Issue: April 2013
April 01, 2013
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Sunshine Act ushers in new era of physician-industry transparency

Issue: April 2013
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Desiring transparency and accountability, the federal government is requiring industry to report payments to physicians, starting Aug. 1 of this year.

The Physician Payment Sunshine Act requires the manufacturers of drugs, devices, biologics and medical supplies to disclose payments of at least $10 to physicians and teaching hospitals. Disclosures will be posted on a federal website in late 2014.

“We, frankly, are very pleased with some aspects of the final rule,” Marjorie Powell, senior assistant general counsel for the Pharmaceutical Research and Manufacturers of America (PhRMA), said. However, she expressed concern about a requirement that companies track grant payments to physicians.

At conferences, in peer-reviewed journals and in medical periodicals, physicians voluntarily disclose financial relationships with industry as a matter of course. Now, a new federal rule requires industry to report payments made to physicians. Detailed disclosures will be available for public scrutiny on a government website.

The National Physician Payment Transparency Program: Open Payments, also implements the Physician Payment Sunshine Act, which is a provision of the Affordable Care Act. The Centers for Medicare and Medicaid Services issued a final rule establishing the program on Feb. 1.

The Sunshine Act is about transparency, not about prohibiting relationships, according to Thomas A. Gustafson, PhD.

Source: Gustafson TA

The final rule requires manufacturers of drugs, devices, biologics and medical supplies reimbursed by Medicare, Medicaid or the Children’s Health Insurance Program to disclose to CMS payments, with a few specified exceptions, made to physicians and teaching hospitals. Manufacturers and group purchasing organizations must also report physician ownership and investment arrangements.

Data collection is scheduled to begin Aug. 1, and CMS plans to release the information to the public on a CMS website by Sept. 30, 2014.

Physicians, analysts and industry advocates voiced overall support for transparency, but some are concerned about specific reporting requirements and the cost of compliance, particularly for smaller drug and device companies.

According to Paul A. Volberding, MD, Infectious Disease News Chief Medical Editor, most physicians are advocates of transparency and disclosing relationships. However, the act doesn’t focus on disclosing the nature of relationships.

“The focus is too much on the money and not enough on the nature of the relationship,” Volberding said. “Many physicians have relationships with industry that are solely based on science and helping to facilitate drug development. However, there is no way to differentiate between those physicians and physicians who are conducting promotional lectures for drug companies. The two physicians could be paid the same amount, but the nature of the relationships is vastly different. The type of relationship needs to be disclosed, not just the dollar amount received.”

Thomas P. Stossel, MD, senior hematologist at Brigham and Women’s Hospital, Boston, said that the Sunshine Act will invite false allegations of abuse from adversaries of drug and device companies.

“The Sunshine Act has to be one of the most intrusive invasions of privacy of a single group in the history of the republic,” Stossel said. “The final report admits that no empiric basis exists for justifying it. It is a stimulus plan for critics of and litigators against the pharmaceutical and medical device industries and physicians who have relationships with them.”

Ultimately, patients will pay little or no attention to disclosures made under the Sunshine Act, Stossel said.

“Few patients have the time, interest or competence to interpret the complex and superficially explained disclosures,” he said. “Even if they did, most survey data indicate that patients have few concerns about physicians’ industry relationships.”

Overview of reporting requirements

The original version of the Physician Payment Sunshine Act was introduced in 2007, and an amended version was rolled into the Affordable Care Act, which was signed into law in March 2010.

The final rule mainly clarifies reporting requirements but leaves a few unanswered questions, according to Thomas A. Gustafson, PhD, a public policy advisor with the Washington, D.C., law firm Arnold & Porter. Gustafson summarized key provisions outlined in an advisory posted on the Arnold & Porter website.

“Now we know what we’re up against in terms of how CMS is going to implement this,” Gustafson said. “It doesn’t remove all uncertainty because you’ve got a bunch of lawyers with all kinds of additional questions, and people will be raising those as they unpack this rule and try to figure out what it’s going to mean for them operationally.”

