Shedding Some Light on the ACA’s Sunshine Provisions

Posted by on October 01, 2012
Affordable Care Act, Fraud and Abuse

On September 12, 2012, the Senate Special Committee on Aging held a roundtable hearing on the Sunshine Provisions in Section 6002 of the Patient Protection and Affordable Care Act (the “Sunshine Provisions”).  Under the Sunshine Provisions, certain drug and device manufacturers must annually report to the government many payments and other transfers of value they make to physicians and teaching hospitals.  Certain drug and device manufacturers and group purchasing organizations (“GPOs”) must also report ownership and investment interests in them held by physicians and their immediate family members.  In this post, we will report on the roundtable hearing, provide an overview of a Proposed Rule regarding the Sunshine Provisions, and discuss their implementation.

At the roundtable hearing, the Committee’s Chair, Senator Herb Kohl, and various industry stakeholders expressed frustration with the Centers for Medicare and Medicaid Services’s (“CMS”) failure to issue a Final Rule on the Sunshine Provisions.  CMS issued a Proposed Rule in December 2011 outlining how this reporting regime would work.  The Proposed Rule raises, however, as many issues as it answers, and CMS is currently considering over 300 comments submitted by the public. Senator Kohl called the delay “both troublesome and not acceptable.”  He also said he expected CMS to honor its commitment to issue a Final Rule by the end of 2012.  Various stakeholders at the roundtable opined that it would take the industry at least 6 months after the Final Rule is issued to implement it, given the numerous business processes involved, such as drafting procedures, configuring and testing IT systems, and training employees.  Stakeholders also warned that ensuring accurate reporting will require significant planning, so as to prevent unwarranted governmental investigations or inferences of impropriety between physicians and industry.

The Proposed Rule sets forth the following reporting requirements: 

Which Entities Must Report?

Two types of entities must provide Sunshine Provisions reports: (1) applicable manufacturers and (2) applicable group purchasing organizations.

An “applicable manufacturer” generally includes entities engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply for sale or distribution in the United States, as well as certain entities under common ownership with such an entity.  In general, a drug, biological, or medical supply is “covered” if payment is available for it under Medicare or Medicaid and if it requires a prescription to be dispensed.  A device is “covered” if payment is available for it under Medicare or Medicaid and it requires FDA premarket approval or notification. 

An “applicable group purchasing organization,” in turn, generally means an entity that both (1) operates in the United States and (2) purchases, arranges for, or negotiates the purchase of a covered drug, device, biological, or medical supply for a group of individuals or entities, and not solely for use by the entity itself.

What Must Be Reported?

Applicable manufacturers generally must report payments or other transfers of value to any “covered recipient.”  “Covered recipients” generally include physicians, dentists, podiatrists, optometrists, licensed chiropractors, and teaching hospitals.  Some examples of payments or transfers of value include consulting fees, compensation, honoraria, gifts, entertainment, food and beverages, travel and lodging, education, research, charitable contributions, royalties, licenses, ownership or investment interests, and grants. The report must include the name of the covered recipient and the amount of each payment or transfer of value.

In addition, applicable manufacturers and applicable GPOs generally must report ownership or investment interests held by physicians or their immediate family members.  These reports must include the name of the physician, the dollar amount invested by each physician or immediate family member, and the value of the investment. 

When Will Collecting and Reporting Begin?

It’s difficult to predict when applicable manufacturers and applicable GPOs must begin collecting and reporting Sunshine Provision information to CMS.  According to a posting on The CMS Blog, because of the delay in issuing final regulations, CMS will not start requiring data collection until after January 1, 2013.

Next Steps

While CMS finalizes the regulations, drug and device manufacturers and GPOs must begin to determine whether they are covered by the Sunshine Provisions.  If so, manufacturers must also determine how to identify and track payments or transfers of value they make to physicians or teaching hospitals.  And applicable manufacturers and applicable GPOs will both need to determine whether any physicians or their immediate family members have a reportable ownership interest.  In anticipation of the Final Rule, reporting entities will need to develop the operational and systems capacity, and the organizational buy-in, to ensure full compliance with the Sunshine Provisions.  Future posts will further explore the evolving requirements and implementation of the Sunshine Provisions.

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