Pharmaspective

Sunshine Act: Reporting Food, CME, and Research…Oh My!

By Sarah Canberg

 

As the life sciences industry continues to prepare to begin collecting data on payments and transfers of value to physicians and teaching hospitals on August 1, 2013, applicable manufacturers look for clarity and guidance on the scope of information to be reported. The final Sunshine Act regulations and lengthy preamble include numerous revisions to the draft regulation.  Here, we focus on a few key special rules for reporting food and beverage in a group setting, payments or transfers of value to accredited continuing education providers, and payments for research.

 

Allocating Food and Beverage in Group Setting

The final regulations modified how applicable manufacturers are to capture and report food and beverages provided to covered recipients in a group setting.  Applicable manufacturers are to report the cost of the group meal by allocating the cost per person, not the cost per covered recipient, to each covered recipient “who partook in the meal,” which is a substantial change from the draft regulations.  For example, if an applicable manufacturer brings a platter of sandwiches to a doctor’s office that costs $150 and 5 physicians and 5 office staff members participate in the meal, the applicable manufacturer  must report the cost per person ($150/10 = $15) for each of the 5 participating physicians. This is a common sense approach to reporting meals in a group setting.

 

Exclusion of Speaker Payments for Qualifying CME Programs

In recognition of the unique and important role of industry support for accredited or certified continuing education, CMS excluded payments to speakers participating in qualifying continuing medical education (CME) programs from reporting requirements.  For speaker compensation to be excluded from Sunshine Act reporting requirements, all of the following conditions must be met:

 

(1)    the program meets the accreditation or certification requirements for continuing education of one of five specifically listed organizations (e.g., the Accreditation Council for Continuing Medical Education (ACCME));

(2)    the applicable manufacturer does not select the covered recipient speaker or even provide a distinct list of potential speakers to be considered by the CME provider; and

(3)    the applicable manufacturer does not pay the covered recipient directly.

 

If all of the above conditions are met, the payment to the covered recipient to serve as a speaker at the qualifying CME program will not be subject to reporting.  On the other hand, if the above conditions are not met, such payment must be reported under the either of the appropriate nature of payment categories:

 

• “Compensation for serving as faculty or as speaker for an accredited or certified continuing education program,” or

• “Compensation for serving as a faculty or as a speaker for a unaccredited non-certified continuing education program.” 

 

Special Rules for Reporting Research

Following the publication of the draft Sunshine Act regulations in December 2011, the lack of clarity surrounding the reporting of research payments caused confusion and concern throughout the life sciences industry.  With the release of the final regulations, CMS’ substantial modification of reporting requirements for research-related payments reflected thoughtful revisions aimed at capturing the actual payment stream for research. 

 

In the final regulations, CMS removed the requirement for the applicable manufacturer to indicate whether the payment was direct or indirect, which was a source of much of the confusion in the draft regulations and concern that many payments would be double reported.  Instead, the final regulations require that research payments be reported separately from other reportable payments and transfers of value.  Further, research payments are to be reported as a single payment including the name of the individual or entity that actually received the payment for the research services and indicating the principal investigator(s) of the applicable research payment.  For example, if an applicable manufacturer provides payment to a CRO, and the CRO provides the payment to the academic institution conducting the research that involves Dr. John Smith as the principal investigator, the applicable manufacturer will report the payment as a single payment to the academic institution and include Dr. John Smith as the Principal Investigator in that single reportable interaction.  The final regulations require specific information to reported regarding the research payment, such as the name of the research study and the names of the related covered product (and National Drug Code if a drug or a biological), but also provides the option for the applicable manufacturer to provide context for the research payment.

 

While the regulations set forth the data elements that must be collected and reported for each of the above interactions, we look forward to reviewing the report layout, especially as related to the section for research-related payments.

 

For additional information on the Sunshine Act and to view a copy of the final regulations as released by CMS on February 1, 2013, please see visit the Federal Register website. 

 

Don't forget to check out yesterday's post for The Who and the What of the Sunshine Act Regulations.

The Who and the What of the Sunshine Act Regulations

By Sarah Canberg

With the long awaited Sunshine Act final regulations in hand, members of the life sciences industry continue to sift through the 285 page regulatory tome to parse out the regulatory reporting requirements that resulted from Centers for Medicare & Medicaid Services’ (CMS) consideration of over 373 comments from medical professionals and organizations, industry members and organizations, consumers, and others. While we do not attempt to summarize the entirety of the final regulations here, we highlight a few key changes to definitions and modifications to reporting requirements.

