Pharmaspective

FDA Issues Draft Guidance to Help Companies Distinguish Between a Voluntary Medical Device Recall and a Product Enhancement

By Laura C. Conway and Stephen C. Matthews

On February 22, 2013, the Food and Drug Administration (FDA) issued a draft guidance entitled “Distinguishing Medical Device Recalls from Product Enhancements and Associated Reporting Requirements.”  (Docket No. FDA-2013-D-0114)  (Draft Guidance).  The purpose of the Draft Guidance, according to FDA, is to “clarify when a change to a device constitutes a medical device recall, to distinguish those instances from product enhancements that do not meet the definition of a medical device recall, and to identify the associated regulatory reporting requirements for each.”  (Draft Guidance, lines 90-93)

 

The Draft Guidance applies only to voluntary recalls, whether they are commenced by the manufacturer on its own initiative or as the result of a formal request by FDA, as opposed to mandatory recalls.  Mandatory recalls are governed by the Food, Drug and Cosmetic Act (the “FDCA”),  21 U.S.C. §360h.  Voluntary recalls are governed by related regulations found at 21 CFR, part 7.

 

The distinction between whether an action constitutes a “recall” or a “product enhancement” is significant, because product recalls necessitate submission of a correction and removal report (also known as an “806 report”) to FDA (if the violation at issue may present a risk to health), often generate negative publicity, could damage the company’s reputation with customers, could reduce revenue of the product line or lines associated with the recall, and could have implications in subsequent lawsuits.   What medical device companies previously viewed as improvements could now be considered recalls in some circumstances.  Changes to products that constitute recalls can range from labeling changes to updates to instructions for implantation to component substitutions.  

 

The regulations define a “recall” as “a firm’s removal or correction of a marketed product that the Food and Drug Administration considers to be in violation of the laws it administers and against which the agency would initiate legal action, e.g., seizure.  Recall does not include a market withdrawal or a stock recovery.”  21 CFR § 7.3(g).  A “market withdrawal,” in turn, is defined as “a firm’s removal or correction of a distributed product which involves a minor violation that would not be subject to legal action by the Food and Drug Administration or which involves no violation, e.g., normal stock rotation practices, routine equipment adjustments and repairs, etc.”  21 CFR § 7.3(j).  A “stock recovery” is “a firm’s removal or correction of a product that has not been marketed or that has not left the direct control of the firm.”  21 CFR § 7.3(k). 

 

The regulations do not define “product enhancement.” The Draft Guidance provides the following definition:  “For purposes of this guidance document, product enhancement means a change or improvement to a non-violative device as part of continuous device improvement activities.” (Draft Guidance, lines 138-140)  According to FDA, product enhancements include “changes designed to better meet the needs of the user, changes to make the product easier to manufacture, and changes to the appearance of the device that do not affect its use.  A product enhancement is both (1) a change to improve the performance or quality of a device, and (2) not a change to remedy a violation of the [FDCA] caused by the device.”  (Draft Guidance, lines 140-6) 

 

Distinguishing between a product enhancement and a recall can be difficult.  Essentially, FDA states that an action does not constitute a recall unless it is a change to a marketed medical device that addresses a violation of the FDCA.  The changes could be to “1) the device design; 2) the manufacturing process; 3) the device labeling . . . . (including updating the labeling of a distributed product); and 4) marketing practices (e.g., a removal of the device from the market).”  (Draft Guidance, lines 185-189).  

