The Sunshine Act specifies categories of information required to be reported for each payment or other transfer of value provided to a covered recipient. Below is a detailed description of analysis of the information and categories that CMS finalized.
Payment and Other Transfer of Value Report Content
Physician Name: Applicable manufacturers must report the middle initial of a physician covered recipient as listed in NPPES, but will not be penalized for leaving the field blank if it is not available in NPPES or if the physician does not have a middle name.
Business Address: CMS stated that applicable manufacturers do not need to use NPPES when reporting addresses, but must report the “full street business address.” CMS also encouraged physicians to keep their addresses in their NPPES profiles updated. CMS also finalized that the “primary practice location address to be reported as the business address.” Recognizing that it may be difficult for an applicable manufacturer to know which address represents the primary practice location, CMS said it will “not penalize applicable manufacturers for providing the incorrect address, as long as applicable manufacturer reports a legitimate business address for the covered recipient.”
Specialty, NPI and State License Number: CMS agreed that applicable manufacturers may use their internal information when reporting specialty. However, the NPPES “provider taxonomy” list should be used as the list of accepted specialties since consistency in the names of reported specialties is important for facilitating aggregation of the data. CMS is also requesting for companies to report up to five state license numbers for each physician. CMS noted that “when reporting specialty, applicable manufacturers should list both the specialty name and code to ensure consistency.” CMS also stated that reporting “a single specialty should be sufficient and that allowing applicable manufacturers to provide a justification of physician specialty would be too much information to be beneficial.”
Date of Payment: CMS finalized that “applicable manufacturers have the flexibility to report payments made over multiple dates either separately or as a single line item for the first payment date.” In addition, CMS will allow flexibility for what specific date to report for a nature of payment category. CMS stated that the methodology employed by an applicable manufacturer “should be consistent within a single nature of payment category.” For example, for all “flights, applicable manufacturers should report dates in a consistent manner (such as the flight date or ticket purchase date). In addition, the aggregated payments should not cross years, so for payments which span multiple years, the amount paid in a given year must be reported for that reporting year.”
Similarly, the date of payment methodology “should not be used to move payments from one reporting year to another.” Applicable manufacturers are encouraged to include information on the methods they used for reporting date of payment or other transfer of value in their assumptions document. When reporting the date of payment for bundled small payments (as described in §403.904(i)(2)(iv)), “applicable manufacturers should report the date of payment as the date of the first small payment or other transfer of value made to the covered recipient.”
Context: CMS agreed to allow information on the context of a payment or other transfer of value because it will help 1) the public better understand the relationships between the industry and covered recipients; and 2) covered recipients when reviewing the payments to assess the accuracy of the payment. Thus, section 403.904(c)(12) “allows applicable manufacturers to provide brief contextual information for each payment or other transfer of value, but does not require them to do so.” CMS, however, did not explain what “brief” means—whether it is two sentences or three paragraphs.
Related Covered Drug, Device, Biological or Medical Supply: Section 1128G(a)(1)(A)(vii) of the Act requires that “if a payment or other transfer of value is related to marketing, education, or research specific to a covered drug, device, biological, or medical supply,” applicable manufacturers must report the name of the covered product. CMS finalized “that applicable manufacturers must report a related product name for all payments or transfers of value, unless the payment or other transfer of value is not related to a covered product.”
However, CMS does not “believe applicable manufacturers should be required to report the name of associated non-covered products, since this may be misleading to consumers and would provide information that is beyond the goal of the statute.” Nevertheless, CMS said it “is useful to know the extent of payments or other transfers of value that are not associated with any product or not associated with a covered product.”
Because this distinction will not be possible if applicable manufacturers leave the associated products fields blank in cases when it is not applicable, “the final rule directs applicable manufacturers to fill in associated product fields as appropriate.” Thus, “if the payment or other transfer of value is not related to at least one covered product, then applicable manufacturers should report “none.”
