Attention doctors and drug makers: Sunshine Act database goes live Sept. 30th
On September 30th, the Centers for Medicare and Medicaid Services (“CMS”) will publicly release all sales and marketing expenses from drug companies to doctors and hospitals. While cost transparency tends to focus on medical providers and insurers, the financial relationships between drug manufacturers, physicians and teaching hospitals have become heavily scrutinized. The initiative, arising from a section of PPACA commonly known as the “Sunshine Act,” is part of nationwide effort to promote transparency throughout the healthcare industry. The law requires applicable manufacturers of covered drugs, devices, biological products and medical supplies to report to CMS information about payments made to physicians and teaching hospitals as well as any ownership and investment interests held. Submitting the information to a federal entity will hopefully reduce gifts and kickbacks that doctors sometimes receive when agreeing to use a drug company’s product.
Opponents of the Sunshine Act argue that a majority of the spending goes toward training doctors on how to use their products – not for perks such as meals and sporting tickets. Still, they worry that hospitals and physicians may stop using certain products given to them by medical device firms due to public stigma attached to financial spending. In turn, patients could be adversely impacted as they may not benefit from a new drug or medical product if a doctor ceases communication with a healthcare distributor. In addition, companies argue that implementation of the new federal requirement hurts business efforts, is extremely expensive and requires hiring additional staff to manage the system. These groups also believe that public disclosure of payments weakens the established relationships with physicians and hospitals and hinders the ability to cohesively work together to create and test critical medical products.
In 2008, Massachusetts enacted the Massachusetts Pharmaceutical and Medical Device Manufacturer Code of Conduct (“PCOC”), requiring drug and pharmaceutical manufacturers to disclose to the State all transactions higher than $50 paid to healthcare practitioners. The law also imposed a gift ban between doctors and drug and medical device makers. In order to alleviate repetitive reporting, Massachusetts recently released a Notice of Federal Preemption, stating that pharmaceutical and medical device manufacturers are not required to disclose information to the State that is also sent to CMS. However, any payments that fall outside of the federal mandate must still be reported and all other State requirements remain in effect.
Critics of the disclosure law cite Massachusetts as an example where relationships between for-profit companies and local hospitals have brought new medical products to market. According to the Massachusetts Department of Public Health, although figures show an increase in expenses going toward food (i.e. meals for doctors), it represents only 3% of total reported data. More than half of the money spent in 2012 includes reimbursement for research, continuing medical education, and serving on advisory boards. Some say the federal reporting categories are too broad and that publicly posting the data will make it difficult to separate what is a justifiable expense and what is not. Amid concerns about the site’s functionality and accuracy of information, the AMA and several physician groups are lobbying for a delay before the database is made public. This would give physicians more time to register and review their financial data to make sure it’s correct.
While it’s unclear as to how the medical industry will be impacted once the reports become public, drug companies should familiarize themselves with both the federal and state financial data reporting provisions. They must educate marketing staff professionals about complying with the Sunshine Act, and how various services, products and payments provided to physicians and hospitals are captured and described to the public. Those who are transparent in showing the public who they work with, what they are doing and why it is important will have the most success in complying with the law.
(Click here for previous WGA InsureBlog item on this topic from WGA Life Sciences team)
About the Author
Alyssa Martin is a Vice President at William Gallagher Associates, providing proactive service, effective decision-making and advanced problem-solving capabilities to a number of national clients in the mid-sized to large markets. She also works with key WGA clients to assist their employees with their individual Medicare choices as they are approaching retirement.