 

FDA provided an example of a product enhancement and a recall relating to an approved implantable device that contained a battery with an estimated battery life of five years under normal conditions of use.  A change to a new  battery that extended the battery life to five and one-half years under normal conditions would constitute a product enhancement, not a recall.  Similarly, including a new battery from a new supplier with a six-year battery life because the prior battery is obsolete would be a product enhancement rather than a recall.  In contrast, FDA provided an example when a change would not be a product enhancement but rather a recall.  Under the Draft Guidance, when a device manufacturer with two battery suppliers with an aggregate life of five years determines that the battery from one supplier is found to have a lifespan of four years rather than the specified five years due to manufacturing issue.  Those devices that contained the battery that prematurely depleted would be subject to a recall even though the device as a whole had an average battery life of five years.  (Draft Guidance, line 238)

 

Whether the change is made to correct a violation of the FDCA is not always clear.  The Draft Guidance provides that, generally, devices that fail to meet specifications or fail to perform are considered “adulterated” and therefore violative of the FDCA.  Changes to correct those failures would constitute recalls, according to the Draft Guidance.  (Draft Guidance, lines 219-223).  Similarly, the Draft Guidance provides that devices that are mislabeled or provide inadequate directions are considered misbranded under and therefore violative of the FDCA.  As such, according to the Draft Guidance, corrections to false or misleading labels, which include pamphlets, instruction books,  direction sheets, and websites, would constitute recalls.  (Draft Guidance, lines 244-260.).

 

Of significant note is the statement in the Draft Guidance that even a product enhancement that does not constitute a recall may be reportable.  (Draft Guidance, lines 260-263, 415-429).  FDA provides the following examples of changes that do not qualify as recalls but nevertheless must be reported through an 806 report because they were “initiate[d] to reduce a risk to health posed” by the device:  addition of new warnings to a label in order to reduce a health risk, a manufacturing change to reduce likelihood of contamination of a sterile device, and a “design change to improve a product’s safety profile.”  (Draft Guidance, lines 415-429)

 

In short, the Draft Guidance provides that if “the result of [the manufacturer’s] assessment indicates that the change is made to a violative marketed device to bring it into compliance with the laws administered by FDA, then the change would most likely constitute a medical device recall.”  (Draft Guidance, lines 267-269).  Many updates that may not appear to be recalls could be interpreted as such, which would subject companies to more stringent requirements.  Medical device manufacturers’ marketing, research and development, regulatory, quality assurance, and legal departments, among others, must be mindful of whether changes to their products or labeling could constitute recalls so they can ensure that they follow all of the procedures for recalls.

 

The FDA invited comments on the Draft Guidance.   To date, seven public comments have been made available.  Three of those comments were submitted by the industry, while the other four were submitted by individuals.  While the substance of the comments varies, the comments generally raised the following concerns about the Draft Guidance’s:

 

• creation of additional and potentially burdensome reporting requirements for product enhancements;
• definition of “product enhancement,” including that it is potentially subjective, which could lead to inconsistent interpretation by industry and FDA;
• discrepancies between definitions included in the guidance and those provided in the established regulations;
• inclusion of the term “product enhancement” in the definitions of “correction” and “removal,” which potentially and incorrectly could equate a product enhancement with a recall;
• absence of definitions of “violation” and “violative device,” which definitions would assist manufacturers in determining whether an action is a recall or an enhancement;
• imposition of definitions and reporting requirements through a draft guidance rather than the rulemaking process;
• lack of clarity in the example and flow chart included in the guidance and the scope of devices covered by the guidance document; and
•  eliminating the manufacturer’s discretion in determining whether an action is a recall or an enhancement.

 

Please contact us if you would like more information about the Draft Guidance or submitted comments.

 

Laura C. Conway, Esq. 

Counsel, Porzio, Bromberg and Newman, P. C.

Manager, Regulatory and Compliance Services, Porzio Life Sciences, LLC

 

Stephen C. Matthews, Esq.

Principal, Porzio, Bromberg and Newman, P. C.

