Life Science Compliance Update

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June 11, 2013

Physician Payment Sunshine Act: New England Journal of Medicine Articles on Requirements and Potential Effects

With less than two months (see our daily counter to the right) for applicable manufacturers and group purchasing organizations to begin collecting the required payment information and data required under the National Physician Payment Transparency Program (NPPTP) of the Centers for Medicare and Medicaid Services (CMS), stakeholders are increasingly beginning to discuss the requirements and potential effects. In fact, the New England Journal of Medicine (NEJM) devoted several articles in a recent issue, including one article authored by NPPTP architects Shantanu Agrawal, M.D., Niall Brennan, M.P.P., and Peter Budetti, M.D., J.D.

The article begins by giving stakeholders a broad overview of the various reporting requirements and background of Sunshine. While using mostly outdated data regarding physician-industry collaboration and relationships, the authors did strive to use updated data regarding continuing medical education (CME), citing data from 2011—which shows that commercial funding accounts for only a third of all CME offerings.

The CMS officials noted that "Three types of transfers will be reported and tracked: general payments, ownership and investment interests, and payments for research."

While the officials acknowledged that "speaker compensation for CME events" is among the required items for reporting, they also maintained that the final rule sought to "balance the value of data transparency against its possible effects on innovation or CME." For example, the authors clarified that "because many CME companies have adopted comprehensive codes of conduct in recent years, CMS … worked to balance transparency with the availability of high-quality medical education by restricting reporting of CME-related payments to cases in which the manufacturer had direct influence over the choice of speaker."

Although the law targets applicable manufacturers and GPOs, the final rule will have a significant impact on physicians and teaching hospitals. Specifically, physicians and teaching hospitals will spend numerous hours checking, correcting, monitoring, recordkeeping, and if necessary, disputing payment information—not to mention the training, compliance and oversight costs for individual physicians or small group practices. Physicians and hospitals will also have to address the stigmatic effect that the posting of wrong or inaccurate information may have on physicians and their relationships with patients, as well as the harm to professional reputation.

These concerns are also coupled with additional scrutiny and oversight by federal research institutions and organizations, institutional review boards, professional medical associations, the IRS, the media, plaintiff and qui tam lawyers, and private insurers. While the CMS officials acknowledge that contextual information must be published with the data, the details on how much data, where it will appear and other important information is still unclear. For now, CMS proposed only 200 characters of contextual information.

The authors then recommend that physicians begin assisting manufacturers by:

  • tracking their own payments from industry and clarifying with industry representatives what will be reported;
  • providing companies with identifying information such as their National Provider Identifier (NPI), state licensure information, business address, and specialty;
  • inquiring about the source of payments they receive, since transfers of value can occur indirectly — through specialty societies, for example — when funding originates with manufacturers; and
  • participating in the prepublication review-and-dispute period to validate reported data and identify potential inaccuracies.

The officials emphasized that updating NPI information or obtaining an NPI through the National Plan and Provider Enumeration System ( is critical. They also encouraged physicians to "supply information to manufacturers and encourage its reporting to provide the appropriate context for research funding, grants, or other payments [because] manufacturers may not possess this information otherwise." In particular, CMS mentioned that "physician groups may want to explain how payments were obtained and divided equitably among members."

Sunlight as Disinfectant

In second perspective article published in the NEJM, Meredith Rosenthal, Ph.D, a Professor of Health Economics and Policy at the Harvard School of Public Health, and Michelle M. Mello, J.D., Ph.D., also discussed the potential impact the Sunshine Act will have for patients and the intent of the Sunshine Act is "to help patients make more informed decisions and to deter financial relationships that might inflate health care costs." She notes that while "[t]he rules go well beyond preexisting law, [they] stop short of directly regulating financial relationships."

However, the Congressional history behind the law shows that Congress never meant to regulate financial relationships. In fact, Senator Grassley announced when first introducing the Sunshine Act in 2007 (and again reiterated in 2009) that the Sunshine Act "does not regulate the business of the drug and device industries" and that "the people in the industry [should be left] to do their business."

Consequently, the authors note that the cost of complying with the Sunshine Act will reach nearly $1 billion over 5 years. However, they questioned what, if any, benefits "disclosure is likely to bring." Although the Sunshine Act rectified problems and weaknesses of the several state laws previously in place, it is unclear that the transparency will have the "intended effects" of educating patients and lowering drug costs.

