R. Jeffrey Layne, Benjamin Koplin and Selina Coleman
December 15, 2011
The Centers for Medicare & Medicaid Services ("CMS") has at last released long-awaited proposed regulations for the physician payment and ownership transparency provisions of the Patient Protection and Affordable Care Act ("PPACA"), commonly referred to as the "Sunshine Act." See PPACA § 6002, 42 U.S.C. 1320a-7h. The proposed rules address numerous areas on which the industry has been anxiously awaiting guidance; describe in detail how CMS may expect reporting entities to disclose the required data; and also propose some significant expansions to the Sunshine Act itself (under CMS's discretionary rulemaking authority). The rules are available at the Federal Register's Electronic Public Inspection Desk here and are due to be published in the Federal Register on December 19.
Some points-of-interest are:
- Due Date for Comments: Comments are due by 5 PM EST on February 17, 2012.
- Collection and Reporting Deadlines: As expected, CMS will not require applicable manufacturers and applicable group purchasing organizations to begin collecting required transfers-of-value information on January 1, 2012 (as required by the statute). In fact, CMS suggests that such entities will have at least 90 days after publication of the final rule to begin complying with the data collection requirements (though the proposed rules leave unanswered exactly when the final rules will be published). In an unexpected move, CMS is displaying some flexibility on the March 31, 2013 reporting deadline, seeking comments on the feasibility of submitting the required information for calendar year 2012 by that date.
- Definition of "Applicable Manufacturer" and "Common Ownership" Issues: The proposed rule definition of "applicable manufacturer" is both broader than some expected (in that CMS intends to exercise authority over any such manufacturer that sells or distributes its products in the United States regardless of where it actually produces the products, or where it is located or incorporated – e.g. international manufacturers), and also narrower than some expected (CMS's proposed definition tracks the statute closely, and is somewhat more limited than similar FDA and Medicare statutory and rule definitions). One proposal regarding the definition of "common ownership" among entities follows rules Medicare providers and suppliers may already be familiar with regarding disclosure of ownership and control interests. See, e.g., 42 CFR §§ 420.200 et seq.
- Definition of "Teaching Hospital": Because the term "teaching hospital" is not explicitly defined in the Sunshine Act, CMS has proposed that "teaching hospital" be defined as any institution that received payments for IPPS indirect medical education ("IME"), direct graduate medical education, or psychiatric hospitals IME during the most recent year for which such information is available. Recognizing that it may be difficult for manufacturers to identify such teaching hospital entities, CMS proposes publishing a list of teaching hospitals for which transfers of value will need to be reported. CMS expects the list to comprise approximately 1,100 hospitals; manufacturers currently reporting to State agencies will be familiar with interacting with such covered recipient lists.
- Rulemaking Discretion Regarding "Forms of Payment" and "Natures of Payment": While many in the industry expected CMS to define new forms of payment (the Sunshine Act requires applicable manufacturers to classify transfers of value as 1) cash or cash equivalents; 2) in kind items or services; 3) stock, options, or other ownership interests; or 4) other forms of payment determined by the Secretary of Health and Human Services), CMS declined to define any new "forms of payment" and instead limited itself to only the first three statutory types. And while CMS proposed a new catch-all "nature of payment" category titled "Other," it proposed no other substantive changes to the list of reportable natures of payment. (Attentive readers to the proposed rules will recognize a numbering error at proposed 42 CFR § 403.904(d)(2)(xvi); there are only 15 natures-of-payment. The proposed rule's numbering goes to 16.)
Readers will appreciate that the Sunshine Act represents an enormous regulatory burden on the drug, biological, device and supply industry and its customers. Indeed, CMS expects reporting entities to devote between one and fifteen FTEs to meeting the reporting requirements, and estimates that the total estimated burden of the Sunshine Act for the first year alone to be $224,360,000 – we expect that this is an under-estimation.
Fulbright's Health Care Practice Group will host a half-hour web seminar, Top Ten Things You Need to Know About the Proposed Sunshine Rules, on Monday, December 19 to discuss the aforementioned topics as well as several other key regulatory proposals and their significance for reporting entities and physicians/teaching hospitals alike. These will include proposals related to the definition of "covered drugs, devices, biologicals and medical supplies"; segregation of reportable expenses; processes for handling reporting discrepancies; indirect payments; and penalties. You may register for the seminar here.
Background on the Sunshine Act and the Regulations
Under the Sunshine Act, certain pharmaceutical, medical device, biological, and medical-supply manufacturers will be required to collect and report data on "transfers of value" that they provide to doctors and teaching hospitals. Manufacturers and group purchasing organizations will also be required to publicly report all ownership or investment interests held by physicians or members of their families. Violations of the disclosure requirements can result in civil monetary penalties ranging from $1,000 to $100,000. For more information on the Sunshine Act statute section, see Fulbright's March 31, 2010 Briefing here.
The Sunshine Act required the Secretary ("the Secretary") of the Department of Health and Human Services ("HHS") to issue regulations by October 1 (a task that was delegated to CMS). But the first Monday after the deadline, October 3, came and went without the release of regulations. On October 5, U.S. Senators Chuck Grassley (R-Iowa) and Herb Kohl (D-Wis.), who played key roles in drafting the Sunshine Act, issued a letter to CMS Administrator Donald Berwick pressing for details on why CMS missed the statutory deadline and when the agency intended to issue the regulations, as previously briefed by Fulbright here. In an October 25 letter available here, industry groups such as Advanced Medical Technology Association ("AdvaMed") and the Pharmaceutical Research and Manufacturers of America ("PhRMA") also urged the Secretary to act so that manufacturers could ensure that they meet their statutory obligations.
This article was prepared by R. Jeffrey Layne (email@example.com or 512 536 4593), Benjamin Koplin (firstname.lastname@example.org or 512 536 2439) and Selina Spinos (email@example.com or 202 662 4536) from Fulbright's Health Care Practice Group.
Web Seminar - Top 10 Things You Need to Know About the Proposed Sunshine Regulations
R. Jeffrey Layne