CMS Is Accepting Comments on the Revised Templates for Data Collection and Submission of Reports Required by the Sunshine Act

As  previously reported on Pharmaspective, the Centers for Medicare and Medicaid Services (CMS)  recently posted on its website revised templates for data collection and submission of reports required by the Transparency Reports and Reporting of Physician Ownership or Investment Interests section of the Patient Protection and Affordable Care Act, commonly referred to as the “Sunshine Act.” The Sunshine Act requires applicable manufacturers of covered drugs, devices, biological products, and medical supplies to report annually certain information regarding payments and other transfers of value to physicians and teaching hospitals. An additional provision requires applicable manufacturers and group purchasing organizations (GPOs) to report all ownership and investment interests held by physicians or members of their families. As set forth in the final regulations, applicable manufacturers and GPOs must begin data collection on August 1, 2013, and must file their first reports on March 31, 2014.

 

CMS is currently accepting comments on the following revised templates:

 

• General Payments (Non-Research) Template;
• Physician Ownership Template; and
• Research Payment Template.

 

To be assured consideration, comments and recommendations must be received no later than 5 p.m. on June 3, 2013, at the following electronic address:

 

Office of Management and Budget

Office of Information and Regulatory Affairs

Attention: CMS Desk Officer

Fax Number: (202) 395-6974

Email: OIRA_submission@omb.eop.gov.

CMS Posts Revised Templates For Data Collection and Submission of Reports Required By the Sunshine Act

By Rachael Garrison

The Centers for Medicare and Medicaid Services (CMS) is continuing its efforts to quickly implement the Transparency Reports and Reporting of Physician Ownership or Investment Interests section of the Patient Protection and Affordable Care Act, commonly referred to as the “Sunshine Act.”  The Sunshine Act requires applicable manufacturers of covered drugs, devices, biological products, and medical supplies to report annually certain information regarding payments and other transfers of value to physicians and teaching hospitals. An additional provision requires applicable manufacturers and group purchasing organizations (GPOs) to report all ownership and investment interests held by physicians or members of their families.

On February 1, 2013, CMS announced the release of the final regulations implementing Sunshine Act. CMS also released proposed templates for data collection and submission of reports required by the Sunshine Act. Interested parties were permitted to submit comments on the proposed templates by April 9, 2013. CMS recently posted on its website the following revised templates for data collection and submission of reports required by the Sunshine Act:

• General Payments (Non-Research) Template;

• Physician Ownership Template; and

• Research Payment Template.

In addition to the revised templates, CMS also posted a “Revisions Crosswalk” document, which outlines the changes and additions that were made to the proposed templates and the reason for such changes and additions. Although the revised templates are currently undergoing final clearance, CMS has indicated that it intends to use the revised templates for 2013 data collection. As set forth in the final regulations, applicable manufacturers and GPOs must begin data collection on August 1, 2013, and must file their first reports on March 31, 2014.

CMS Publishes List of Teaching Hospitals Subject to Reporting Under the Sunshine Act

By James E. Squier

On February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) announced the release of the final regulations implementing the Transparency Reports and Reporting of Physician Ownership or Investment Interests section of the Patient Protection and Affordable Care Act, commonly referred to as the “Sunshine Act.” The Sunshine Act requires applicable manufacturers of covered drugs, devices, biological products, and medical supplies to report annually certain information regarding payments and other transfers of value to physicians and teaching hospitals.

 

As defined in the final regulations, a “teaching hospital” is “any institution that received a payment under 1886(d)(5)(B), 1886(h), or 1886(s) of the Act during the last calendar year for which such information is available.” In order to assist applicable manufacturers in identifying teaching hospitals, CMS stated that it will publish a list “at least 90 days before the beginning of the reporting year, or for the first reporting year, at least 90 days prior to the start of data collection.” As set forth in the final regulations, applicable manufacturers must begin data collection on August 1, 2013, and must file their first reports on March 31, 2014.

 

CMS recently posted the list of teaching hospitals on its National Physician Payment Transparency Program: Open Payments website. This list identifies hospitals that are considered “teaching hospitals” under the Sunshine Act. This list is to be used for payments and transfers of value made in 2013, to be reported to CMS by March 31, 2014. The teaching hospital list will assist applicable manufacturers in determining which payments must be reported and provides address information and a tax ID for each hospital. For future reporting years, a list of teaching hospitals will be posted on October 1st of each year.

