Life Science Compliance Update

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July 25, 2013

Physician Payment Sunshine Act: Reporting Physician Ownership

Open Payments (The Physician Payment Sunshine Act) requires drug, biological and medical device manufacturers ("Applicable Manufacturers") and group purchasing organizations to annually disclose direct and indirect ownership and investment interests held by physicians and their immediate family members. 

Hall and Render's Health Law News reports several key pieces of information around physician ownership:

Defining Physician-Owned Distributors

"Both Congress and CMS specifically intended to include Physician-Owned Distributors ("PODs") among those GPOs subject to the ownership and investment reporting requirements.  Although CMS explained that the rule is written to include most entities that purchase Covered Products for resale to others, the language of the statute does not encompass all POD models.  For example, CMS declined to limit the exclusion for entities that purchase products for their own use to only those entities that are the end users of the device based on billing under the same provider or supplier number as the entities that purchased the product.  Additionally, because the Sunshine Act defines a GPO as an organization purchasing for a group, a POD with only a single buyer is not required to comply with ownership and investment reporting as it is not a group purchaser."

Furthermore: "Depending upon its structure, a POD may also qualify as an Applicable Manufacturer and be required to report payments or other transfers of value to Covered Recipients as described in our first article in this series.  For example, many PODs take title to the products they distribute, and title-holding distributors are subject to the same reporting requirements as Applicable Manufacturers.  PODs should also be aware of the common-ownership rule: entities that provide necessary and integral "assistance and support," such as marketing and distribution activities, to an Applicable Manufacturer with which a common ownership structure is shared, are subject to full reporting requirements."

Who is covered?

"GPOs and Applicable Manufacturers must annually disclose direct and indirect ownership and investment interests held by physicians and their immediate family members.  They are not required to report any ownership or investment interests held by teaching hospitals.  There is no exclusion from reporting for bona fide employees, so GPOs and Applicable Manufacturers must report investment and ownership interests held by their employees who are physicians or physicians' immediate family members."

Defining "Immediate Family Members"

"The final rule defines a physician's "immediate family members" in a manner similar to the Stark law regulations, specifically including a physician's spouse, parents, children, siblings, step-parents, step-siblings, in-laws, grandparents, spouses of grandparents and grandchildren, regardless of whether the person is a natural or an adopted family member.  It may be difficult for GPOs and Applicable Manufacturers to identify immediate family members because physicians are not required to disclose their relations.  For this reason, there is an exception from reporting when the Applicable Manufacturer or GPO does not know that a physician's immediate family member holds a reportable ownership or investment interest.  Similar to the False Claims Act knowledge standard, the Sunshine Act's definition of ''know'' provides that a person, with respect to information, has actual knowledge of the information, acts in deliberate ignorance of the information or acts in reckless disregard of the truth or falsity of the information."

Defining Ownership and Investment Interests

"The definition of ownership or investment interests in the final rule is similar to the Stark law definition.  It includes, but is not limited to:

  • Stock and stock options (equity);
  • Partnership shares;
  • Limited liability company memberships or units; and
  • Loans, bonds or other financial instruments that are secured with all or a portion of an entity's property or revenue."

Exceptions from the definition:

  • "An interest held in an employer-based retirement plan;
  • Unsecured loans subordinated to a credit facility;
  • Stock options or convertible securities received as compensation, until converted to equity; and
  • Publicly traded securities and mutual funds as described in section 1877(c) of the Social Security Act."

Payments and Transfers of Value 

"A GPO is not required to report payments or transfers of value to a Covered Recipient when the Covered Recipient does not also hold ownership or investment interests in the GPO.  However, when a physician is a holder of ownership or investment interests in the GPO, the GPO must report both the physician's ownership/investment interests and any other payments and transfers of value made to that physician.  Indirect payments or transfers of value made by a GPO to the physician through a third party, including the physician's family member or a trust, must also be reported if the GPO requires, instructs, directs or otherwise causes the third party to provide the payment or transfer of value to the physician.  The GPO need not report indirect payments of which it is unaware, so long as it has satisfied the "knowledge standard" with a reasonable inquiry."

The Reporting Process

"All Applicable Manufacturers and GPOs that have reportable ownership or investment interests must register with CMS within 90 days of the end of the calendar year for which a report is required.  Reporting entities must register individually, regardless of whether they intend to be part of a consolidated report being submitted by another entity.  Applicable Manufacturers and GPOs that do not have reportable ownership or investment interests held by a physician or physician's immediate family member during the previous calendar year are not required to register or report."


"Applicable Manufacturers and GPOs must submit reports for each calendar year by the following March 31 or 90th day of the subsequent calendar year.  Only ownership or investment interests held on or after August 1, 2013 must be reported to CMS for the calendar year 2013 report that is due to CMS by March 31, 2014."

What must reports of physician ownership and investment interests include about the physician?

  • "Name as listed in the National Plan & Provider Enumeration System ("NPPES"), indicating whether the interest is held by the physician or an immediate family member;
  • Primary business address;
  • Medical specialty;
  • National Provider Identifier (if applicable and as listed in NPPES); and
  • State professional license number."

Information about the financial interest to be reported includes:

  • "Dollar amount invested by the physician or the immediate family member;
  • Value and terms of each ownership or investment interest; and
  • Any other payments or transfers of value provided to the physician holding an ownership or investment interest, either directly or indirectly through a third party."

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