Life Science Compliance Update

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March 06, 2014

Physician Payments Sunshine Act: Best Practices for Journal Reprint Valuation, Physician Owners and Recruits, Pre-Disclosures, and Publication Support

The CBI Compliance Congress shined a bright light on the Sunshine Act's complex reporting requirements. The presentation entitled "Best Practices for Report Filing" focused on a number of the most troublesome areas that compliance departments have struggled with, including (1) valuing reprints; (2) healthcare providers (HCPs) that are government officials; (3) physician-owners and physicians who sit on the company's Board of Directors; (4) physician recruitment; (5) co-promotion agreements; (6) Corporate Integrity Agreements; (7) pre-disclosures; and (8) publication support.

Four senior compliance officers weighed in on their company's reporting practices, including Victoria Browning of Allergan, Erik Eglite of Lundbeck Pharmaceuticals, Gus Papandrikos of Daiichi Sankyo, and Gaurica Manchanda-Chacko of Edwards Lifesciences.

Assessing the Value of Reprints:

Under the Physician Payments Sunshine Act, "payments" are defined very broadly. Pharmaceutical companies are required to report almost any transfer of value to physicians, whether direct or indirect. However, Congress specifically excluded 12 items from reporting, including "educational materials that directly benefit patients or are intended for patient use." Despite this exclusion, the Centers for Medicare and Medicaid Services (CMS) have interpreted the Sunshine Act to require manufacturers to report medical textbooks and peer reviewed journal reprints as "transfers of value."

Thus, the question is how does one put a value on a journal reprint?

CMS has stated that the "value of a journal reprint should reflect the cost that an applicable manufacturer…paid to acquire the reprint from the publisher or other distributor."

Daiichi Sankyo uses this cost model, but Gus Papandrikos, Director, Compliance spoke to two other possibilities: some companies use a blended average model, others have hired a third party to value for them.

The cost model regarding reprints is not 100 percent cut-and-dry. Papandrikos used a hypothetical where a company wanted to ship reprints internationally as soon as possible, and used expensive rush delivery services. In this case, the company would not pass the entire cost of shipping onto the physician. According to Papandrikos, this would count as "distributing to ourselves and then disseminating."

In general, though, Daiichi uses the cost of acquisition model. Papandrikos also noted that Daiichi Sankyo has integrated the marketing department into the aggregate spend process. "The majority of reprints come from marketing," he states, and "we mandated they put in a process to value reprints."

Papandrikos stated that Daiichi has "approximately 15 reprints" that their reps can disseminate. In terms of volume, Daiichi actually distributes "a few thousand," which Papandrikos stated is "not a huge number." A number of audience members indicated that their company had several hundred reprints. Such diversified manufacturers also use the cost model, and treat each reprint's value as the cost the company incurred to obtain the reprint.

Like Daiichi, Lundbeck Pharmaceuticals uses the cost model as well. Erik Eglite, Vice President, Lundbeck's Chief Compliance Officer and Corporate Counsel, stated: "If we buy in bulk, and 1000 articles costs $1000, they cost $1 each—just using simple math." Lundbeck has about 20 articles, and reps can track their dissemination through a CRM tool that records the transfer.

Edwards Lifesciences uses an average for its valuation process. Edwards divides its educational materials into categories: textbooks, journal reprints, and other electronic media. Gaurica Manchanda-Chacko, Senior Director, Global HCP Compliance, stated that Edwards has about eight reprints, but the "volume is what determines the value." Similarly to reprints, Edwards has medical textbooks that range from $50-200. The company uses an average of the range to determine value. Manchanda-Chacko believes that companies should make sure to document their thought process in reaching their averages. Since the rule is still unclear, she believes that companies who keep thorough records will be able to support their conclusions to CMS.

Manchanda-Chacko stressed that "the mechanism of how companies distribute reprints is just as important a consideration as the valuation associated with them." She noted an example of medical information that is "available on a public domain, yet hard to parse through." Manchanda-Chacko believes that sending physicians the exact link to a medical research page would not be reportable because it is public data—her company "did not have to buy anything or sign up to get the information."

Victoria Browning of Allergan moderated the panel, and noted that a challenge regarding the average model would be for pharmaceutical companies who have subscriptions to medical publications. The companies would need to keep track of which reprints they use internally and which are distributed to doctors. The panel also stated that a tougher issue may be obscure, one-off journals that cost $50-100 each.