 

In addition to the list of teaching hospitals, CMS has also updated its website to include a “Key OPEN PAYMENTS Activities” section. The section identifies ten key activities “that must happen on time so that 2013 OPEN PAYMENTS program cycle is successful” and information about the status of each. With respect to the report templates, CMS states that the 2013 reporting period data collection templates “are currently undergoing final public and federal clearance and therefore are subject to change. We anticipate that any changes that may arise will be minimal, and should not impact applicable manufacturer’s and applicable GPO’s ability to establish internal systems necessary to adhere to the OPEN PAYMENTS submission requirements.” Templates for future reporting periods will also be posted on October 1st of each year.

CMS Is Accepting Comments on the Proposed Templates for Data Collection and Submission of Reports Required By the Sunshine Act

By Monica Aurelien

On February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) announced the release of the final regulations implementing the Transparency Reports and Reporting of Physician Ownership or Investment Interests section of the Patient Protection and Affordable Care Act, commonly referred to as the “Sunshine Act.” The Sunshine Act requires applicable manufacturers of covered drugs, devices, biological products, and medical supplies to report annually certain information regarding payments and other transfers of value to physicians and teaching hospitals. An additional provision requires applicable manufacturers and group purchasing organizations (GPOs) to report all ownership and investment interests held by physicians or members of their families. As set forth in the final regulations, applicable manufacturers and GPOs must begin data collection on August 1, 2013, and must file their first reports on March 31, 2014.

In addition to the final regulations, CMS also released the following proposed templates for data collection and submission of reports required by the Sunshine Act:

• Non-research Payment Template;
• Physician Ownership Template; and
• Research Payment Template.

 

CMS is currently accepting comments on the proposed templates. Interested parties may submit their comments electronically to:

http://www.regulations.gov/#!documentDetail;D=CMS-2013-0052-0001

Comments may also be submitted via regular mail to the following address:

CMS, Office of Strategic Operations and Regulatory Affairs
Division of Regulations Development
Attention: Document Identifier/OMB Control Number CMS – 10419
Room C4–26–05
7500 Security Boulevard
Baltimore, Maryland 21244–1850

Comments must be submitted by April 9, 2013, to assure consideration.

Minnesota Legislature Proposes to Repeal the Annual Disclosure Requirement for Wholesale Drug Distributors and Manufacturers

By Jenna Gervasio

Minnesota law [Minn. Stat. § 151.47(f)] currently requires wholesale drug distributors and manufacturers to report annually to the Minnesota Board of Pharmacy (Board) all "payments, honoraria, reimbursement or other compensation" permitted under the gift prohibition statute and provided to practitioners during the previous calendar year.  On March 5, 2013, the Minnesota Senate introduced Senate Bill 1081 (SB 1081), which would repeal this section of the law.

 

The introduction of SB 1081 comes almost two months after the Board indicated in a letter that it will not require wholesale drug distributors and manufacturers to submit annual disclosure reports for the 2012 calendar year. The Board’s letter noted that the Sunshine Act provisions of the federal Patient Protection and Affordable Care Act (Sunshine Act) preempts state laws that require manufacturers to report the same information required by the federal law. Since the Board requires wholesale drug distributors and manufacturers to report most of the information required by the Sunshine Act, the Board indicated that it will not require these entities to report data for the 2012 calendar year. In this letter, the Board also noted that it intended to ask the Minnesota Legislature to repeal section 151.47(f) of the law.

 

SB 1081 would not repeal the gift ban [Minn. Stat. § 151.461], which prohibits wholesale drug distributors and manufacturers from offering or giving any gift to a practitioner in excess of $50 per calendar year.

