CMS Belatedly Issues Sunshine Rule; HP&M Promptly Issues Summary

By Alan M. Kirschenbaum & Jennifer D. Newberger

Sixteen months past its statutory deadline, CMS issued last Friday a pre-publication version of its final regulation implementing the physician payment transparency provisions of the Patient Protection and Affordable Care Act. The rule is scheduled for publication in the Federal Register on February 8. However, not to lose any more time, Hyman, Phelps & McNamara has prepared a memorandum summarizing the final rule, which is available here.

Transparency reporting will impose a major burden on drug and device manufacturers. CMS estimates that the infrastructure and labor costs for manufacturers and GPOs to implement the requirements will total over $205 million in the first year alone. Having said that, CMS (with help from OMB) did make significant changes to its December 2011 proposed regulation, which somewhat narrow the scope of the rule. Among the more notable changes are the following (page references are to our summary memorandum):

  • Manufacturers will not be required to begin tracking payments until August 1, 2013, and the first report (for the remainder of 2013) will be due by March 31, 2014. (39)
  • The definition of an “applicable manufacturer” subject to reporting has been narrowed by excluding companies that have no physical presence or activities in the U.S. (3), and hospitals, hospital pharmacies, and compounding pharmacies that prepare drugs or devices for their own patients (4).
  • Compared with the proposed rule, the reporting burden is reduced for companies that only manufacture drugs or devices under contract (6-7); those whose gross revenue from covered products is less than ten percent of total gross revenue (7-8); those that assist corporate affiliates with manufacturing, marketing, promotion, sale, or distribution (8); and those with operating divisions that do not manufacture covered products (8).
  • Payments for continuing medical education programs that are accredited by the ACCME or other specified accrediting organization need not be reported, as long as the manufacturer neither pays faculty directly nor suggests or recommends faculty members. (16)
  • CMS has changed the rules on reporting meals provided to physicians in a group setting, so that meals will not be attributed to physicians who do not eat the meal, as originally proposed (16).
  • The proposed regulation’s confusing and duplicative methodology for reporting research payments has been replaced by a simpler system under which a research payment (regardless whether direct or indirect) is reported only once, along with information on the recipient institution and the principal investigator(s). (17-18)
  • Manufacturers will not be charged with knowledge of the identities of physicians paid by third parties to participate in blinded market research studies. (22)

The rule and preamble contain numerous other changes and clarifications, which are outlined in our memorandum.

Lest our readers become discouraged by the burden of transparency reporting and the complexity of the rule, we leave you with this quote from Sherlock Holmes in “His Last Bow,” by Arthur Conan Doyle:

There's an east wind coming all the same … It will be cold and bitter, Watson, and a good many of us may wither before its blast. But it's God's own wind none the less, and a cleaner, better, stronger land will lie in the sunshine when the storm has cleared.