 

The Who

The first step for many in the life sciences industry is an evaluation of whether their company has an obligation to comply with the Sunshine Act.  In making this determination, the company must determine if their operations fall within the definition of an “applicable manufacturer” of a “covered drug, device, biological, or medical supply” which is operating in the United States.  The final regulations provide clarification and details regarding these two key definitions.

 

“Applicable Manufacturer”

Here, we highlight a few noteworthy clarifications included in the preamble regarding the scope of who is included and excluded within the definition of “applicable manufacturer.”  The regulatory definition of applicable manufacturer includes distributors and wholesalers that take title to a covered drug, device, biological or medical supply.  As a result, these entities are subject to the reporting requirements.  While distributors that do not take title to covered products do not fall within the definition of applicable manufacturer and are not subject to reporting.  It is important to note that distributors that qualify as “applicable manufacturers” have an independent obligation to submit reports pursuant to the Sunshine Act. 

 

The final regulations confirm the “all in” concept that requires a company that falls within the definition of an applicable manufacturer to report all payments or transfers of value to covered recipients regardless of whether the payments are related to covered products.  Yet, the final regulations provide that if an applicable manufacturer has less than 10% of its total (gross) revenue from covered drugs, devices, biologicals or medical supplies during the previous fiscal year, then the applicable manufacturer may report payments or other transfers of value related only to its covered products.

 

Further, if an applicable manufacturer has separate operating divisions that do not produce covered products (the example provided is an animal health division), the final regulations state that such divisions will only be required to report payments or other transfers of value related to the company’s covered products.

 

“Covered Drug, Device, Biological or Medical Supply”

The definition of “covered drug, device, biological or medical supply” includes two parts: (1) a drug, device biological or medical supply for which payment is available under Medicare, Medicaid, or CHIP, either separately or a bundled payment), and, if a drug or biological, requires a prescription, or, if a device, requires premarket approval or premarket notification to the FDA.  To  qualify as a “covered drug, device, biological or medical supply,” the product must satisfy both parts of this definition.

 

The What

“Indirect Payments or Other Transfers of Value”

In response to comments seeking clarification on which indirect payments or transfers of value are subject to the exclusion and which must be reported, CMS confirms that some indirect payments will be subject to reporting.  Specifically, the statutory exclusion of indirect payments turns upon the whether or not the applicable manufacturer is aware of the covered recipient of such payment.  If the applicable manufacturer is aware of the identify of the covered recipient, then the payment or transfer of value must be reported. In the preamble to the final regulations, CMS notes that excluding from the reporting requirements all payments made through a third party would create a  significant loophole by allowing manufacturers to funnel payments through a third party and not report them; such a loophole would significantly undermine the intent of the reporting requirements.  (pg. 28)

 

CMS further clarifies that if a covered recipient requests that an applicable manufacturer make a payment to a third party, and the third party then provides the payment to the covered recipient, the applicable manufacturer has an obligation to report such indirect payment or transfer of value against the covered recipient. This example of a reportable indirect payment differs from the situation where an applicable manufacturer provides a payment to a third party, and the third party provides a payment to a covered recipient without the applicable manufacturer’s knowledge or direction, which would fall within the indirect payment exclusion. For example, if an applicable manufacturer makes a payment to a consulting firm and, unbeknownst to and without direction from the applicable manufacturer, the consulting firm employs and pays a physician to work on the project, the applicable manufacturer would have no obligation to report such indirect payment from a third party to a covered recipient.

 

Be sure to visit our blog later this week for further analysis and discussion highlighting key provisions in the final regulations.

 

For additional information on the Sunshine Act and to view a copy of the final regulations as released by CMS on February 1, 2013, please see visit the Federal Register website. 

Amnesty! Courtesy of the Vermont Attorney General's Office!

Pursuant to Vermont's Prescribed Products Gift Ban and Disclosure Law (Law), manufacturers of prescription drugs, biological products and medical devices are required to disclose annually to the Attorney General’s Office (AG's Office) the value, nature, purpose, and recipient of any allowable expenditure or permitted gift. On September 6, 2012, the AG’s Office sent a memorandum to manufacturers of medical devices and biologics offering limited amnesty to those “whose obligation to comply with the [Law] began on or after July 1, 2009 but who failed to report their activities in any of the following reporting periods: FY10 (7/1/09-6/30/10), FY11 (7/1/10-6/30/11), or 2011 (7/1/11-12/31/11).” Notably, this offer is limited to amnesty from the “financial penalties the [AG’s Office] is authorized to seek under the Law for failure to report, and does not apply to back-payment of registration fees or penalties for other violations of the law, such as gift ban violations.”