 

On Friday, February 1, 2013, the Centers for Medicare & Medicaid Services (CMS) announced the much anticipated release of the final regulations implementing the Sunshine Act. The Sunshine Act requires applicable manufacturers of covered drugs, devices, biological products, and medical supplies to report annually certain information regarding payments and other transfers of value to physicians and teaching hospitals. An additional provision requires applicable manufacturers and group purchasing organizations (GPOs) to report all ownership and investment interests held by physicians or members of their families. As set forth in the final regulations, applicable manufacturers and GPOs must begin data collection on August 1, 2013, and must file their first reports on March 31, 2014.

 

An Update From CMS on the Sunshine Act…Draft Templates!

On February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) announced the release of the final regulations implementing the Transparency Reports and Reporting of Physician Ownership or Investment Interests section of the Patient Protection and Affordable Care Act, commonly referred to as the "Sunshine Act." The final rule was published in the Federal Register today, and will become effective on April 9, 2013.

 

The Sunshine Act requires applicable manufacturers of covered drugs, devices, biological products, and medical supplies to report annually certain information regarding payments and other transfers of value to physicians and teaching hospitals. An additional provision requires applicable manufacturers and group purchasing organizations (GPOs) to report all ownership and investment interests held by physicians or members of their families. As set forth in the final regulations, applicable manufacturers and GPOs must begin data collection on August 1, 2013, and must file their first reports on March 31, 2014.

 

In preparation for reporting, CMS has posted on their website the following proposed templates for data collection and submission of reports required by the Sunshine Act:

 

-  Non-Research Payment Template;

-  Physician Ownership Template; and

-  Research Payment Template

 

Additionally, CMS has set up a “National Physician Payment Transparency Program: OPENPAYMENTS” website. This website will provide ongoing information and updates on the Sunshine Act, including:

 

- General information

- Fact sheets

- Tools and instructions

- Resources

- Dates of webinars, calls and meetings

- Frequently asked questions

 

Stay tuned!

 

Don't forget to check out our other posts regarding the Sunshine Act Final Regulations:

The Who and the What of the Sunshine Act Regulations,Sunshine Act: Reporting Food, CME, and Research...Oh My! and Sunshine Act: Indirect Payments: Reportable or Excluded?

FDA May Change Regulations to Allow Generics to Change their Product Warnings

By Frank Fazio and Genevieve Spires

@frankfaziopls    @gmspires

A single footnote in a brief filed by the Department of Justice has garnered a lot of attention this week, and understandably so.  The footnotes states: “This office has been informed that FDA is considering a regulatory change that would allow generic manufacturers, like brand-name manufacturers, to change their labeling in appropriate circumstances. If such a regulatory change is adopted, it could eliminate preemption of failure-to-warn claims against generic-drug manufacturers.”

The background of this statement is complex, but briefly, the United States Supreme Court ruled last year that plaintiffs claiming injuries as a result of their use of generic drugs may not sue generic manufacturers for their failure to warn of an alleged drug-related danger.  In deciding this, the Court found that these claims are preempted – and therefore barred – by federal law, largely because generic manufacturers are not permitted to make changes to their product labels under the current regulatory scheme (even in cases where they think stronger warnings are needed).

Under current FDA regulations, generic manufacturers cannot unilaterally update their product labeling.  Only brand-name manufacturers have the ability to update warnings on product labeling and must get FDA approval to make those changes.  Generic manufacturers are required to adopt the warnings of their  brand-name counterpart.

Any change in regulations to allow generics to change their labels will undoubtedly reopen the litigation floodgates and result in a slew of failure to warn cases being brought against generic drug manufacturers.   Likewise, such a rule can result in inconsistencies in warning information on the same drug which can certainly result in increased liabilities for those companies who fall behind in regard to labeling updates adopted by competitors.  And while we do not know the source of the information referenced in the DOJ brief, we will definitely stay tuned to see if Congress takes steps to alter the generic drug label regulatory scheme.

