NPI) Number Date of Payment For payments made over multiple dates, such as a consulting agreement, manufacturers may report the total payment on the first date, or may use separate line items for each payment Associated Covered Drug, Device, Biological or Medical Supply If the payment is reasonably associated with one drug or device, the name of that drug must be reported Form of Payment Manufacturers must select one of the following: Cash/Cash Equivalent, In-Kind Items or Services, Stocks/Stock Options/ Ownership/Dividends/ROIs, Other 2 Number 1266 December 19, 2011

Nature of Payment Manufacturers must select one of the following: Consulting Fees, Compensation for Services other than Consulting, Honoraria, Gift, Entertainment, Food, Travel (including destinations), Education, Research, Charitable Contribution, Royalty or License, Ownership/ Investment Interest, Compensation for Faculty or Speaker at Medical Education Event, Grant, Other CMS clarified that manufacturers must report a single form of payment and nature of payment for each transfer of value made. For example, if a physician received meals and travel in association with a consulting fee, CMS will require that each segregable payment be reported separately in the appropriate category. The applicable manufacturer would have to report three separate line items: one for consulting fees, one for meals and one for travel. The amount of the payment would be based on the amount of the consulting fee, and the payments for the meals and travel. For these lump sum payments or other transfers of value, CMS clarified that the applicable manufacturer must break out the disparate aspects of the payment that fall into multiple categories for both form of payment and nature of payment. CMS also stated that manufacturers may include with their annual submission a document describing the assumptions used when categorizing the payments, although such a document is not mandatory. How Should Manufacturers Report Food and Beverage Provided to Physicians? CMS explained that all food and beverages provided to physicians in excess of $10 must be reported. Where food is provided in a group setting, manufacturers should report the cost per-covered recipient, unless doing so brings the cost per physician below the $10 threshold. For example, CMS stated that where a manufacturer s sales representative brings $25 worth of bagels and coffee to a solo physician s office, the per-physician value would be $25 and the transfer of value of $25 must be reported for that physician. However, if a sales representative brings $25 worth of bagels and coffee to a physician group practice with five physician members, the per-covered recipient value would be $5 (regardless of whether all five physicians actually consumed the food) and the payment would not need to be reported. CMS noted that manufacturers would not need to report offerings of food, snacks or coffee at booths at conferences or similar events where it would be difficult to ascertain the identify of individuals who accept the offerings. How Should Manufacturers Report Research Activities? CMS recognized that reporting payments for research activities may be complicated, since many activities include large payments spread across numerous activities and parties. Additionally, payments are often provided to a clinic, hospital or other institution being led by a physiciancovered recipient as the principal investigator. CMS proposed classifying research payments to clarify whether the transfer of value went indirectly or directly to the covered recipient, and that manufacturers should report these transfers of value accordingly with labels of indirect research or direct research. Research payments must be reported under the names and NPIs of the physician-covered recipients serving as principal investigators of clinical trials. The statute does provide for delayed publication of payments from manufacturers to physicians pursuant to product development agreements or clinical investigations in order to maintain confidentiality for proprietary 3 Number 1266 December 19, 2011

information relating to the development of new drugs and devices. While these payments will still need to be timely reported, the payments will be not be made publicly available on the HHS website until the first publication date after (1) the FDA approval and licensure of the product; or (2) four calendar years from the date of payment. CMS clarified that manufacturers must identify on their annual reports any payments that should be granted a delay in publication on the public website. How Should Manufacturers Report Payments for Physician Speakers? CMS interpreted this category broadly and will require reporting in all instances in which applicable manufacturers pay physicians to serve as speakers, not simply those situations involving medical education. Are Any Transfers of Value Excluded from the Reporting Requirements? Per the Act, the following types of payments and transfers of value are excluded from the reporting requirements: Transfers of value less than $10, so long as the aggregate amount transferred to the covered recipient does not exceed $100 in a calendar year Product samples that are not intended to be sold and are intended for patient use Educational materials that directly benefit patients or are intended for patient use The loan of a covered device for a short-term trial period, not to exceed 90 days Items or services provided under a contractual warranty, including the replacement of a covered device A transfer of anything of value to a covered recipient when the covered recipient is a patient and not acting in the professional capacity of a covered recipient Discounts, including rebates In-kind items used for the provision of charity care A dividend or other profit distribution from, or ownership or investment interest in, a publicly traded security or mutual fund In the case of an applicable manufacturer who offers a selfinsured plan, payments for the provision of health care to employees under the plan In the case of a covered recipient who is a licensed non-medical professional, a transfer of anything of value to the covered recipient if the transfer is payment solely for the non-medical professional services of the licensed non-medical professional A transfer of anything of value to a physician if the transfer is payment solely for the services of the covered recipient with respect to a civil or criminal action or an administrative proceeding Transfers of value made indirectly to a covered recipient through a third party in cases when the applicable manufacturer is unaware of the identity of the covered recipient. What are the Penalties for Non-Compliance? The Act provides for the imposition of civil monetary penalties (CMPs) for failures to report the required information in accordance with the law. Failure to submit the required information can result in a CMP of at least $1,000, but no more than $10,000, for each payment or transfer of value not reported, not to exceed $150,000 annually. For a knowing failure to submit the required information, a manufacturer will be subject to a CMP of at least $10,000 but no more than $100,000, for each payment or transfer of value not reported, not to exceed $1,000,000 annually. CMS clarified that 4 Number 1266 December 19, 2011