In order to take advantage of this offer of limited amnesty, manufacturers of  medical devices or biologics must email prescribedproducts@atg.state.vt.us on or before October 1, 2012, with the following information:

•    The manufacturer’s name;
•    The reporting period(s) for which the manufacturer failed to report; and
•    The name, physical address, email address and phone number of the person with whom the AG’s Office should communicate with about the unreported activity.

The AG’s Office has indicated that it “does not anticipate seeking full disclosure for unreported activity[.]” The AG’s Office does, however, “anticipate requiring disclosure – at a later date –  of some aggregate information related to the activity.” Also note that the AG’s Office may seek to execute an Assurance of Discontinues “to secure a manufacturer’s future compliance with the law notwithstanding that manufacturer’s acceptance of the offer of limited amnesty.”

Let the Sunshine In!

On Wednesday, September 12, 2012, Senator Herb Kohl, Chairman of the U.S. Senate Special Committee on Aging, will convene a roundtable discussion entitled “Let the Sunshine In: Implementing the Physician Payments Sunshine Act.”  The “Sunshine Act” provisions of the Patient Protection and Affordable Care Act requires drug, device, biological product, and medical supply manufacturers to report annually certain information regarding payments and other transfers of value to physicians and teaching hospitals. An additional provision requires manufacturers and group purchasing organizations (GPOs) to report all ownership or investment interests held by physicians or members of their family. Further, the Secretary of the Department of Health and Human Services is required to establish procedures for making reported information publicly available through an Internet website.

 According to a press release issued by the U.S. Senate Special Committee on Aging, the roundtable discussion will focus on “how these payments will be made available to the public, the complexities of reporting and collecting payments, and how to engage stakeholders in implementing the law.” The roundtable will be moderated by Dr. Mark McClellan, Director of the Engelberg Center for Health Care Reform at the Brookings Institution. Senator Charles Grassley, co-author of the Sunshine Act, is expected to participate in the discussion, as well as the Centers for Medicare and Medicaid Services (CMS) and a wide range of stakeholders. The following individuals are also expected to participate (subject to changes):

 

- Niall Brennan, Director in the Policy and Data Analysis Group, Centers for Medicare and Medicaid Services (CMS), Washington, D.C.

- Dr.  Jeremy A. Lazarus, President, American Medical Association, Chicago, Ill.

- Dr. Douglas Peddicord, Executive Director, Association of Clinical Research Organizations (ACRO), Washington, D.C.

- Dr. Daniel Carlat, Project Director, Pew Charitable Trusts, Washington, D.C.

- Dr. James H. Scully, Jr., Medical Director and CEO, American Psychiatric Association, Arlington, Va.

- Dr. Charles Rosen, Clinical Professor of Orthopedic Surgery, University of California, Irvine School of Medicine, Orange, Calif.

- Elizabeth O’Farrell, Senior Vice President of Policy and Finance, Eli Lilly and Co., Indianapolis, Ind.

- Diane Biagianti, Vice President, Chief Responsibility Officer, Edwards Lifesciences, Irvine, Calif.

 

In December 2011, CMS issued a notice of proposed rulemaking announcing the publication of draft regulations to implement the Sunshine Act. Although the Sunshine Act requires manufacturers and GPOs to begin collecting data starting January 1, 2012, CMS has indicated that it will not require data collection by applicable manufacturers and applicable GPOs before January 1, 2013. Both Senators Kohl and Grassley have publicly expressed their disappointment in delaying implementation of the Sunshine Act. Senator Grassley has noted that “consumers need to know more about the financial relationships between their doctors and drug companies sooner rather than later,” and expressed that it is “important that CMS get this right in every way, including the usefulness and accuracy of the information.” Senator Kohl also noted his disappointment with the delay, but looks forward to “working with CMS to finalize the rules so that data collection can begin in January 2013.”

 

The roundtable discussion will take place on Wednesday, September 12^th at 2:30 p.m. at the following location:

 

Dirksen Senate Office Building, Room 562

First Street and Constitution Avenue, NE

Washington, D.C. 20510

Vouchers and Discounts and Rebates…Oh My!

Massachusetts has finally done it! On July 8, 2012, the Governor of Massachusetts signed House Bill 4200, which amends Section 3 of Chapter 175H of the Commonwealth's General Laws. This section of the law generally prohibits any person from soliciting, receiving, or offering any remuneration when a payment is or may be made in whole or in part by a health care insurer. This general prohibition prevented the distribution discounts, rebates, and vouchers in Massachusetts.