Conversely, “if the payment or other transfer of value is related to a specific product, which is not a covered product, then applicable manufacturers are to report “non-covered product.”
Finally, if the payment or other transfer of value is related to at least one covered product, as well as at least one non-covered product, then applicable manufacturers must report the covered products by name (as required), and may include non-covered products in one of the fields for reporting associated product.”
With respect to reporting multiple products, CMS finalized that applicable “manufacturers may report up to five related covered products for each interaction.” If the interaction “was related to more than five products, an applicable manufacturer should report the five products which were most closely related to the payment or other transfer of value.”
Additionally, when aggregating payments or other transfers of value by product, CMS will not represent a single interaction related to multiple products as multiple interactions. However, CMS does “not agree that the applicable manufacturer should report the percentage of the interaction dedicated to each product” because this will be “burdensome to the applicable manufacturers and would not be beneficial to consumers, since it will greatly increase the volume of the data.”
CMS also agreed in allowing greater flexibility in reporting the product name, particularly for devices where the product name is less recognizable to consumers. For drugs and biologicals, CMS finalized that applicable manufacturers must report the market name of the product and must include the NDC (if any).” If a market name is not yet available, applicable manufacturers should use the name registered on clinicaltrials.gov. CMS said that reporting the NDC will greatly help CMS aggregating the data by product. However, if there is no NDC available for a product, it does not have to be reported.
For devices and medical supplies, §403.904(c)(8)(ii) allows reporting of either the name under which the device or medical supply is marketed, or the therapeutic area or product category. CMS believes that reporting devices and medical supplies in this manner is appropriate, since device names are less known to consumers and a single product may actually be comprised of multiple devices. Whereas the names of drugs and biologicals are more readily available to consumers, since they are often listed on a prescription.
Form of Payment and Nature of Payment: CMS finalized that categories within both the form of payment and the nature of payment should be defined as distinct from one another. Additionally, if a payment or other transfer of value for an activity is associated with multiple categories, such as travel to a meeting under a consulting contract, CMS proposed that the travel expenses should remain distinct from the consulting fee expenses and both categories would need to be reported to accurately describe the relationship. In these cases, CMS proposed that for each payment or other transfer of value reported, applicable manufacturers may only report a single nature of payment and a single form of payment.
For example, if a physician received meals and travel in association with a consulting fee, CMS proposed 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 lump sum payments or other transfers of value, CMS proposed that the applicable manufacturer break out the distinct parts of the payment that fall into multiple categories for both form of payment and nature of payment.
CMS agreed that if a payment could fit within multiple possible categories, applicable manufacturers should have flexibility to select the category that best described the payment, in accordance with their own documented methodology. However, this should “not be used to bundle payments of separate categories into a single payment. For example, “a meal should be reported as a meal, even if associated with travel or a consulting contract. Additionally, serving as a faculty for a medical education program should be reported separately from a consulting contract, even if the medical education program speech was similar in content to the consulting services provided by the covered recipient.”
Form of Payment: CMS agreed that "stock, stock option, or any other ownership investment interest, dividend, profit or other return on investment" category should be divided into two categories. CMS did not add any additional categories to form of payment.
Nature of Payment: CMS stated that providing “precise precise definitions for applicable manufacturers to use in categorizing nature of payments will be too restrictive.” CMS clarified that the nature of payment categories are simply used to “describe” these payments, and all payments must be reported unless they fall within an exception. CMS recognized that “relationships between applicable manufacturers and covered recipients are extremely diverse;” and expressed concern that “providing specific, narrow definitions would not encompass every situation, forcing applicable manufacturers to describe payments or other transfers of value by less specific categories that do not accurately describe the relationship.”
CMS recognized that an agreement to “appear as an author of a ghostwritten article is an important relationship that should be reported,” but said there are “sufficient existing nature of payment categories, such as compensation for services other than consulting, which can be used to describe the relationship.”