The panel emphasized that companies should make sure to inform physicians that reprints are a transfer of value—often the sales rep tendering the article tells the doctor that the reprint will be reported. Eglite notes that reps are seeing "a lot of gamesmanship" from doctors, who will hint, for example, that their nurse is "very interested in medicine" in order to get a reprint without the reportable transfer. Reps are taught to report in "good faith" any transfer of value in these situations, even if it might mean that the doctor contests the transaction in the future.

The panel noted that everyone is hoping that Congress reconsiders the textbook and reprints clause.

According to Eglite, reps are reporting that doctors will not accept articles now in light of the reporting requirements. "This is very unfortunate," he states, "Doctors used to go to conferences—I used to be one—you get free articles, and on the way home you'd read peer reviewed journal articles." He wants CMS to recognize that it is "terrible that doctors are not reading article, and now not even writing articles."

The drop in the acceptance rate of reprints may exceed 20 percent in the wake of the Sunshine Act.

"Doctors see [reprints] as taxable income now," states Eglite, "and they would rather not take them." Companies have adjusted to the reporting requirements by writing "canned responses" to medical departments and extracting pertinent excerpts from articles, putting the excerpts into the letters, and leaving references to the full article for doctors to pursue if they choose.

We have followed the push to change this interpretation on reprints because of their clear benefits to patients in keeping physicians up-to-date and educated on best practices. Furthermore, physicians are already turning away medical journals due to the report requirements. Despite the implications, currently the requirement stands. In 2014 at least, textbooks and reprints are reportable transfers of value as part of pharmaceutical companies' aggregate spend.

HCPs that are Government Officials

Generally, government employees may not accept gifts from industry. One exception allows government employees to accept non-cash gifts that have a value of no more than $20 per occasion and no more than a total of $50 per calendar year. In light of the Sunshine reporting requirements, government employees may be unwilling to risk any transfer of value. On the reporting side, oftentimes companies have a tough time tracking who actually is a government employee.

Another prickly issue relates to senators or congressman who are physicians. If a congressman (and, perhaps his or her spouse), receives a transfer of value from a pharmaceutical manufacturer, they too receive transfers of value. "The elected official will not be happy about these disclosures," Papandrikos warned. The panel cautioned companies to have a discussion with their government relations department, if they have one, to consider the ramifications of reporting this information.

Physicians on the Board of Directors

Another potentially tricky question involves physicians who participate on the Board of Directors. One volunteer stated that the sole physician on her company's board no longer accepts any transfers of value, including small lunches.

Physician Ownership

Medical device companies and small pharmaceutical manufacturers often compensate their employees with stock options. Under the "Physician Ownership" aspect of the Sunshine Act reporting, companies must report any type of stocks or ownership interest these consultants possess.

Gaurica Manchanda-Chacko stated that her device company regularly hires physicians for one to two years to train other physicians, meaning they are only on the payroll for a short window. However, these consultants are physicians with a license to practice. Keeping track of these short-term employees, Manchanda-Chacko notes, requires a lot of work.

Physician Recruitment

The physician recruitment aspect of the presentation reinforced just how deep the reporting requirements of the Sunshine Act can go. Drug manufacturers, like any company, recruit potential employees. Sometimes recruits do not end up taking the job. Papandrikos illustrated a case where his company recruited a physician who was teaching at a university. Daiichi paid the traveling and hotel costs of the physician, but the physician ended up declining the offer. The company captured the spend data, and while they did not have to report prior to the Sunshine Act, it is easy to predict the strained relationship the physician would have had at his old job.

In light of the Sunshine Act requirements, companies now have to be proactive in informing physician recruits that travel and lodging are reportable transfers of value. Papandrikos advised consulting with human resources about the best way to disclose this information in a template format. Once physicians understand the implications, they would then need to decide whether to disclose the recruitment to their current employer, utilize video conferencing, or find another way to manage the new spotlight on physician payments.

Manchanda-Chacko concluded that the "reportability" comes down to the transaction, not the outcome. Thus, a doctor who is recruited for a couple of days can have a reportable transfer of value just as much as a long term client.


Co-promotion agreements make it possible for two companies to join together in the drug promotion effort, and perhaps utilize each company's strengths. However, this joint venture raises Sunshine questions: Whose responsibility is it to report the spend data?

Erik Eglite stated that Lundbeck has two large co-promotes. During the contractual phase of the relationship, the parties agreed "he who cuts the check reports the payment." Eglite contrasts this with a relationship where two companies split the reporting obligations when only one was making the payments. This would be complicated: a compliance officer for one company has no visibility as to what the other company's drug reps are doing. Eglite believes it is fair to rely on the other reps and their systems for reporting.

