Life Science Compliance Update

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January 22, 2009

Physician Payment Sunshine Act 2009 Introduced

Since filing this report the Physician Payment Sunshine Act has been included in the final version of the Patient Protection and Affordable Care Act (PPACA).    Press the following link to read a summary of the version the Physician Payment Sunshine Act that is now law.

Physician Payment Sunshine Provision in PPACA.

U.S. Senators Chuck Grassley (R-IA) and Herb Kohl (D-WI) today introduced The Physician Payment Sunshine Act to require manufacturers and group purchasing organizations to report on a wide range of payments to physicians and physician-owned entities.

If passed, beginning in 2010, the government will require yearly reporting of all physician payments over a cumulative value of $100 dollars - with the first report being due by March 31, 2011 - and made available to the public by September 30, 2011.

The bill is similar to the original Bill introduced in 2007 but not taken up by Congress and incorporates many of the recommendations made by the Medicare Payment Advisory Commission (MedPAC). 

It now includes many additional physician financial relationships, including their health related business interests.  The bill uses the “direct payment” system thus excluding most company grants to certified education providers.

Companies will report:

· Name;

· Business Name;

· Address;

· Value of the payment or transfer of value;

· Dates of the payments or transfers; and

· Description of the form of payment or transfer of value.

Items required to be reported:

· Consulting Fees;

· Compensation for services other than consulting;

· Honoraria;

· Gifts;

· Entertainment;

· Food;

· Travel;

· Education;

· Research;

· Charitable Contributions;

· Royalties or licenses;

· Current or prospective ownership or investment interests;

· Compensation for serving as a faculty member or as a speaker for a continuing medical education program;

· Grant; and

· Any other nature of the payment or other transfer of value as defined by the secretary.

If the payment or other transfer of value is related to marketing, education, or research concerns, a specific covered drug, device, biological, or medical supply, companies will be required to report and include the link to the drug.  Also, reporting will be required on whatever the Secretary (currently, the Acting Secretary is Charles Johnson) of Health and Human Services (HHS) deems appropriate.


Reporting of research payments will be required, and some reporting will be delayed by whichever date is earlier:

  • Two years after the date or transfer of value was made; or
  • After the date of Food and Drug Administration (FDA) Approval.

Companies will also be required to aggregate amounts of payments or transfers of value to recipients.

Physician Ownership

The bill also requires reporting of physician ownership interests in private companies including:

· The dollar amount invested;

· The current value; and

· Any payment or transfer of value to the owner, including dividends or other payments.

Excluded from reporting:

· Payments in the aggregate of less than $100;

· Product samples;

· Patient education materials;

· The loan of a device for less than 90 days;

· Warranty replacements (devices);

· Items for use as a patient;

· Discounts and rebates;

· In-kind items used in charity care; and

· Dividends or distributions from a publicly-traded company.


For unintentional failure to report, penalties will include fines from $1,000 - $10,000 for each payment not reported with a cap of $150,000/year.

For intentional failure to report, the penalties will be steeper - the fines are $10,000 - $100,000 for each payment not reported with a cap of $1 million/year.


The Bill has a seriously short timeframe to implement; the Bill states that the Secretary of HHS has until November of 2009 to establish procedures for implementation of the Bill.

The website for which this implementation will be hosted, has a search mechanism by company or physician and is in a format that is clear, understandable, and easily downloaded.

Also, the website will contain a description of any enforcement actions and penalties as a result of the legislation.

The Secretary has tremendous leeway in adding required information to the law and can add any other information that he or his team deems helpful to “consumers.”  The Secretary will be required to consult with consumers, consumer advocates, and “other interested parties” to ensure that information is made available.

The federal government will also make available to each state, a report of physician payments that is specific to the respective state.


The Bill will pre-empt state laws for disclosure of payments or transfers of value for items described. 

They do not pre-empt state laws that have additional reporting requirements on information not required in the Bill.  Further, if a state wanted to require disclosure for samples or rebates, this Bill would not limit that activity.

For Continuing Medical Education (CME)

The language is for direct payments or transfers of value, at the request of, on behalf of, or designated on behalf of, a covered recipient (a physician, physician medical practice or physician group practice).  For direct payments to those entities, reporting will be required for education, compensation for serving as faculty, or as a speaker for a CME program, and grants. 

It is not clear from the first reading, how if passed, this will be interpreted and presented as a rule by the HHS.


This is similar to the original Bill introduced in 2007 but not taken up by Congress and incorporates many of the recommendations made by the Medicare Payment Advisory Commission.

Everyone is in agreement that transparency is going to happen, and the short time frame for implementation and the strict requirements may be ambitious.

The watered down language of the State Pre-Emption Section makes this Bill seriously flawed, in that states can add anything they want to the reporting requirements, and the companies will still be in the same position (reporting to multiple states) before the legislation passed.

If adopted, this legislation will have significant impact on the income and perceptions of physicians.  The addition of ownership in private companies and reporting research may be detrimental to our bio-tech research industry.

For more information:

Physician Payment Sunshine Act of 2009

Press Release Senators Grassley and Kohl 1-22-09

Floor Statement Senator Kohl 1-22-09

Floor Statement Senator Grassley 1-22-09

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