CMS, however, added as a new nature of payment category “space rental and facilities fees,” because the agency agreed that “space rental or facility fees are commonly part of hosting an event at a hospital and believe that including them in another category would inflate the amount in that category.”
In providing additional explanation of the nature of payment categories, CMS noted that such “explanations are not exhaustive (unless specified as such), but rather are intended to provide additional guidance to applicable manufacturers when they are categorizing payments.”
Charitable Contributions: CMS finalized this category as proposed. However, CMS clarified that “charitable contribution” nature of payment category “should be used only in situations when an applicable manufacturer makes a payment or other transfer of value to a charity on behalf of a covered recipient and not in exchange for any service or benefit.” For example, in circumstances where a physician provides consulting services to an applicable manufacturer, but requests that his payment for the services be made to a charity, this would not be a charitable contribution for purposes of this rule because the payment was not provided by the applicable manufacturer as a charitable contribution, but rather as a directed consulting fee.” This payment would be reported as a consulting fee with the physician as the covered recipient, but the entity paid would be the charity.
In the cases of teaching hospital covered recipients that have tax-exempt status under the Internal Revenue Code of 1986, “payments or other transfers of value made to these organizations (other than payments or other transfers of value made for expected services or benefits, such as consulting services or rental of space in a hospital for an event) would be considered and reported as charitable contributions for purposes of this rule.”
Food and Beverage: CMS acknowledged the complications of reporting food, and noted that “tracking exactly what a person ate or drank may not be practical for purposes of the reporting requirements.” CMS also recognized many concerns from commenters about attributing meals to all covered recipients in a practice “because it may be difficult for applicable manufacturers to identify all the physicians within a practice, and this methodology could implicate concerns of off-label marketing in large multispecialty practices.” Accordingly, CMS made several revisions.
For meals in a group setting (other than buffet meals provided at conferences or other similar large-scale settings), CMS will require applicable manufacturers to report the per person cost (not the per covered recipient cost) of the food or beverage for each covered recipient who actually partakes in the meals (that is, actually ate or drank a portion of the offerings).” In other words, applicable manufacturers should divide the total value of the food provided by the number of people who actually partook in the food and beverage including both covered recipients and noncovered recipients (such as support staff).
If the per person cost exceeds the minimum threshold amount ($10), then the applicable manufacturer must report the food or beverage as a payment or other transfer of value for each covered recipient who actually participated in the group meal by eating or drinking a food or beverage item. For example, a sales representative brings a catered lunch costing $165 to a 10-physician group practice. Six of the ten physicians and five support staff participate in the meal. Because the meal cost $15 per participant ($165/11 participants = $15), the meal needs to be reported for the 6 physicians who participated in it. However, the meal does not need to be reported for the 4 other physicians in the group who did not participate in the meal (that is, did not eat or drink any of the offerings). Additionally, if the total cost of the meal was $100, making the cost per participant less than $10, then the meal would not have to be reported since it was below the minimum threshold.
CMS decided to make this modification to the proposed rule because it agreed with commenters that this method will more accurately reflect the actual transaction, and will “not unfairly attribute a payment to a physician who did not partake in it.” CMS also said this approach should “reduce disputes between applicable manufacturers and physicians, since food-related payments or other transfers of value will not be attributed to physicians that did not actually receive them.
Finally, this method does not require the reporting of meals eaten by support staff, for the purposes of this reporting requirement. However, CMS recognized that in other contexts, transfers of value to a physician's office support staff (which may include meals) may constitute transfers of value to the physician.” CMS finalized the position that applicable manufacturers must report the cost per participant for covered recipients in attendance.
Regarding meals that are dropped off at a covered recipient’s office (for example, by a sales representative) and other meals where the attendees are not controlled or selected by the applicable manufacturer, CMS believes “that these situations nevertheless constitute payments or other transfers of value to a covered recipient, so they must be reported.” Applicable manufacturers are responsible for keeping track of food and beverages provided to covered recipients and “must use the same attribution method for all meals as described previously regardless of whether the manufacturer's representative remained in the office for the entire meal.”
