As we have noted many times on this website, the Physician Payments Sunshine Act (Sunshine Act), which was included in the Patient Protection and Affordable Care Act, will have a tremendous impact on all aspects of the healthcare industry, particularly research, consulting, drug/device development, marketing, advertising, clinical trials, education, and even continuing medical education (CME).
Consequently, after the Sunshine Act was passed in 2010, the burden for writing the rules and regulations was passed on to the Centers for Medicare and Medicaid Services (CMS). Between March 2010 to the present, CMS has held only one (1) event related to the Sunshine Act: a Special Open Door Forum on Transparency Reports and Reporting of Physician Ownership or Investment Interests.”
As mandated by the Affordable Care Act, the deadline to draft the regulations was October 1, 2011. Clearly, CMS has failed to meet this deadline, and Senators Charles Grassley (R-IA) and Herb Kohl (D-WI), who are the authors and sponsors of the Sunshine Act, are not happy about it.
In fact, Senators Kohl and Grassley yesterday sent a letter to Donald Berwick, MD, Administrator of CMS, complaining about CMS’s failure to issue the proposed rules.
We should note however, that once a regulation is finished, it must go over to the Office of Budget and Management (OMB), which can take up to 30 days to review and suggest changes.
Kohl and Grassley Letter
At the beginning of their letter, the Senators explicitly recognized that, “many interactions between the pharmaceutical and medical device industries and medical professionals are beneficial to medical science and lead to innovation.” However, this comment was short lived.
Grassley and Kohl went on to explain how, “the Sunshine Act was developed after numerous investigations and hearings revealed that large sums of money were going to physicians for sometimes questionable purposes.” Of course, the Senators failed to explain that many of these investigations never led to any criminal prosecutions and were eventually dropped or no outcome was rendered. They also make it appear as if such practice was widespread, when in fact, it was only a few bad apples.
Nevertheless, the Senators maintained that, “Congress passed the Sunshine Act in response to growing concerns over industry payments to physicians and their potential negative effects on patient care and efforts to restrain healthcare costs.” They cite no data about such concerns, except for articles from the Wall Street Journal and New York Times, hardly empirical evidence of a “growing concern.”
Details of the Sunshine Act
The Senators then went on to explain the provisions of the Sunshine Act, which we have explained in detail many times.
Under the provisions of the law, manufacturers are required to report to the Secretary of the Department of Health and Human Services (HHS) all payments to physicians, including consulting fees, honoraria, travel, and entertainment, for public disclosure by the Secretary. The Secretary is then instructed to include the identity of the manufacturer, the physician, and the drug or device associated with the payment on the internet.
An additional provision requires manufacturers and group purchasing organizations (GPOs) to report all ownership or investment interests held by physicians or members of their family, also for public reporting by the Secretary.
Manufacturers and GPOs are required to start complying with the law by collecting data beginning January 1, 2012, and must begin reporting this information to the government on March 31, 2013. Beginning on September 30, 2013, the details of these payments are to be made available to the public. Violations of the disclosure requirements can result in civil monetary penalties ranging from $1,000 to $100,000.
Consequently, Kohl and Grassley noted that, “in order to ensure that manufacturers had adequate time to comply, the law required that the Secretary establish procedures not later than October 1, 2011, describing how manufactures are to submit information and how the information will be made available to the public.”
In addition, in establishing these procedures the Secretary was required to “consult with the Inspector General, affected industry, consumers, consumer advocates and other interested parties to ensure that the information made available to the public is presented in the appropriate context.”
Accordingly, Kohl and Grassley asserted that, “The deadline for establishing procedures has passed and there has not been, to our knowledge, adequate consultation with either industry representatives or consumer advocates.”
As a result, the Senators told Berwick they were “concerned with CMS’s failure to implement the statutory provisions on time with clear guidance, standards and definitions” because this “will create confusion among both manufacturers and consumers, potentially placing taxpayer dollars at risk.”