He emphasized that the Sunshine Act does not prohibit proper financial relationships but, rather, provides transparency.

“The Sunshine Act doesn’t do anything to prohibit anything,” Gustafson said. “It’s all about transparency. There are extensive reporting requirements. They give dates and specifics. They lay out exactly what needs to be reported, what’s excluded from being reported.”

Physicians and teaching hospitals will not be required to disclose payments made to them, but they should check the website to make sure reports of those payments are accurate, Gustafson said.

“CMS says there will be an opportunity for physicians to register and receive information about what is being reported before it is made public. You don’t have to wait passively for it to go up somewhere and find out about it,” he said. “They have a 45-day window after CMS makes the information available for review to look at what’s there and to raise a dispute if they see that something is wrong. That can be as simple as a matter of somebody slipping a digit and reporting a $5,000 payment as a $50,000 payment. It could be that somebody has got John Smith, MD, confused with some other John Smith, MD, so you might not have received consulting payments when you’re listed as having done so.”

The rule requires eligible entities to report consulting fees and other compensation, honoraria, gifts, entertainment, food and beverages, travel, lodging, education and research. All payments of $10 or more must be reported.

“It’s basically a $10 standard with, plausibly enough, the notion that they’ll inflate it in the future, so it’s not like it’s going to be $10 for the next 100 years. It’ll grow up over time,” Gustafson said. “The minimum standards are statutory for 2013. I don’t know the degree to which they can do more than inflate it. … They’ll redo it on a regular basis.”

Those who make payments to physicians must find a category in which to report, Gustafson said.

“You have to fit in one of those. It’s not like, ‘Oh, I can’t find one that matches me, so I don’t have to report.’ You’ve got to shoehorn yourself in there somehow or other, insofar as you’re providing something of value to one of the covered recipients,” he said.

Paul A. Volberding

Paul A.
Volberding

Volberding said that the new reporting requirements, as well as the extremely low threshold of $10, will lead to some confusion about what physicians themselves have to report.

“There is a real risk that if we don’t know how to report something, then our reports appear to be inconsistent with the reports that the drug companies are providing,” Volberding said. “It can make innocent people appear guilty.”

Some provisions are more subtle. For example, when a physician has an ownership interest in a manufacturer or group purchasing organization, the manufacturer or group purchasing organization must report that arrangement, he said.

Reporting of physician stock holdings in publicly owned companies is not required. Physicians who invent products and have a vested financial interest in companies developing and marketing those products, however, will see those arrangements reported.

Physicians involved in research paid for by manufacturers will also see that information posted. However, manufacturers may defer public reporting of some research-related information for up to 4 years, Gustafson said.

“At the end of the 4 years, or if the deferral doesn’t apply, then your information is going to be up on the website,” he said. “There’s nothing wrong or underhanded about that. It’s just that information that used to be more private is more public. We expect that some companies are going to find this pretty interesting because they’ll be able to see what their competitors are doing at a more detailed level than they had previously in terms of the kinds of investigations that they’re undertaking.”

One problem is that there are reporting requirements for a variety of entities, and there is no universal reporting policy. Different entities have different requirements, and this leads to confusion about what needs to be reported.

“We should be pushing for consistency, in the form of a single, national reporting mechanism,” Volberding said. “Some reporting mechanisms are really complex and confusing. This increases the risk of inconsistency across the board.”

Potential impact on research

While designed to close loopholes that may lead to abuse, the Sunshine Act places an inordinate burden on industry and government, Gustafson said.

“The whole rule, I think, is set up in a comparatively reasonable way to try to avoid loopholes that would allow people to avoid their responsibilities, at least in some obvious ways. But it’s going to impose a very expensive reporting burden for those reporting and for CMS on receiving all these reports and translating them into what needs to go into a Web presentation,” he said.

Stossel said that the annual cost of implementation is estimated at $269 million in the first year and $180 million the second year.