CMS finalized that “food and beverage provided at conferences in settings where it would be difficult to establish the identities of people partaking in the food do not need to be reported.” This applies to situations when an “applicable manufacturer provides a large buffet meal, snacks or coffee which are made available to all conference attendees and where it would be difficult to establish the identities of the physicians who partook in the meal or snack.” CMS “does not intend this to apply to meals provided to select individual attendees at a conference where the sponsoring applicable manufacturer can establish identity of the attendees.”
What is problematic about this clarification, however, is that CMS has not defined or further explained what is “difficult to establish the identit[y].” In other words, is 100 people “difficult to establish” or is 50?
Direct Compensation for Serving as a Faculty or as a Speaker for a Medical
Education Program: Listening to the “numerous” comments concerned about payments for accredited and/or certified continuing education-related speaking engagements, CMS agreed “that given the title of this nature of payment category, which was set out in the statute itself, it should not include compensation for accredited or certified continuing education payments.”
However, CMS did not grant a “blanket exclusion” to all payments to physicians for serving as speakers at an accredited or certified continuing education program. Instead, CMS added an additional nature of payment category for serving as a faculty or speaker at an accredited or certified continuing education event, which we wrote about on Friday, when the final rule was released. This category, named “compensation for serving as faculty or as a speaker for an accredited or certified continuing education event.”
CMS also renamed the category for direct compensation to include speaking engagements at unaccredited and non-certified continuing education events. CMS recognized “that not all payments or other transfers of value related to unaccredited and non-certified continuing education will be provided directly.” Therefore, CMS retitled the category as “compensation for serving as a faculty or as a speaker for an unaccredited and non-certified continuing education program.” This renamed category includes all other instances when an applicable manufacturer provides compensation to a covered recipient for serving as a speaker or faculty at an unaccredited and non-certified education event, regardless of whether the payment was provided directly or indirectly.
Finally, the nature of payment category for “compensation for services other than consulting” at §403.904(e)(2)(ii) now explicitly includes payments or other transfers of value for speaking engagements that are not for continuing education.
CMS stated that this “reporting strategy appropriately separates accredited and certified continuing education from unaccredited and non-certified continuing education, so that consumers can better understand the nature of the payment received by a covered recipient.” CMS recognized that “Accredited and certified continuing education that complies with applicable standards of the accrediting and certifying entities generally includes safeguards designed to reduce industry influence,” so “that, when reportable (that is, when the payments or transfers of value do not meet the conditions delineated at §403.904(g)(1)(i) through (iii)), payments or transfers of value made to support accredited and certified continuing medical education should remain in a distinct category from unaccredited or non-certified continuing education.”
CMS also stated that educational speaking engagements should be separated from all other speaking engagements, promotional or otherwise, to have separated them appropriately. Finally, CMS noted the renaming of the statutory nature of payment category for “direct compensation for serving as a faculty or as a speaker for a medical education program” to include indirect compensation as well, provides applicable manufacturers flexibility to describe payments or other transfers of value more accurately.
Other: CMS agreed with comments and omitted the category of “other.” In doing so, CMS reiterated that all payments unless explicitly excluded, must be reported and described based on the nature of payment categories included in the final rule. CMS also reiterated that failure to report a payment (e.g., for lack of a nature of payment category) may result in the imposition of a civil monetary penalty on the applicable manufacturer.
Other Nature of Payment Categories: CMS provided additional guidance on how to interpret other categories based off comments requesting more information.
Consulting Fees: This category is intended to include fees paid by an applicable manufacturer to a covered recipient for services traditionally viewed as consulting services. CMS stated that “consulting services are typically provided under a written agreement and in response to a legitimate need by the applicable manufacturer. Similarly, CMS said “there is often a connection between the competence of the covered recipient paid and the purpose of the arrangement, as well as a reasonable number of individuals hired to achieve the intended purpose.”