Papandrikos argued that this method is essential for an audit trail: A company that does not make a payment cannot tie the payment back to any transfer of value if they are audited down the road. He contrasted this with employee-physicians. Daiichi requires physicians to pay their own way when they attend a meeting by a co-promote partner.

Corporate Integrity Agreements

Victoria Browning stated that Allergan is under a CIA, and will plan to keep its CIA reporting separate from the Sunshine reporting. Browning believes this supplies flexibility because the CIA allows Allergan to post in ranges. She also noted that the challenging part is making sure both lists are consistent.


As our previous report on the Compliance Congress indicated, pre-disclosure—disclosing spend data to physicians prior to the Sunshine Act reporting—is a best practice for pharmaceutical companies. However, for some companies with limited resources and compliance personnel, this is not a possibility.

Daiichi will engage in a "hybrid" pre-disclosure by disclosing some spend data to physicians after Daiichi submits its report, but before the data goes public. In this way, Papandrikos stated that he hopes to get a head start on the dispute resolution process. Daiichi will not disclose every meal, but will pre-disclose bigger items to get an idea of how many disputes they will have come September 2014.

In Daiichi's pre-disclosure plan, physicians will have to apply for a log-in, and write any disputes on letterhead so Daiichi can validate that the individual is the one who received value. While this process isn't necessarily a roadblock, it will potentially act as a disincentive to doctors who would have otherwise disagreed with a transaction.

Papandrikos predicts a low amount of physician disputes, but admits that year one of the Sunshine Act will be the true test.

Edwards Lifesciences audited their meal transactions from 2009 to 2012. During that time physicians could reimburse the company to avoid a disclosed transaction, so Edwards mailed physicians their meal spend data. Manchanda-Chacko reported that the company was surprised by how many physicians disputed small meal transactions. Many doctors outright stated they were not present at a certain meal event for which Edwards had documented receipts.

In certain instances, Manchanda-Chacko noted that doctors threatened to use Edwards' competitor Medtronic's products because of the meal dispute. Clearly, doctors don't want their information disclosed. "Now expand that and display it on a public website," Manchanda-Chacko stated.

In anticipation of physician disputes, Edwards is "drawing a line in the sand" of $2,500 for pre-disclosures. Edwards is also breaking down healthcare professional (HCP) disputes into three categories:

  1. HCPs asking for backup information for a particular transaction;
  2. HCPs requesting information about what the Sunshine Act is;
  3. HCPs outright denying the charge.

For the third, perhaps most problematic prong, Manchanda-Chacko noted that while HCPs outright denying charges would be very difficult to defend, she anticipates these disputes would only be about meals or transactions-in-kind. Any cash transaction—from consulting, to speaking, to advisory boards—begins with a contract. Thus, the company would have good documentation, signed by the doctor.

Meals present an interesting challenge. Often these meals are informal meetings, where doctors do not sign or explicitly agree to the transaction. Thus, Manchanda-Chacko stated that Edwards was instating a policy where drug reps send a "thank you" email to doctors after meals. This correspondence would not be conclusive proof of the meal transaction, but it provides one more layer of documentation.

After running the email idea past the audience, however, a few problems came to light. For example, reps might include potentially off-label promotion in their "thank you" email—a risk that would clearly outweigh the benefit in that situation. But a compliance-drafted email template would provide both documentation to support a meal transaction and security from unintentional promotion.

Publication Support

The panel last addressed publication support, an issue we have written about numerous times. Who receives value when the drug company supports a physician's work on medical publications? Eglite noted that before further notice from the Federal Government, Lundbeck will not report instances where the only value to physicians is "glory" in name only. His view is that the manufacturers receive the value. "The doctor is not walking home with taxable income—it is not value to him, it is value to us," Eglite states. "We want the article written, and it is value to the public having the article published."

Papandrikos agreed that publications for company-sponsored trials are not a benefit to the physicians. However, he noted that if the company decides to support an Investigator Initiated Study (IIS), that support would be fully reportable. His interpretation is in line with the International Society for Medical Publication Professionals' (ISMPP) recently revised reading of the Sunshine Act. ISMPP now differentiates between "original research" and "author-initiated requests for help."


Manchanda-Chacko posited that when CMS finally audits the Sunshine data, CMS will look at the number of open disputes a particular company has. The panel agreed that the outliers are the most at risk—both on the high end of disputes and on the very low end.

The CBI Compliance Congress identified many important Sunshine Act considerations. The law itself is unclear in many important ways, and we hope CMS clarifies the most problematic areas, such as reprints and publication support, sooner rather than later.


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seems that government actions are mostly in service to special interests, the rest of the time likely inspired by fanatics
imho the latter, here

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