Life Science Compliance Update

July 20, 2015

Open Payments: CMS Clarifies Continuing Medical Education FAQs, Confirms CME Funding Must Meet the Definition of "Indirect Payment" To Be Reportable

  CMS

On Friday, the Centers for Medicare and Medicaid Services (CMS) announced they had updated the Law and Policy page on the Open Payments website with information about the revised reporting requirements for continuing medical education. CMS also announced three FAQs for CME reporting. This information isn't necessarily "new" as CMS revised this page several months ago to correct what many felt was a misinterpretation of the Sunshine Act Final Rule regarding CME payments. This was, however, the agency's first announcement about the revision.

Under the Physician Payments Sunshine Act, pharmaceutical and device manufacturers must report to CMS direct or indirect transfers of value made to physicians and teaching hospitals. "Indirect payments" are situations where a manufacturer "requires, instructs, directs, or otherwise causes" a third party to provide payment or transfer of value, in whole or in part, to a covered recipient. 

Consistent with the regulations, in October 2014 CMS explained in the preamble to its final amended regulations to Open Payments that if a pharmaceutical or device manufacturer “provides funding to support a continuing education event but does not require, instruct, direct, or otherwise cause the continuing education event provider to provide the payment or other transfer of value in whole or in part to a covered recipient,” manufacturers are not responsible for reporting that transfer of value. ACCME-accredited CME, for instance, requires a complete firewall between commercial support and an education program. Manufacturers who provide CME funding must have absolutely no control over: (a) Identification of CME needs; (b) Determination of educational objectives; (c) Selection and presentation of content; (d) Selection of all persons and organizations that will be in a position to control the content of the CME; (e) Selection of educational methods; (f) Evaluation of the activity. (See ACCME Standards for Commercial Support 1.1)

CMS also states: “[n]ot all indirect payments are required to be reported, regardless if it is a payment to a continuing education organization.” For instance, if a manufacturer does “require, instruct, direct, or otherwise cause” the CME provider to provide the payment to a covered recipient, but does not know the identity of the covered recipient during the reporting year or by the end of the quarter of the following reporting year, such payment would not be reportable. CMS’s latest FAQs, outlined below, correctly re-iterate these points. 

In summary, starting in 2016 (with reporting due by March 31, 2017), CME related payments are only reportable if a manufacturer determines that the payment or transfer of value meets the definition of an “indirect payment” and the manufacturer is aware of the covered recipient’s identity within the reporting year or second quarter of the following year.

View screenshots from CMS's previous language here (zoom as necessary with the PDF). 

Frequently Asked Questions

If an applicable manufacturer gave a contribution to support a medical conference, but did not have any say in the content, speakers, or attendees, would this be considered an unrestricted donation? Or, is the fact that the money was specifically for an educational conference mean that it is, by definition, restricted?

Unrestricted donations to a medical conference as described in this FAQ would not be subject to reporting under Open Payments. Although there is no formal definition of an unrestricted donation, in this case we can take that term to mean a grant given by a reporting entity to a professional association for use without any restrictions, preconditions, or post-conditions in order to assist the professional or educational association with its administrative or educational needs. In accordance with the definition of an indirect payment at 42 C.F.R. §403.902, an applicable manufacturer that contributes funding to a medical/educational conference would be required to report the payment if the reporting entity determines that it meets the definition of an indirect payment at 42 C.F.R. §403.902. An indirect payment is defined at 42 C.F.R. §403.902 as a payment or other transfer of value made by an applicable manufacturer to a covered recipient through a third party, where the applicable manufacturer requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value, in whole or in part, to a covered recipient.

Starting with 2016 Open Payments data collection and reporting to CMS in 2017, are payments provided by an applicable manufacturer to a continuing education organization for continuing education events reportable?

