CMS Physician Sunshine Proposal Finally Sees Light of Day; HP&M Issues Summary Memorandum

By Alan M. Kirschenbaum & Nisha P. Shah –

In the December 19, 2011 Federal Register, CMS published a long-awaited proposed regulation to implement the transparency report requirements of the Patient Protection and Affordable Care Act.  Hyman, Phelps & McNamara, P.C. has prepared a summary of the proposed rule, which is available here.  The CMS proposal is unusual in the number of issues on which CMS is considering alternative approaches and soliciting comments.

 Among the more noteworthy features of the proposed rule are the following:

• Although the statute requires reporting by March 31, 2013 of payments and other transfers of value made in calendar year 2012, CMS has decided not to require manufacturers to begin collecting required information until 90 days after publication of the final rule.  This means that the initial report due on March 31, 2013 would cover only a portion of CY 2012.

• The reporting requirement would apply to foreign entities that market covered products in the U.S., as well as to entities that do not manufacture covered products themselves, but instead hold FDA approval, licensure, or clearance and contract out the actual manufacturing.

• The marketing of a single covered (i.e. federally reimbursable) product is sufficient to subject a manufacturer to the requirement to report all of its payments, even if it primarily manufacturers non-covered products.

• For purposes of determining whether an entity manufacturers covered products and is thus subject to the reporting requirement, covered products include prescription – not OTC – drugs and biologicals, and only devices requiring PMA approval on 510(k) clearance – not 510(k)-exempt devices.

• An activity associated with several purposes would need to be broken down into each segregable purpose and reported separately rather than as a single lump sum.  For example, if a payment to a consultant covered a service fee, travel expenses, and meals, the value of the fee, travel, and meals would have to be broken out and reported separately.

• An exemption for “educational materials that directly benefit patients or are intended for patient use” would not cover educational materials given to physicians for their own education.  This could mean that educational and promotional materials provided to physicians for their own education would have to be reported if they exceeded the de minimis threshold.

• Manufacturers who provide research funding to institutions would not have to report on the exact amount received by each principal investigator.  However, manufacturers who provide grants to third parties for CME would have to report on the amounts received by each physician faculty member if the identities of the faculty are publicly available.

• Provisions for a delay in CMS publication of payments to clinical investigators would apply to clinical investigations of new products, but not of new indications for currently marked products.

• Under an expansive definition of GPOs that are subject to a requirement to report physician ownership interests, a GPO could be interpreted to include a distributor.

These and other features of the CMS proposal that are described in our memorandum warrant comment by manufacturers.  CMS is accepting comments through February 17, 2012.