Life Science Compliance Update

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December 14, 2011

Physician Payment Sunshine Act: CMS Releases Proposed Regulations

The Centers for Medicare and Medicaid Services (CMS) released their proposed rule for the Physician Payment Sunshine provision for section 6002 of the Affordable Care Act.

The proposed rule will require manufacturers of drugs, devices, biologicals, and medical supplies covered by Medicare, Medicaid, or the Children’s Health Insurance Program to report to CMS payments or other transfers of value they make to physicians and teaching hospitals.  The proposed rule would also require manufacturers and group purchasing organizations (GPOs) to disclose to CMS physician ownership or investment interests. 

The rule covers all payments to physicians of $10.00 or more or any combination of payments that total more than $100.00.

This increased transparency is intended to help reduce the potential for conflicts of interest that physicians or teaching hospitals might face as a result of their relationships with manufacturers.

Drug and biologic manufacturers, medical device or supply manufacturers, and GPOs would be affected by the new reporting requirements. These organizations, as well as the physicians and teaching hospitals, would be allowed an opportunity to review and correct information prior to its publication. 

 The Affordable Care Act provides that violators of the reporting requirements will be subject to civil monetary penalties (CMPs), capped at $150,000 annually for failing to report, and $1,000,000 for knowingly failing to report. 

 CMS is proposing that data collection will not begin on Jan. 1, 2012 and that manufacturers and GPOs do not need to begin data collection until final regulations are issued.   Depending on the timing of the final rule, CMS is proposing that manufacturers and GPOs will be required to submit a partial year on Mar. 31, 2013.  Once the data has been submitted, CMS will aggregate manufacturer submissions at the individual physician and teaching hospital level, provide them with a 45-day period to confidentially review and, if necessary, correct the data, and make the data publicly available by Sep. 30, 2013

CMS will accept comments on the proposed rule until Feb. 17, 2012, and will respond to them in the final rule.

The proposed rule can be downloaded from the Federal Register Inspection Desk at: 

Senator’s Kohl and Grassley are crediting their efforts to help produce these regulation and seem to be pleased despite the delay for the rule which was supposed to be released on October 1, 2011.

“The Sunshine Act guidance is a welcome, if late, step toward ensuring that the financial links between physicians and the drug, biologics and medical device industries are transparent,” Kohl said. “As we move forward, it’s vital that stakeholders have a voice in this process to ensure transparency and accountability in our health care system.” 

“The completion of the guidance is good news,” Grassley said.  “It came after a lot of follow-up from Sen. Kohl and me to find out the status and to press for results from CMS. It shows Congress has a responsibility not just to make laws but also to see that they’re carried out as intended. Companies need this guidance to do their part.” 

Kohl and Grassley have been pushing for the timely release of regulatory guidance for more than a year. In November 2010, Grassley and Kohl urged HHS Secretary Kathleen Sebelius to implement the Sunshine Act with adequate time for time for comment and review. And, on October 3, 2011, Kohl and Grassley urged CMS to issue guidance and sought an explanation for having missed the October 1, 2011 deadline. 

We will be writing a full analysis of the regulations to be released tomorrow AM.

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