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Physician Payment Sunshine Act 2010 Proposed Rule Published – Overview and Summary of Requirements

  • By: Staff Editor
  • Date: December 21, 2011
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The Physician Payment Sunshine Act was passed in 2010 as part of President Barack Obama’s legislative agenda to overhaul healthcare. The Centers for Medicine and Medicaid Services (CMS) was tasked with the drafting of the rules to enforce the Act’s requirements. CMS delayed the publication of the proposed and the Act’s requirements, which were to be effective from January 1, 2012, has been pushed further back, giving drug and device companies more time to get their compliance processes in order.

 
The main purpose of the Physician Payment Sunshine Act was to bring about greater transparency into the relationships between the drug and device industry and physicians. The Act’s basic requirement is that manufacturers have to report payments greater than $10 to physicians.
 
Applicability
 
The proposed rule will apply to “applicable manufacturers”.
 
What is an applicable manufacturer?
 
According to the rule, an applicable manufacturer is an entity:
 
  • Engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply for sale or distribution in the US or
  • That supports an entity engaged in the above in the US
 
Covered Drug, Device, Biological or Medical Supply
 
According to the Act and proposed rule, the requirements apply to manufacturers of a “covered drug, device, biological, or medical supply."
 
A covered drug, device, biological or medical supply refers to any drug, biological product, device, or medical supply for which payment is "available" under Medicare, Medicaid, or CHIP.
 
Over-the-counter (OTC) drugs and biologicals are not covered by this rule.
 
Covered Recipients
 
Applicable manufacturers have to disclose payments made to covered recipients. According to the rule, a covered recipient is:
 
  1. a physician other than a physician who is an employee of an applicable manufacturer or
  2. a teaching hospital
 
 
Reports of payments or other transfers of value – requirements
 
The proposed rule requires manufacturers to annually report details or payments above $10 or other transfers of value to the CMS. The report must contain the following information for each payment or transfer of value:
 
  • Name of the covered recipient
  • Business address of the covered recipient
  • In case the covered recipient is a physician, his or her specialty and National Provider Identification (if applicable) should be provided
  • Amount of each payment or other transfer of value
  • Date of each payment or transfer of value
  • Form of each payment or transfer of value
  • Nature of payment – whether the payment was:
    • Consulting fee.
    • Compensation for services other than consulting.
    • Honoraria.
    • Gift.
    • Entertainment.
    • Food and beverage.
    • Travel and lodging.
    • Education.
    • Research.
    • Charitable contribution.
    • Royalty or license.
    • Current or prospective ownership or investment interests.
    • Direct compensation for serving as a faculty or as a speaker for a medical education program.
    • Grant.
    • Other
 
  • If a payment or other transfer of value is related to marketing, education, or research specific to a covered drug, device, biological, or medical supply, the name under which the covered drug, device, biological, or medical supply is marketed.
  • In cases where the applicable manufacturer makes a payment to an entity or individual on the designated behalf of a covered recipient, the name of the entity or individual should be provided
  • Whether the payment or other transfer of value was provided to a physician who holds an ownership or investment interest in the applicable manufacturer.
 
     
 
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Rule for research payments
 
Manufacturers to whom the rule applies should designate each research payment or transfer of value as direct research or indirect research:
 
  • Direct research: A payment provided to a covered entity directly by an applicable manufacturer or through a contract research organization
  • Indirect research: A payment made to a clinic, hospital, or other institution conducting the research, and that clinic, hospital, or other institution conducting the research in turn pays the physician covered recipient serving as the principal investigator
 
All payments or other transfers of value designated as research (direct or indirect) must be subject to a written agreement and research protocol.
 
What is excluded from reporting?
 
The following types of payments are excluded from reporting to CMS:
 
  • Transfers of value made indirectly to a covered recipient through a third party in cases when the applicable manufacturer is unaware of the identity of the covered recipient.
  • For 2012, transfers of value less than $10, unless the aggregate amount transferred to, requested by, or designated on behalf of the covered recipient exceeds $100 in a calendar year.
  • Product samples that are not intended to be sold and are intended for patient use.
  • Educational materials that directly benefit patients or are intended for patient use.
  • The loan of a covered device for a short-term trial period, not to exceed 90 days, to permit evaluation of the covered device by the covered recipient.
  • Items or services provided under a contractual warranty
  • A transfer of anything of value to a covered recipient when the covered recipient is a patient and not acting in the professional capacity of a covered recipient.
  • Discounts, including rebates
  • In-kind items used for the provision of charity care.
  • A dividend or other profit distribution from, or ownership or investment interest in, a publicly traded security or mutual fund.
  • In the case of an applicable manufacturer who offers a self-insured plan, payments for the provision of health care to employees under the plan.
  • If a covered recipient is a licensed non-medical professional, a transfer of anything of value to the covered recipient if the transfer is payment solely for the nonmedical professional services of the licensed non-medical professional.
  • If a covered recipient is a physician, a transfer of anything of value to the covered recipient if the transfer is payment solely for the services of the covered recipient with respect to a civil or criminal action or an administrative proceeding.
 
Penalties for failure to report
 
For failing to report, manufacturers will be subject to a civil monetary penalty of not less than $1,000, but not more than $10,000, for each payment or other transfer of value or ownership or investment interest not reported.
 
For knowingly failing to report, manufacturers will be subject to a civil monetary penalty of not less than $10,000, but not more than $100,000, for each payment or other transfer of value or ownership or investment interest not reported.
 
Additional Resources
 
Read CMS’ proposed Physician Payment Sunshine Act rule in full

 

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