Compensation for Services Other than Consulting: This category is intended to capture compensation for activities or services that are not traditionally considered consulting services, but are provided by a covered recipient to an applicable manufacturer. CMS stated that “this category should include payments or other transfers of value for speaking engagements that are not related to continuing education, such as promotional or marketing activities.”
Honoraria: CMS explained that this category is similar to “compensation for services other than consulting,” however, CMS noted that “honoraria are distinguishable in that they are generally provided for services for which custom prohibits a price from being set.”
Gift: CMS described this as a “general category” that “will often include anything provided to a covered recipient that does not fit into another category.” For example, “the provision of small trinkets (above the minimum threshold) would need to be reported as a “gift” since they are not included in any other category.” However, provision of tickets to a professional sporting event should not be reported as a “gift” since this transaction is better described by the nature of payment category “entertainment” even if the provision of the tickets was a gift.
Entertainment: This category is “intended to include, but is not limited to, attendance at recreational, cultural, sporting or other events that would generally have a cost.”
Travel and Lodging: This category includes travel, including any means of transportation, as well as lodging. The destination, including City, State and country must be reported.
Education: CMS explained that “this category generally includes payments or transfers of value for classes, activities, programs or events that involve the imparting or acquiring of particular knowledge or skills, such as those used for a profession.” CMS clarified, however, that this category does not “intend to capture the attendees at accredited or certified continuing education events whose fees have been subsidized through the CME organization by an applicable manufacturer (as opposed to payments
for speakers at such events).” However, CMS stated that “any travel or meals provided by an applicable manufacturer to specified covered recipients associated with these events must be reported under the appropriate nature of payment categories.”
Royalty or License: This category includes, but is not limited to, the right to use patents, copyrights, other intellectual property and trade secrets, including methods and processes. This may be pursuant to a written agreement and could entail various payment schedules (such as scheduled or milestones methods). Applicable manufacturers may report total aggregated payment amounts for payments made under a single agreement, in order to consolidate reporting.
Current or Prospective Ownership or Investment Interests: This category includes ownership or investment interests currently held by the covered recipient, as well as ownership interests or investment that the covered recipient has not yet exercised. Details on current ownership or investment interests is discussed in the section of the final rule dedicated to reporting ownership or investment interests of physicians.
Grant: This category generally refers to payments to covered recipients in support of a specific cause or activity.
Assumptions Document: CMS finalized the voluntary submission of an assumptions document in the final rule. Applicable manufacturers may include in the assumptions document assumptions and methodologies other than only those employed when classifying nature of payment categories. Applicable GPOs may also submit an assumptions document. CMS finalized that the assumptions documents will not be made public. If a statement within the assumptions document pertains to a particular section of the report, “applicable manufacturers should explicitly refer to that section in the assumptions document.”
CMS also stated that it will not provide the assumptions documents to covered recipients, however, “Applicable manufacturers may provide their assumptions document to covered recipients upon the request of covered recipients independently from CMS.” CMS also noted that if an assumptions document is requested under the Freedom of Information Act (FOIA), CMS would follow its “predisclosure notification procedures at 45 CFR 5.65(d) and seek the submitter's input on the applicability of FOIA Exemption 4, which protects trade secrets and commercial or financial information that is obtained from a person and is privileged or confidential.”
CMS said it will “carefully review the assumptions documents to determine whether [CMS] need to publish more detailed guidance to assist applicable manufacturers in classifying the nature of payment categories, or other assumptions or methodologies included in the assumptions document.” Additionally, CMS said it intends to provide assistance to applicable manufacturers to help classify payments or other transfers of value and hope that such guidance will be useful.
Finally, CMS said it does “not intend to use the assumptions document for prosecution, but acknowledge[s] that the reporting based on the assumptions would be open to prosecution. Specifically, CMS stated that “other HHS divisions, the Department of Justice (DOJ), or the Office of the Inspector General (OIG) could request access to the documents as part of an audit or investigation into an applicable manufacturer or applicable GPO.”