What is the Physician Payments Sunshine Act?

What is the Physician Payments Sunshine Act?

The Physician Payment Sunshine Act, part of the Affordable Care Act, was passed by Congress in 2010. Under the Sunshine Act, manufacturers of drugs, medical devices, biological, or medical supplies, and group purchasing organizations, are required to report all financial transactions/transfers of value to physicians and teaching hospitals. Ownership and investment interests of physicians and their immediate family members in these companies are also reportable. Manufacturers are required to submit the compiled reports to the Center for Medicare and Medicaid Services (CMS) on an annual basis. The information will then be made available on a public, searchable website. The program implementing the requirements of the Act is called “Open Payments” and will be administered by CMS.

Who Needs to Report

1. Entities operating in the U.S. who are engaged in the production, preparation, propagation, compounding, or conversion of medical devices, medical supplies, biologicals, and drugs.
2. An entity under common ownership (5% indirect or direct) with an entity engaged in the production, preparation, propagation, compounding, or conversion of medical devices, medical supplies, biologicals, and drugs and which provides assistance or support to such entity with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological or medical supply.
3. GPO’s including physician owned distributors

What is Assistance or Support?

Providing a service or services that are necessary or integral to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological or medical supply.

What is Operating in the U.S.?

1. Has a physical location within the United States or in a territory, possession, or commonwealth of the United States; or
2. Otherwise conducts activities within the United States or in a territory, possession, or commonwealth of the United States, either directly or through a legally-authorized agent. 
3. Includes foreign entities with a business presence or operations in the U.S.
4. Includes U.S. entities making payments to foreign entities which are then transferred to a physician, teaching hospital, or other covered entity

Who Is Excluded

1. Entities meeting the definition of “applicable manufacturer” that are engaged in the production, preparation, compounding, or conversion for the solely for use by or within the entity itself or by the entity’s own patients.

2. Wholesalers, distributors, repackaging entities

3. Pharmacies and compound pharmacies as long as the compound pharmacy meets certain conditions.

What must be reported?

1. Transfers of value made by a GPO or an applicable manufacturer (defined as something with “discernible economic value,” i.e, lunch or dinner or concert tickers) in connection with or in reference to a medical device, medical supply, drug, or biological to a physician or a teaching hospital (includes an academic medical center)
2. Indirect payments or other transfers of value made by a GPO or an applicable manufacturer  to physicians, teaching hospitals or physician owners or investors through a third party where the entity requires, instructs, directs, or otherwise causes the third party to provide the payment to a physician, teaching hospital, or a physician owner or investor.
3. Investment interests held by physicians (or their immediate family members) in applicable manufacturers
4. Physician ownership and investment interests in GPOs

What Drugs, Biologicals, or Devices are covered?

1. Drugs or biologicals are only covered if they require a prescription to be dispensed
2. Medical devices that require premarket approval or premarket notification pursuant to applicable FDA regulations
3. Devices, supplies, biologicals, and drugs are only covered if payment may be made through a federal healthcare benefit plan or a state plan (or a waiver of such plan), either separately  or as part of a bundled payment plan or system.

What must be reported in Phase I?

Phase I reporting includes the reporting of aggregate 2013 payment and investment interest data to CMS.

Phase II (May 2014)

Phase II reporting will begin in May of this year and will require applicable manufacturers and GPO’s to provide CMS with more specific, particularized payment data with respect to “transfers of value.”

Conclusion

14 days remain for group purchasing organizations (GPOs) and applicable manufacturers of medical devices, medical supplies, biologicals, and drugs to file their Phase I report with the Center of Medicare and Medicaid Services through the Open Payments system. Although the deadline is creeping closer and closer, it is not too late to make a good faith effort to comply with the new Rule. Indeed, entities that are required to file a report would be well-advised to do so since penalties for failing to report are severe. Entities that knowingly fail to file a report may be fined up to $1,000,000.00 whereas entities that fail to report a payment may be fined up to $10,000.00 for each payment they fail to report.

Author: Andrew Feldman

Mr. Feldman represents professionals, corporations, health care providers, and health care marketers in government investigations and prosecutions throughout the United States. Mr. Feldman works tirelessly for his clients from the time an investigation begins until the time a jury renders a verdict.

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