HB 4200 amends this section of the law and exempts from the general prohibition “any discount, rebate, product voucher or other reduction in an individual’s out-of-pocket expenses, including co-payments and deductibles, on: (i) any biological product… or (ii) any prescription drug provided by a pharmaceutical manufacturing company…that is made available to an individual if the discount, rebate, product voucher or other reduction is provided directly or electronically to the individual or through a point of sale or mail-in rebate, or through similar means.” Pharmaceutical manufacturing companies may not, however, exclude or favor any pharmacy in the redemption of discounts, rebates, vouchers, or other expense reduction offers to consumers.

HB 4200 prohibits a pharmaceutical manufacturing company from providing "any discount, rebate, product voucher or other reduction in an individual's out-of-pocket expenses, including copayments and deductibles, for any prescription drug that has an AB rated generic drug equivalent as determined by the United States Food and Drug Administration.”

The amendments to section 3 of Chapter 175H are effective as of July 1, 2012.

Vermont Attorney General’s Office Will Provide Updates to Its "2012 Guide to Vermont’s Prescribed Product Gift Ban and Disclosure Law” on June 1, 2012

Pursuant to Vermont's Prescribed Products Gift Ban and Disclosure Law, manufacturers of prescription drugs, biological products and medical devices are required to disclose to the Vermont Attorney General's Office the value, nature, purpose, and recipient of any allowable expenditure or permitted gift. Manufacturers are also required to submit samples reports that include the product, recipient, number of units, dosage and other information for all samples provided to health care providers.

 

The AG’s Office recently indicated in a memorandum that it made updates to the 2012 Guide to Vermont’s Prescribed Product Gift Ban and Disclosure Law, which it will incorporate into an amended Guide by June 1, 2012. Among other updates, the amended Guide will include the following:

 

-         With respect to reporting of information on over-the-counter drugs, nonprescription medical devices, and items of nonprescription durable medical equipment, manufacturers are only required to report the product, dosage, number of units, and recipient information of these products. Because these are the same categories of information required to be reported for samples of prescription products, manufacturers should disclose the distribution of such over-the-counter products using the samples form and the sample database.

 

-         Regarding the permissibility of distribution of over the counter products, the AG’s Office will not enforce the gift ban  for lotions, eye drops, and like products in 2012. Any distribution of these products that occurs on or after January 1, 2013, will be treated as unlawful. This is a departure from the AG’s Office’s previous position that these products were permissible under the exception to the gift ban allowing for the distribution of reasonable amounts of over-the-counter drugs, nonprescription medical devices, or nonprescription durable medical equipment to health care practitioners for free distribution to patients.

 

-         As for capital equipment and related consumables for medical devices, the AG’s Office clarifies that manufacturers may place capital with a recipient to use without payment based on an agreement that the recipient will purchase a related consumable. Manufacturers are also permitted to provide a recipient with consumables for usage without payment as part of a contracted-for use or purchase of a related medical device. The placement of such capital or the provision of such consumables need not be reported. 

 

Click HERE to view a copy of the 2012 Guide to Vermont’s Prescribed Product Gift Ban and Disclosure Law.

 

Click HERE to view a copy of the memorandum regarding updates to the 2012 Guide.

A Holiday Present from CMS: Proposed Regulations Implementing Sunshine

More than 2 months after the October 1, 2011 deadline, the Centers for Medicare and Medicaid Services (CMS) has finally released the proposed rule that would implement the “Transparency Reports and Reporting of Physician Ownership or Investment Interests” section of the Patient Protection and Affordable Care Act (often referred to as the “Sunshine Act”).   The proposed rule would require manufacturers of drugs, devices, biologicals, and medical supplies covered by Medicare, Medicaid, or the Children’s Health Insurance Program to report  payments or other transfers of value made to physicians and teaching hospitals.  It would also require manufacturers and group purchasing organizations (GPOs) to disclose physician ownership or investment interests.  Although the proposed rule is not scheduled to be published in the Federal Register until Monday, CMS issued a notice of proposed rulemaking yesterday and actually made available the unpublished rule.