the term knowingly is given the same meaning as in the federal False Claims Act, 31 U.S.C. 3729(b). CMS also stated that in determining the amount of the CMP, the following factors will be considered: The length of time the applicable manufacturer failed to report, including the length of time the applicable manufacturer knew of the payment or other transfer of value, or ownership or investment interest Amount of the payment or other transfer of value or the value of the ownership or investment interest the applicable manufacturer failed to report Level of culpability Nature and amount of information reported in error Degree of diligence exercised in correcting information reported in error In addition, CMS explained that CMS, DHHS, or OIG may audit, evaluate or inspect any applicable manufacturer for compliance with the Act. To facilitate any potential audit, all covered manufacturers must maintain all books, records, documents and other materials sufficient to enable an audit for at least five years from the date of payment or transfer of value. What Are the Potential Burdens to Manufacturers to Comply with the Act? CMS estimates that approximately 1,150 applicable manufacturers will submit reports, including 150 pharmaceutical companies and 1,000 device and medical supply companies. CMS further estimates that, on average, smaller applicable manufacturers will have to dedicate 50 percent of a full time equivalent (FTE) employee (mainly in the range of zero to one), whereas larger applicable manufacturers may have to dedicate 5 to 15 FTE employees to comply with the reporting requirements. CMS estimates the average cost per organization to comply with the Act to be roughly $170,000 in Year 1. When Must Companies Begin to Comply with the Law? Due to the delayed publication of the proposed rule, which was supposed to have been issued two months ago, CMS recognized that a final rule will not be published in time for applicable manufacturers to begin collecting the information required on January 1, 2012, as indicated in the Act. CMS clarified that it will not require applicable manufacturers to begin collecting the required information until after the publication of the final rule. As far as submitting the first annual report, applicable manufacturers must report the required payment and other transfer of value information to CMS in an electronic format by March 31, 2013, and on the 90th day of each calendar year thereafter. How Can Manufacturers Submit a Comment on the Proposed Rule? CMS is accepting comments on the proposed rule. Comments must refer to file code CMS-5060-P and can be submitted electronically at http://www. regulations.gov., by regular mail to the following address: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-5060-P, P.O. Box 8013, Baltimore, MD 21244-8013, by express or overnight mail to the following address: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-5060-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850, or by 5 Number 1266 December 19, 2011

courier or hand to Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445- G, Hubert H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. Comments must be received no later than 5 p.m. Eastern Standard Time on February 17, 2012. Endnotes 1 Please note that we have limited this Client Alert to the provisions of the law aimed at manufacturers and have not set forth the regulations pertaining to GPOs, entities which also are required to report transfers of value under the law. If you have any questions about this Client Alert, please contact one of the authors listed below or the Latham attorney with whom you normally consult: Katherine A. Lauer +1.619.238.2841 katherine.lauer@lw.com San Diego Christopher S. Olson +1.619.238.2918 christopher.olson@lw.com San Diego Client Alert is published by Latham & Watkins as a news reporting service to clients and other friends. The information contained in this publication should not be construed as legal advice. Should further analysis or explanation of the subject matter be required, please contact the attorney with whom you normally consult. A complete list of our Client Alerts can be found on our website at www.lw.com. If you wish to update your contact details or customize the information you receive from Latham & Watkins, please visit www.lw.com/lathammail.aspx to subscribe to our global client mailings program. Abu Dhabi Barcelona Beijing Boston Brussels Chicago Doha Dubai Frankfurt Hamburg Hong Kong Houston London Los Angeles Madrid Milan Moscow Munich New Jersey New York Orange County Paris Riyadh* Rome San Diego San Francisco Shanghai Silicon Valley Singapore Tokyo Washington, D.C. * In association with the Law Office of Mohammed A. Al-Sheikh 6 Number 1266 December 19, 2011