Life Science Compliance Update

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June 12, 2012

Physician Payment Sunshine Act: Surveys Show Mixed Expectations

Mixxed Feelings
According to a recent survey conducted by Forbes Insights for Deloitte Touche Tohmatsu Limited (DTTL), fifty-four percent of physicians surveyed are in favor of a public, searchable database of all physician-industry relationships as long as patients understand how to interpret the data.  In addition, the survey found that fifty-five percent of life sciences companies expect their HCP transparency-related compliance investments to increase over the next two years

The survey, Physician Payment Sunshine Act: Physicians and life sciences companies coming to terms with transparency, was conducted in January and February 2012 among 110 U.S.-based physicians and 223 global executives from life sciences companies worldwide.

The Sunshine Act requires appropriate manufacturers of drugs, devices, biologicals, or medical supplies covered by Medicare, Medicaid or the Children's Health Insurance Program to annually report certain payments or transfers of value provided to physicians or teaching hospitals, known as covered recipients, to the Secretary of Health and Human Services. The first PPSA reports will be due March, 2013.

Another survey of 50,000 specialists and primary care physicians, found that 56 percent of surveyed are concerned about the pending Sunshine Act.  The poll was conducted by Portsmouth, N.H-based software company MMIS,

“A number of regulatory measures, such as the Physician Payment Sunshine Act (PPSA), are forcing life sciences companies to make significant compliance and infrastructure program investments,” said Pete Mooney, Global Life Sciences and Health Care Industry Leader, DTTL.  “Meanwhile, the same measures are creating concerns for physicians over how the data will be interpreted by the public.  Despite the challenges, however, we see that the life sciences and health care industry has accepted the new reality and is fast on its way to adapting to the changes proposed by regulatory bodies.”

With about 12 months to go until the first reporting requirements under PPSA (March 2013), two-thirds (66 percent) of the life sciences executives responding to the DTTL/Forbes Insights survey said that their companies are either “100 percent ready” or are “50 percent done and hoping to be ready in time” for the PPSA and other new compliance requirements.

Meanwhile, the majority (55 percent) of life sciences companies expect to see their HCP transparency-related compliance investments to continue to increase in 2012 and 2013. Almost half (48 percent) of these investments are expected to go into in-house training programs, 34 percent to in-house software upgrades and integration, and 25 percent to hiring new full-time employees.

Asked about the challenges of putting in place a strategy to comply with the PPSA and other laws, life sciences executives pointed to four main challenges:

  • Training of employees (52 percent)
  • Financial expenditure required (43 percent)
  • Understanding and keeping current with the requirements of the global regulatory environment (41 percent), and
  • Engaging all necessary stakeholders within the company in compliance programs (40 percent).

“As the survey results illustrate, physicians, the life sciences industry, and even governments are expected to expend significant time, effort, and resources complying with PPSA,” said Seth Whitelaw, Director, Deloitte & Touche LLP in the United States. “Yet it is too early to tell whether the PPSA will significantly alter the landscape of provider-industry relationships.”

Almost three-quarters (72 percent) of physicians responding to the survey believe that new regulations will not change provider-industry relationships.  Moreover, despite all the efforts to comply with the new regulations, 38 percent of life sciences executives responding to the survey said that they either don't know how, or have no plans, to use and leverage the publicly available data regarding other companies.

“Perhaps the most important consideration for the life sciences industry is that the PPSA provides an opportunity to evaluate spending allocations for health care provider relationships,” added Mooney.  “Disclosure may allow companies to reduce negative perceptions around interactions, and it may also provide an opportunity to improve overall operational efficiency, thereby reducing costs.”

Michaeline Daboul, President of MMIS, answered a few questions on the effect the Sunshine Act will have on hospitals and physicians in a recent interview.  He first noted that the major concern presently, is over the forthcoming details and requirements set forth in CMS' draft rules.

“From a broad prospective, all stakeholders — hospitals, physicians, group purchasing organizations and the medical and pharmaceutical industry — are concerned that information available in the public domain could unfairly distort the positive nature of the collaborative relationships that physicians maintain with the industry.”  Other areas of concern include:

  • correct identification of a physician,
  • reporting of a physician's specialty as listed in the NPI database (which could inadvertently create issues for off-label marketing),
  • the manner in which research payments are reported and
  • listing food and beverage dispersal to physicians who may not have participated in a meal.

CMS is required to provide context and background information, posted on a public website, in order to educate consumers about the relationships that exist between physicians and the industry. Significant improvements to enhanced patient care — new drugs and new medical devices to diagnose and treat diseases — have occurred because of these close, ethical relationships; a physician’s financial relationship with the industry does not mean the physician's judgment is compromised or that the relationship with the manufacturer or drug maker is unethical.

Daboul noted that the primary issue for hospitals involves the reporting of indirect payments for independent continuing medical education (CME).  Specifically, the question is: Does the industry have to report payments to teaching hospitals, in support of independent CME, over which the industry has no control?  Additional hospital concerns and areas of interest include

  • Research related payments to institutions reported as such and not attributed to the physician investigator
  • Timely review and resolution of disputes
  • The accuracy of payments made to physicians and
  • The reputation of the hospital, which may be adversely impacted should negative information about an affiliated physician or department chair be published.

“Physicians are concerned that the relationships they currently maintain with the medical device and pharmaceutical industry are being construed as suspect.”  However, as Daboul correctly pointed out, “Just because a physician receives a transfer of value from an industry member does not mean the physician is ethically compromised.”  He recognized how, “the vast majority of transactions involve fair market value payments in exchange for consulting, speaking, and research.”

Physicians are also concerned about the accuracy of the data because they do not want erroneous data to be used by watchdog groups who will make individual doctors a poster on lists such as "Doctors for Dollars."


It may be a few more months until the Centers for Medicare and Medicaid Services (CMS) publish the final rules to implement the Sunshine Act.  The final regulations will also depend on this month’s expected opinion from the Supreme Court about whether the Affordable Care Act is constitutional, and whether the entire law will be struck or only certain pieces.  Regardless, companies, teaching hospitals, and physicians must begin preparing for the Sunshine Act now given the stiff penalties the law provides.

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