Life Science Compliance Update

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October 13, 2008

Physician Payment Sunshine: MedPac Prepares to Act

MedPac, a congressional advisory group, has been holding a series of meetings the last three months to suggest to Congress legislation on payments to physicians.  These meetings follow the summer release of “Public reporting of physicians’ financial relationships” as part of their twice yearly reports.  The meetings on this topic started last year and on November 5-6 MedPac’s commissioners will be voting on recommendations for Congress to consider.

Some background on MedPac:

The Medicare Payment Advisory Commission (MedPAC) is an independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. The Commission's statutory mandate is quite broad: In addition to advising the Congress on payments to private health plans participating in Medicare and providers in Medicare's traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare.

The Commission's 17 members bring diverse expertise in the financing and delivery of health care services. Commissioners are appointed to three-year terms (subject to renewal) by the Comptroller General and serve part time. Appointments are staggered; the terms of five or six Commissioners expire each year. For more information on the commissioner appointment process, please click here. The Commission is supported by an executive director and a staff of analysts, who typically have backgrounds in economics, health policy, public health or medicine.

The following are details and some background around the current proposal under consideration.


·         Financial relationships between physicians and drug/device manufactures are pervasive

·         Industry-physician ties have benefits and risks

·         Efforts by private sector and government to regulate relationships

·         5 states and DC require manufactures to publicly report payments to physicians

Background:  MedPac has been looking at this topic for quite some time. They held a series of meetings earlier this year and released a report in June outlining what they saw as the current situation. There was input from industry but that input was limited.

Advantages of National Database

·         Could discourage inappropriate financial arrangements

·         Media/researchers could shed light on relationships

·         Payers and plans could examine whether industry ties affect physicians’ practice patterns

·         Academic medical centers could verify financial interests of researchers

·         Hospitals could check whether physicians involved in purchasing decisions have financial ties

Background:  These points, along with several slides in the report MedPac published this summer was developed with Peter Laurie, MD  of Public Citizen.  They are correct in that it would discourage inappropriate financial arrangements, but it would also discourage legitimate financial ones as well.  What physician is going to want his name available for “media and researchers” to write articles and review his prescribing practices, open himself up to lawsuits, or further challenges by insurance company on medical decisions?  This will also be used by hospitals and health plans to purge themselves of anyone tied to research or with any pharmaceutical relationship so they can adopt cheaper formularies.

Cost and Limitations of national database on physician-industry relationships

·         Compliance cost for manufacturers

·         Administrative costs for government

·         Might discourage beneficial arrangements

·         Would not eliminate conflicts of interest

·         Information may be of limited use to patients

Background:  This is the unfunded mandate part of the equation; there will be huge costs in capturing all this information.  They are correct in that this may discourage beneficial arrangements - because of the problems a database will cause with the media, reputation and potential law suits this would discourage most relationships.  One of the limitations they quote is that it would not eliminate conflicts of interest.  This national database proposal assumes that the only conflict a doctor would have is with a manufacturer.  Perhaps they should consider all the other potential conflicts of interest: government, managed care, academic, etc.  On a positive note they do admit that this information would have limited use and value to patients.  Patients are not likely to process this information and it would probably be poorly utilized by them.

 Reporting System would apply to broad set of manufacturers and recipients

·         Manufactures of drugs, biologicals, devices and supplies

o   Include small and large companies

o   Include subsidiaries

·         Recipients of payments

o   Physicians and other prescribers (including Physician Assistants and Nurse Practitioners

o   Hospitals and Medical Schools (the thought is that Academic Medical Centers receive significant industry support for education and research)

o   Professional and patient advocacy organizations

o   Organizations that sponsor CME

Background:  This broadens the definition of reportees and recipients.  This adds a requirement from existing proposals that there should be reporting of payments to hospitals, medical schools, professional and patient advocacy organizations and CME providers.  This would specifically hurt the patient advocacy organizations for diseases that are less common.    They added organizations that support CME, this is a change from other proposed legislation, and would require a Lilly style database for reporting educational grants.  This would be used by  “researchers” to further discourage educational grants especially to medical societies and local institutions.

Threshold for payments that should be reported

·         Manufacturers should report payments if total annual payments to a recipient exceeds $100

·         Adjust threshold annually based on inflation

Background:  One hundred dollars is a very low number, much lower than the $500 threhold in the currently proposed Physician Payment Sunshine Act.  This would mean "Doctor, we can invite you once per year for dinner to learn about our products, if we have two products then you might not want to come." 

As several of the members of the MedPac commission pointed out, this low of a number may create more data than it's worth; the persons they want to capture are the abusers of the system.

Types of relationships to report

·         Gifts, food, entertainment, honoraria, research, funding for education and conferences, consulting fees, investment interests, product royalties

·         Exclude discounts, rebates, free samples for patient use

·         Companies should report

o   Value, type, date of each payment

o   Name, specialty, Medicare billing number (if applicable), and address of each recipient

Background: The definition of a gift is quite broad, and significantly broader than other proposals, but consistent with the Prescription Project Definition of “Gift”.  Even though this slide discussed excluding samples there was considerable discussion among the commissioners to possibly include samples.  The other big debate came around including the Medicare billing number and address of the recipient.  The problems the commissioners discussed centered around identity theft.  They are very concerned that this information could be lifted for unqualified prescriptions.  The MedPac staff stated the number would be useful research for tracking prescribing patterns to the payments.  The research will be used for discouraging branded prescriptions.

Guidelines for reporting payments related to new product development

·         Tradeoff between protecting sensitive information and public transparency

·         May delay reporting of payments related to clinical trials until trial registered on NIH website

·         May delay reporting of other payments related to development of new product until FDA approval, but no later than 2 years after payment made.

Background:  MedPac did recognize that there are limitations to reporting especially for early stage clinical trials.  Their solution seems to be similar to the Physician Payment Sunshine Act, in that they require disclosure of payments no later than two years after payment made.  In many stages of drug development you may be five to seven years away and this would give information about your trial program way in advance of FDA approval.

Federal reporting law should preempt equally or less stringent state laws

·         Strike balance between state autonomy and advantages of national system

·         Preempt state laws that collect data on same types of financial relationships and recipients as federal law

Background:  This proposed pre-emption equals no pre-emption.  The discussion centered around allowing states to pass more stringent laws.  This type of preemption has the potential of creating a fifty state and District of Columbia system where each state can up the requirements whenever they want.

Other design issues

·         Authority to assess civil penalties on manufacturers for non-compliance

·         Require manufacturers to investigate and correct reported errors in timely fashion

·         Information should be reported annually

·         Allow companies to report clarifying information about patients

Implementation issues

·         Allow Secretary to choose which agency to administer (options include FDA, CMS, OIG)

·         Administrative costs unclear

o   According to Minnesota, cost of collecting and posting information is minimal (but no searchable electronic database)

o   No data on enforcement costs

o   Ask Congress to provide sufficient resources to Secretary

These proposals are sweeping in the information they propose to collect.  The $100 threshold would create a much bigger disclosure database than the $500 threshold agreed on by supporters in the Physician Payment Sunshine Act and there seems to be little discussion around changes to the last draft by the commission members.

At the two public forums they held on this topic, there were no comments made by the public during open session.  There is still time to send in your comments to the commissioners, their next meeting is November 6-7, Ronald Regan Building, Washington, DC.

MedPac Commissioners

Selected Transcript of  MedPac October Meeting (Physician Payment Only)

Slide Presentations and Brief October MedPac Meeting

Selected Transcript of MedPac September Meeting (Physician Payment Only)

Slide Presentation and Brief September MedPac meeting

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