Life Science Compliance Update

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May 07, 2014

Massachusetts Department of Public Health Posts 2012 Payments to Healthcare Providers: 12% Drop in Payments from 2011, Payments to Hospitals Dropped 59%

In 2009, the State of Massachusetts enacted the Massachusetts Pharmaceutical and Medical Device Manufacturer Code of Conduct (PCOC), which requires the reporting of payments of more than $50 made to any health care practitioner by industry.  We have covered the release of the payment data in 2010 and 2011.

This past week, Massachusetts finally released the 2012 database. Virtually no news stories covered the spend reports, but companies have apparently reacted to the transparency requirements. From 2011-2012, the total payments from industry to healthcare providers and hospitals dropped -12% from about $62.5 million to $55.6 million.

Despite the decrease in total payments, for 2012 there was a significant increase in the number of payments. The change in the number of payments can credited to the increase in the food spend which was a result of a change in the Massachusetts Law in 2012. The Massachusetts Public Health Council amended the PCOC to allow companies to provide "modest meals" for healthcare providers. In 2012, there were 3,507 additional payments with 3,487 of those payments 99.9% resulting from the increase spending on meals.

Food spend

 Breakdown of Payments: The following pie chart shows that compensation and grants/education were the two highest forms of payments in 2012. Compensation for services accounted for 58% and Education, CME, and Training together accounted for 30% of pharmaceutical and device spending. This leaves 12% for Food, Charitable Donations, Marketing Studies and other spending. The exact dollar amount follows.

  • Compensation:  $32,097,007
  • Grants/Education:  $9,642,140
  • CME Conferences:  $5,085,729
  • Education/Training:  $2,170,666
  • Other:  $2,059,638
  • Food:  $1,556,465
  • Marketing Studies:  $1,507,442
  • Charitable Donation:  $1,447,269

Massachusetts Top 20 Companies: 

Top 20

The one story highlighting the release of this data, titled "Mass. Doctors are getting fewer gifts from drug and device companies," noted: "The largest amount of "gifts" in 2012 were given by Abbott Laboratories, which gave $3.2 million to 558 different recipients, followed by Sanofi and Boehringer Ingelheim, which gave $2.4 million and $2.3 million respectively. Massachusetts life science companies included in the top 20 were Genzyme (which gave $1.2 million), Covidien ($924,000), Boston Scientific Corp. ($834,000), Hologic ($753,000) and Millennium Pharmaceuticals ($737,000)."

This does not represent the most diligent reporting we have seen on stories about payments to health care providers and hospitals. For example, the $3.2 million from Abott represents 7 different categories of payments. As our Breakdown of Payments chart above shows, "gifts" is not the proper categorization of the total payments. Massachusetts breaks down the nature of payments. However, the story may foreshadow some selective journalism we may see once the Sunshine Act data is published later this year. 

As the chart below shows, the top 20 companies represent about half of the total payments in 2012, but have actually reduced their payments by much more than the Massachusetts total. The 23 percent drop from 2011-2012 for the top companies represents a far greater decline than the 12 percent drop industry wide in the first chart, above. 

Breakdown of recipients:

Physicians represent the largest slice of the pie with 56% of payments going to them, then followed by hospitals at 19% and clinical labs at 13% which together account for 89% of the payments from manufacturers in Massachusetts. Some of the "physicians" under the physician payment sunshine act such as Chiropractors, Optometrists and Podiatrists all received 1% or less of the total payments from manufacturers. Non physician healthcare providers received little in the way of payments amounting to 6% for al Pharmacists, NP's and PA's.

Massachusetts Top 50 Doctors from 2009-2012:

When we break down the data into the top 50 physicians, the total payments have gone up slightly since 2011, but the average payment and median have both gone down.

We are also interested in the effect that being named as one of the top industry-paid doctors has on practitioners in Massachusetts. The following table suggests that doctors do not like being called out in this data. The attrition rate is very high from year to year. Often doctors show up for one year, than fall off. We looked closely at the Top 50 doctors and have seen that for the most part, doctors drop off the list once they have been on there for one year.

Massachusetts Hospital Data

Physician payments took a hit from 2011 to 2012, but hospitals' pay took an absolute beating, dropping 59 percent during the year.

The ten Massachusetts hospitals that received the most payments from 2010 to 2012 have lost nearly $6 million. The top three hospitals who earned the most in 2012 — Massachusetts General, Brigham and Women's and Dana-Farber Cancer Institute — saw the dollar amount from drug and device companies decline $3 million in just two years, from $10.9 million in 2010 to $7.8 million in 2012. Brigham & Women's Hospital alone dropped from $4.1 million in 2011 to $1.3 million in 2012.

Commentary:  

Massachusetts has given us a bit of a preview for how the Physician Payments Sunshine Act will work later this year. It took Massachusetts almost a year and a half to publish one state's data. The Centers for Medicare and Medicaid Services (CMS) clearly have a tall order in publishing payments for all fifty states.

Also of note, given the immense expense that went into collecting this spending data, it is hard to imagine that less than $55 million was spent on compliance, which means that it was probably more expensive to collect the data than the actual dollars spent. 

Massachusetts is still considering how to treat preemption under the Physician Payments Sunshine Act beginning in 2013. It will be interesting to see what changes are made to what is reported to Massachusetts in the coming months, but right now there are no instructions for applicable manufacturers to file their 2013 report on the Massachusetts Department of Public Health website. There appears to be no instruction updates since May 2013. It is not clear if they ever decided what to do about the quarterly reporting for meals--the website says the regulation is being updated.

Given the small amount of recipients and payments which are not preempted under the Physician Payment Sunshine Act, a strong case could be made to completely drop the reporting requirements for Massachusetts. It is important that legislators consider the compliance cost vs. the usefulness of this paltry amount of additional data.

If companies have expenditures to hosptials or healthcare providers in Massachusetts according to the Department of Public Health they will still need to register and pay the $2,000 for each year 2013 and 2014.

Earlier this year, we published a transparency chart that examined the individual state reporting requirements. We noted that some states have expanded transparency requirements to nurse practitioners and physician assistants. States considering including these professions should consider that in Massachusetts they amounted to about 1 percent of all payments. With state resources strapped for cash, there are significantly better ways to control spending than to force companies to spend more on needless additional transparency.

View the entire data sets here: List of the Prepared Reports

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