“These estimates depend entirely on guesses regarding compliance management by individual physicians and industry and corporate accounting officials,” Stossel said. “It makes no mention of the predictable requirement for far more expensive legal advice that will be necessary to navigate the minutiae. Most importantly, the estimates do not take into account the opportunity costs of diverting resources from research, development and education to compliance activities. Dollars far better applied to innovation and education will shift to Sunshine management. This regulatory burden disproportionately compromises small companies at the cutting edge of innovation.”

There is some concern that the Sunshine Act may ultimately hinder product development and innovation. In infectious diseases, the development of new antimicrobials for the significant increase in drug-resistant infections requires collaboration between the industry and physicians.

“When it comes to antibiotics, we have a distinctive circumstance compared to other specialties,” William Schaffner, MD, an Infectious Disease News Editorial Board member, said. “We have been working with industry and Congress to create an environment in which it will be financially attractive for industry to devote substantial resources to developing new antimicrobials. We are working together closely as partners for the benefit of public health.

In addition, industry-physician relationships are important for the development of vaccines. According to Schaffner, the United States has the best infant, childhood and adolescent immunization program in the world, which would not be possible without the collaboration between industry and physicians.

“Our colleagues in the industry do a lot of basic research and, more importantly, to work through all of the regulatory mechanisms necessary to bring vaccines to market,” Schaffner said. “When we give educational talks about vaccines, we always confine ourselves to the indications recommended by the Advisory Committee on Immunization Practices. To that extent, there is no opportunity for the abuse of industry relationships that might exist in other pharmaceutical areas.”

Industry advocates

Representatives from the Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry’s largest advocacy organization, voiced overall support for the Sunshine Act but had a few basic concerns.

“We support the Physician Payment Sunshine Act because we think transparency is important,” Marjorie Powell, PhRMA senior assistant general counsel, said. “We, frankly, are very pleased with some aspects of the final rule. We think CMS drastically streamlined the reporting of research. That will make it much more accurate and comprehensible. So, rather than doing all of the direct and indirect payments, you just send the entity to whom the payment goes and you identify the principal investigator.”

Powell said PhRMA appreciates that the final rule does not require companies to report the cost of producing and distributing items that are used for patient education, such as anatomic models and brochures used in physicians’ offices.

“We think those things are very helpful for patients,” Powell said.

However, Powell is concerned about a requirement that a company providing a grant must track the grant payment for the remainder of the year and an additional 6 months.

“In case the grantee makes the decision to spend some of that money by hiring a doctor to come and doctor their people, the pharmaceutical company has to know that and report that as a payment from the company to the doctor. We think that’s sort of a false statement that the pharmaceutical company pays the doctor because the doctor may not even know where the money came from,” Powell said.

Questions remain about how CMS will post the information on its website and what kinds of contextual details will be provided, Powell said.

“We think that’s vitally important because, in order to understand the importance of research and physicians’ involvement in research, the public and patients are going to need a lot of information,” she said.

The Sunshine Act will enhance public understanding of industry-physician relationships, according to Christopher White, AdvaMed general counsel and senior executive vice president.– by Matt Hasson and Emily Shafer

References:

Affordable Care Act “Sunshine” rule increases transparency in health care. Centers for Medicare and Medicaid Services. http://www.cms.gov/apps/media/press/release.asp?Counter=4520&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date. Published Feb. 1, 2013. Accessed March 13, 2013.
Final rule issued for Physician Payment Sunshine Provisions of the Affordable Care Act. Arnold & Porter LLP. http://www.arnoldporter.com/resources/documents/Advisory%20Final_Rule_Issued_for_Physician_Payment_Sunshine_Provisions_Affordable_Care_Act.pdf. Published February 2013. Accessed March 13, 2013.
PhRMA statement on Sunshine proposed rule. Pharmaceutical Research and Manufacturers of America. www.phrma.org/media/releases/phrma-statement-sunshine-proposed-rule. Published Feb. 17, 2012. Accessed March 13, 2013.
Physician Payments Sunshine Law. Advanced Medical Technology Association. www.advamed.org/issues/16/physician-payments-sunshine-law. Accessed March 13, 2013.