So, what are the implications on timing for data collection and reporting?  In a lengthy preamble accompanying the draft rule, CMS is proposing that manufacturers and GPOs would not be required  to begin collecting data for federal disclosure on January 1, 2012, but that they will be able to wait until the final regulations are issued sometime in 2012.  As a result, manufacturers and GPOs would submit a disclosure report for only part of 2012 on March 31, 2013.  CMS will then aggregate these submissions and provide physicians and teaching hospitals 45 days to review the information before it is made publicly available by September 30, 2013.  Applicable manufacturers and other interested parties will have until 5 pm Eastern Standard Time on February 17, 2012, to submit their comments on the proposed rule electronically; by regular, express or overnight mail; or by hand or courier. 

Many in industry have been working frantically to meet the January 1, 2012 deadline to begin data collection, and perhaps some companies will forge ahead as planned and begin collecting, and perhaps voluntarily reporting their spend as of January 1.   For others, the proposed delay  may be a welcome reprieve and an opportunity to prepare for compliance, now with the added benefit of the proposed rule.  Either way, Happy Holidays! 

Biotechnology Industry Pushing for Progressive Changes within FDA

At its annual meeting in June, the Biotechnology Industry Organization (“BIO”) discussed a wide range of suggested policy changes to effectuate change within FDA.  BIO’s proposals focus on encouraging biotechnology innovation and bringing biologic drugs to patients on an expedited basis.  One such proposal was for FDA to use a progressive approach to FDA drug and biologic approvals.  This progressive approach would allow new treatments to reach narrow patient populations, such as those with illnesses for which no adequate therapy exists, prior to final approval.  Then, as efficacy and safety are demonstrated by clinical trials, the approved population could be gradually expanded.  BIO’s proposed progressive approach would apply only “to innovative products for unmet medical needs, significant advances to standard of care, targeted therapies, or those that have been approved by the European Medicines Agency or other mature regulatory agencies.”    According to BIO’s executive vice president of health, Sara Radcliffe, this proposed progressive approach would combine many of the best characteristics of several drug approval pathways already used by the FDA and drugmakers. 

 In addition to the progressive approval approach, BIO’s proposals also include:

 Empowering FDA to use a “weight-of evidence” approach to establish therapeutic  effectiveness;

• Leveraging electronic health records to facilitate clinical research; and
• Create an “experimental space” within FDA to pilot promising new scientific and regulatory approached to therapy development.

While a few legislators, notably Representative Fred Upton (R-Michigan) and Senator Richard Burr (R-North Carolina), have voiced support for many elements of BIO’s proposals, BIO’s CEO Jim Greenwood stated that many of the proposals could be implemented without legislative action, yet legislation would expedite the implementation of the proposals. 

PhRMA is said to be in the process of drafting proposals that include very similar elements.  BIO suggests that the two organizations may collaborate on such proposals in the future.

While FDA currently has an investigational new drug application process that provides an avenue for an unapproved drug, or an approved drug for a new indication or a new patient population, to be further investigated or available in an emergency situation prior to approval, the existing process is by no means as broad and potentially far reaching as BIO’s proposed progressive approach.  Will the agency and legislators be open to consider BIO’s proposal to expedite drug development approval process, even for a narrow population with no adequate therapy available? While a progressive drug approval process may stimulate and encourage innovation, would it have a substantial positive or negative impact on the safety and effectiveness of approved drugs? 

Who Knew Drugs Could be the Answer to the Federal Deficit?

 
In a prior post, “Will the ‘New Normal’ Affect the Life Sciences Industry," we queried whether the life sciences industry would become a target during the on-going government budgetary crisis.  President Obama’s recently released Budget of the United States Government for Fiscal Year 2012 includes provisions targeting the Department of Health and Human Services, some of which will likely impact the life sciences industry.

Two of the budgetary proposals intend to bring generic versions of brand-name drugs to market sooner than originally permitted, reducing federal healthcare costs. Specifically, the 2012 Budget includes proposals to modify the period of data exclusivity for brand name biologics from 12 years to 7 years, expediting the availability of data formulas for brand-name biologics by 5 years, and essentially shaving off 5 years of expected profits for the originating company. Additionally, the Federal Trade Commission would be authorized to prohibit drug companies from entering into anti-competitive agreements extending the period of exclusivity for brand name drugs. By reducing the exclusivity time of biologics and potentially prohibiting the ability to extend the exclusivity of other generics through private agreements, these two budgetary proposals estimate a reduction of the federal deficit by approximately $11M. From the perspective of the life sciences industry, this projected reduction to the federal deficit may prove to be an insubstantial figure compared to the potentially significant profits that pharmaceutical companies may forfeit, not to mention the potential freezing effect these proposals may have on innovations from pharmaceutical companies in the coming years.

Not all of the budget proposals will advance, but we do expect that life science companies will feel some pain.