For example, Rosenthal maintained that both "theory and evidence suggest that the benefits of disclosure are unlikely to be realized solely through environmental exposure of patients to this information." We previously noted in fact that State transparency laws in Maine, New Hampshire, and Rhode Island had negligible to small effects of the disclosure laws in Maine and West Virginia for both statins and SSRIs (which the authors themselves cite).

They note that in addition to "policing" conflicts of interest, the Sunshine Act will improve the "free flow of information on health care quality and cost", which has been a federal policy priority for at least two decades.

They go on to explain that disclosure rules such as the Sunshine Act "aim to influence the behavior of both the subjects of reporting and those making decisions about whether to do business with them." Thus, one mechanism through which the Sunshine Act could reduce health care costs is that "patients, having learned of a physician's involvement with industry, might alter their view of the physician's trustworthiness. They might be less inclined to accept treatment recommendations from these physicians or even to receive care from them."

However, as we previously noted, a recent survey from Kaiser shows that "42 percent of the public does not know the Affordable Care Act is still law of the land and is being implemented." Thus, almost half of America does not even know the Sunshine Act exists, and it is highly unlikely that of the citizens who know the ACA is law, they even have a clue what the Sunshine Act is—particularly since most physicians don't even know about the Sunshine Act, so how could they even tell their patients?

Additionally, only about one in 10 Americans report getting information about the reform law from federal agencies, such as the U.S. Department of Health & Human Services, so how will anyone even know when these payments are published and how to use the site? There is a high likelihood, however, that the Obama Administration will use funds to educate consumers about the Sunshine Act through its OpenPayments website.

So it is unclear how patients will use such data, and it is even more unclear how patients and physicians will find time in their 15-minute appointment to discuss life-saving treatments and examinations as well as what a doctor ate during his CME program last month. In fact, the authors recognize that "[d]ecades of public reporting of provider quality information have underscored the difficulty of engaging consumers in seeking even the most salient information about their providers, such as a cardiothoracic surgeon's predicted mortality rate, from a passive report."

Moreover, "[c]onsumers are typically unaware of these data and, even when they know about them, tend to choose their providers on the basis of other factors." Given that the payment data under the Sunshine Act are also complex, and even with the educational information CMS plans to provide, "patients may have difficulty evaluating the undesirable and beneficial aspects of various types of payments."

Yet, the authors believe that such transparency will reduce costs because there is "evidence that greater physician financial involvement with manufacturers is associated with higher utilization of expensive, brand-name products, such dynamics could reduce costs." But the authors neglect to mention that over 75% of medicines prescribed today are generics. Moreover, most medicines actually reduce costs, and only account for 10 cents of every dollar spent on healthcare. Thus, they're premise is somewhat misguided. In fact, restricting access and interactions with physicians may actually increase costs due to uniformed physicians who are not up-to-date on the latest FDA safety-information, label changes, or black box warnings—as research has shown

Nevertheless, the authors believe that the disclosure requirements could effect physician behavior by causing them to "avoid financial relationships with companies to guard against patient distrust, peer reproach, or becoming the target of a journalistic exposé or government investigation." However, they recognize no "published evidence about whether this type of disclosure deters physicians from accepting industry payments." Furthermore, "it seems unlikely that the mere existence of a payment-information repository will lead many patients or physicians to alter their behavior," the authors conclude.

Consequently, and somewhat disturbingly, the authors suggest that the use of Sunshine data by "learned intermediaries," such as health insurers "could be a game changer." For example, the authors maintain that "Health insurers could serve as learned intermediaries for physician-payment data, taking physicians' involvement with industry into consideration in network-design decisions and perhaps designating as "preferred" those physicians who receive no money from industry."

They add that "[i]nsurers are well resourced to perform this analysis and have an economic incentive to discourage relationships that promote the use of expensive drugs. They hold financial power, and their active surveillance would eliminate physicians' perceptions that payment reports are inconsequential because no one is looking." Insurer use of such data, the authors compare, is similar to institutional investors and financial analysts who scour over require Securities and Exchange Commission (SEC) reporting's.

The authors also acknowledge that "[r]esearchers and watchdog organizations can also serve as valuable intermediaries" and that "their analyses can flag especially problematic relationships and help policymakers decide whether to impose direct restrictions." Ultimately, the authors conclude that for the Sunshine Act to have "a real disinfecting effect, this sunlight must be filtered through the lens of a capable, motivated intermediary."

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