Specifically, while many of the large pharmaceutical and medical device manufacturers, universities, and even the National Institutes of Health (NIH) have already begun to implement disclosure policies voluntarily, the Senators “are concerned that smaller companies are waiting for clarity and direction from CMS and will find the lack of timely guidance burdensome and costly.”
They recognized that, “prompt federal guidance is urgently needed to ensure a smooth path toward increasing disclosure, eliminating conflicts, and ultimately providing patients with the tools they need to make informed health choices.”
Additionally, Grassley and Kohl noted how in a conference call with their staff on Friday, September 23, 2011, CMS assured the Senators that CMS had sent the proposed rule over to OMB for review. Accordingly, in order to monitor their progress on the proposed rules, the Senators asked CMS to answer the following questions in writing no later than October 14, 2011:
- What is your timetable for implementing the Sunshine Act?
- When did you originally send the proposed rule to OMB? Please include any dates that follow-up was conducted and for what reason.
- Why have you failed to meet the statutory deadline?
- What is the anticipated release date of the preliminary regulations? How long will the regulations be open for comment as required by the statute? What is your timeline for issuing final regulations?
In addition, the Senators asked Berwick to have the appropriate CMS officials contact their staff no later than October 7 to schedule an in-depth briefing on these issues and an open discussion on a path forward that allows both a timely implementation and a robust comment period.
Discussion
One could tell pretty early on that implementation of this provision was not going well. Earlier this year we had a meeting with key White House personnel on healthcare reform. When mentioned the Sunshine provision, and was greeted with a blank stare. They had no idea what this was and seemed surprised this provision made it in the bill.
Another sign that things were not going well was last December, when CMS published their list of tasks for the implementation of the Affordable Care Act. Section 6002, the Sunshine provision was not on the list.
Finally, from the town hall forum, it was clear that the CMS personnel were still trying to figure it how the disclosure and reporting system would work. The public open forum (conference call) on Sunshine was the only public open forum that CMS held since its enactment, and it was never listed again on their website.
With Berwick having no chance of confirmation, (he is a recess appointment) and leaving at the end of the year, it is doubtful that the pressure that Senator’s Grassley and Kohl are applying will do much good.
Moreover, it is important to recognize that Grassley and Kohl explicitly acknowledged that to date, “there has not been … adequate consultation with either industry representatives or consumer advocates.” This means that even when the proposed rule comes, it could be fundamentally flawed from the start because there has not been adequate input from affected stakeholders. Particularly, the Senators recognized the tremendous disadvantage that smaller companies are facing because of CMS’s failure to consult with interested and affected parties.
It is interesting that Grassley and Kohl are already admitting, even before the proposed rule comes out, that CMS’s failure will place “taxpayer dollars at risk” by creating “confusion among both manufacturers and consumers.”
In the end, it is likely that OMB is going through CMS’s proposed rule and scratching their heads. One thing they must do in their analysis is essentially a cost-benefit analysis. Like many other provisions contained in the Affordable Care Act, OMB will be looking for how much money CMS will have to spend to implement this program, staff, resources, oversight, etc., as well as how much it will take to maintain such a program over the years.
Implementing the Sunshine Act will cost hundreds of millions, if not billions of dollars, especially given there are 61,156 Medical Equipment & Device Companies in the U.S., 16,834 Pharmaceutical Companies and subsidiaries, and almost 1,000 Biotech Companies, and this does not even include distributors and wholesalers all potential reporting entities. Not to mention the thousands of hospitals and over 600,000 physicians that will be reported on.
At the end of the day, the real question is simple: who is going to use this data, and how is it going to save money in the American health care system? How is it going to improve patient care? How is it going to make our system more efficient and cost effective? Or is this just a waste of taxpayer dollars? Do patients really care?
Given that the authors of the Sunshine Act can’t answer these questions, and are already worried about putting taxpayer dollars at risk, maybe it’s time Obama takes his Executive Memorandum about reviewing regulations (and getting rid of bad ones), and applies it to the Sunshine Act, before it’s too late.
Accordingly, in order to monitor their progress on the proposed rules, the Senators asked CMS to answer the following questions in writing no later than October 14, 2011.