For more information:

Paul A. Volberding, MD, can be reached at paul.volberding@ucsf.edu.
Thomas A. Gustafson, PhD, can be reached at Arnold & Porter LLP, 555 Twelfth Street NW, Washington, DC 20004-1206; 202-942-6570; fax: 202-942-9999; email: tom.gustafson@aporter.com.
William Schaffner, MD, can be reached at 
william.schaffner@vanderbilt.edu.
Thomas P. Stossel, MD, can be reached at Hematology Division, Brigham and Women’s Hospital, 1 Blackfan Circle, Karp 6, Boston, MA; 617-355-9001; fax: 617-355-9016; email: tstossel@partners.org.
Christopher White can be reached at Advanced Medical Technology Association, 701 Pennsylvania Ave. NW, Suite 800, Washington DC 20004; 202-783-8700; fax: 783-8750; email: amcmaster@advamed.org.

Disclosures: Gustafson, Schaffner, Stossel and Volberding have no relevant financial disclosures. Powell is senior assistant general counsel at PhRMA. Arnold & Porter write a monthly column for Healio.com.



POINT

Industry, not physicians, bears heaviest burden

Actually, I see very little impact of any kind. There are some positive results: improved transparency and improved physician confidence in clinical research.

William L. Rich

Our current conflict-of-interest attestations at the start of a clinical talk are useless. The listing of a conflict as an "industry consultant" or "member of a company’s speakers bureau" may be a benign relationship or one with six-figure revenues. The new rules will clarify meaningful financial conflicts.

Many young physicians have become very cynical when listening to talks dealing with new techniques, drugs or devices. The more meaningful revelation of financial involvement will help clear this pervasive cynicism. Physicians who have had a major role in the development of a device or drug should be proud of that relationship and have no qualms about revealing any monetary benefit that has been earned.

I see little downside for practitioners but an onerous reporting burden for our partners in industry.

William L. Rich III, MD, is medical director of health policy for the American Academy of Ophthalmology. Disclosure: Rich has no relevant financial disclosures.

COUNTER

Physicians have incentive to consult for industry

The crux of the issue is the trust between doctor and patient. To disclose financial relationships between medical industry and an individual physician creates a level of transparency that can increase trust because that relationship can be discussed between the doctor and the patient, often increasing the patient’s appreciation of the doctor’s honesty and clinical, research and business activities. Of course, if financial matters are not discussed, negativity may cloud disclosure, with patients becoming suspicious that their doctor is being bribed or bought. After all due consideration and analysis, patients express their confidence in the knowledge and ethic of the physician when they follow the doctor’s recommendation. 

George O. Waring

On the professional side, disclosure may create jealousy because some doctors have developed research skills, talent in business consultation, and teaching abilities that deserve compensation from industry when applied properly. Others, devoid of such skills, may be jealous that their colleagues are so rewarded. Doctors cannot function without medical industry and the medical industry cannot function without doctors; the two are interdependent and must develop productive cooperative relationships. Disclosing these relationships is likely to increase the respect that a patient has for their doctor who is active in the business side of their profession.

Most doctors do not share the financial details of their medical practices with each other, such matters being considered appropriately confidential. Sunshine laws do not require full financial disclosure concerning a doctor’s financial life but only disclosure of compensation paid from individual companies to the individual doctor. 

Contemporary podium presentations include disclosures of potential conflicts of interest, but these are seldom informative. Sunshine laws answer a broader question of not only with what commercial firms a doctor may have a conflict of interest, but also "how much."

George O. Waring III, MD, FACS, FRCOphth, is clinical professor of ophthalmology, Emory University, Atlanta. Disclosure: Waring has no relevant financial disclosures.