Yes, the payment is reportable if the applicable manufacturer determines that the payment meets the definition of an indirect payment, and the applicable manufacturer knows or can determine the identity of the covered recipient by the end of the second quarter of the following reporting year. An indirect payment is defined at 42 C.F.R. §403.902 as a payment or other transfer of value made by an applicable manufacturer to a covered recipient through a third party, where the applicable manufacturer requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value, in whole or in part, to a covered recipient. In accordance with 42 C.F.R. §403.904(i)(1), indirect payments or other transfers of value do not have to be reported if the applicable manufacturer is unaware of the identity of the covered recipient during the reporting year or by the end of the second quarter of the following reporting year.

If several applicable manufacturers contribute funding to a continuing medical education (CME) program and there are several speakers, how is this reported?

In accordance with the definition of an indirect payment at 42 C.F.R. §403.902, applicable manufacturers that contribute funding to a CME program with several speakers are required to report the payments provided to physician speakers if they determine that the payments meet the definition of an indirect payment. An indirect payment is defined at 42 C.F.R. §403.902 as a payment or other transfer of value made by an applicable manufacturer to a covered recipient through a third party, where the applicable manufacturer requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value, in whole or in part, to a covered recipient.

Consistent with the CMS Final Rule (CMS-5060-F), there are instances where indirect payments provided by an applicable manufacturer to a CME program are not reportable. In accordance with 42 C.F.R. §403.904(i)(1), indirect payments or other transfers of value are excluded from reporting where the applicable manufacturer is unaware of the identity of the covered recipient during the reporting year or by the end of the second quarter of the following reporting year.

If the payment is a reportable payment, then the amount should be equally divided among the known covered recipient speakers.

 

July 17, 2015

Open Payments Data Reveal Compliance Efforts Are Not In Vain, by Seth Whitelaw

 

Seth Whitelaw is President and CEO of Whitelaw Compliance Group, LLC.

As a compliance officer, I always looked for data to support the fact that the compliance program made a difference; something I knew intuitively, but could find little objective support.  This week, Policy and Medicine in conjunction with Open Payments Analytics published a more detailed analysis of the second round of Open Payments data published by the Centers for Medicare and Medicaid Services (CMS). Finally, I believe we have support that the efforts by life science compliance officers and their departments, together with the PhRMA and AdvaMed codes governing interactions with healthcare professionals is making a difference. Here are some figures that struck me.

  1. 49% of physicians in the database received less than $100. As noted by the Policy and Medicine article, this could simply be an indicator that companies are being overly conservative in their reporting. However, I believe it also indicates that life sciences companies are not making large numbers of high value payments to the majority of physicians as initially thought by some advocacy groups.

  2. Out of $6.49 billion worth of transactions, only $29 million (or 0.45%) are attributable to gifts. Both the PhRMA and AdvaMed codes have prohibited gifts for a physician’s personal benefit for many years now, and so do most company policies. While further research is needed, the remaining gifts could be attributed to companies, who do not support the industry codes, or it could simply be educational items, such as medical textbooks, that CMS’s own FAQ states can be classified as a gift for Open Payments purposes (CMS FAQ 8254). Regardless of the reason, it is important to recognize gifts being provided to physicians account for less than ½% of all the transactions. It was not long ago that gift giving was prevalent in the industry, now it appears to be more of a rarity.

  3. The average consulting fee is $2,726. Given that many industry events, such as investigator meetings and advisory boards are daylong events, this translates into an hourly rate of between $340/hour and $390/hour depending on whether a seven or eight hour day is used.   These rates strike me as reasonable, especially when you consider the level of professional qualifications those physicians involved, as well as the costs associated with being away from the practice.

  4. The most travelled to destination was Chicago followed by New York and Dallas. Once again, I believe we need to take note how things have changed. Fewer and fewer industry meetings are being held in resort destinations. Instead of industry meetings being viewed as pseudo-vacations, now the emphasis is on output and work. The industry codes and the compliance professionals for years have been insisting that the resort destinations must go, and it appears that they are.

While the work of life science compliance departments is by no means finished, I think it is important to celebrate the fact that over the last 20+ years since the National Medical Enterprises and C.R. Bard, Inc. cases, life science compliance has come a long way, and has made a difference; one that we can now measure empirically.

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