The Final Sunshine Act Regulations Have Been Published in Federal Register, and Will Become Effective on April 9, 2013

By Hiramella Deonarine

On February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) announced the release of the final regulations implementing the Transparency Reports and Reporting of Physician Ownership or Investment Interests section of the Patient Protection and Affordable Care Act, commonly referred to as the "Sunshine Act." The final rule was published in the Federal Register, and will become effective on April 9, 2013.

 

The Sunshine Act requires applicable manufacturers of covered drugs, devices, biological products, and medical supplies to report annually certain information regarding payments and other transfers of value to physicians and teaching hospitals. An additional provision requires applicable manufacturers and group purchasing organizations (GPOs) to report all ownership and investment interests held by physicians or members of their families. As set forth in the final regulations, applicable manufacturers and GPOs must begin data collection on August 1, 2013, and must file their first reports on March 31, 2014.

 

In addition to releasing the final regulations, CMS also released a Fact Sheet providing, among other things, a summary of the reporting requirements, the implementation timeline, and information regarding research payments. In response to CMS’ release of the final regulations, Senator Charles Grassley, co-author of the Sunshine Act, made the following statement:

 

“Disclosure brings about accountability, and accountability will strengthen the credibility of medical research, the marketing of ideas and, ultimately, the practice of medicine. The lack of transparency regarding payments made by the pharmaceutical and medical device community to physicians has created a culture that this law should begin to change substantially. The reform represented by the Grassley-Kohl Sunshine Law is in patients’ best interests. I will stay vigilant about how this law is implemented, especially after the delays seen already. The goal is straightforward, and CMS needs to make certain the reporting and disclosure are complete and clear.”

 

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 our other posts regarding the Sunshine Act Final Regulations:

The Who and the What of the Sunshine Act Regulations; 

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

Sunshine Act: Indirect Payment: Reportable or Excluded?

 

 

Sunshine Act: Indirect Payments: Reportable or Excluded?

By Sarah Canberg

All too often, a payment from an applicable manufacturer does not go directly to a physician or teaching hospital. Instead, the applicable manufacturer indirectly provides a payment to a covered recipient by making a payment to a third party that then transmits the payment to the covered recipient that actually performed the services (e.g., a pass through payment). Alternatively, a covered recipient may request that the applicable manufacturer provide the payment to a third party “at the request of” or “on behalf of” a covered recipient rather than the covered recipient receiving the payment.  The actual recipient of the payment is often a charitable entity. The final Sunshine Act regulations acknowledge these payment streams and, as a general requirement, mandate the reporting of these payments to physicians and teaching hospitals as well as payments to non-covered entities or individuals “at the request of “ or “on behalf of” a physician or teaching hospital. Yet, there are notable nuances and exceptions to the rule.

Indirect Payments: What Are They? When Are They Reportable?

In an effort to clarify when an indirect payment is subject to reporting, the final regulations include a definition of “indirect payments or other transfers of value”:

payments or other transfers of value made by an applicable manufacturer…to a covered recipient…through a third party, where the applicable manufacturer…requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value, in whole or in part, to a covered recipient(s)….

The preamble includes an example of an applicable manufacturer providing an unrestricted donation to a physician professional organization for use at the organization’s discretion.  In turn, the organization uses the funds to provide a grant to physicians.  Since the applicable manufacturer did not require, instruct, direct, or otherwise cause the recipient of its donation, the organization, to use the funds for grants to physicians, this does not fall within the regulatory definition of “indirect payment or other transfer of value” and, as such, is not reportable as either a direct or indirect payment to a covered recipient.  On the other hand, if the applicable manufacturer provides a donation to the organization with an earmark for the payment to be used to provide grants to physicians, this would constitute an indirect payment reportable against the ultimate covered recipient.  This is so even if the manufacturer did not specify or suggest which physicians would receive the grants.

Payments “At the Request Of” and “On Behalf Of”: Follow the Money

It is not unusual for a physician or teaching hospital to request that an applicable manufacturer to provide a payment to a third party rather than directly to the covered recipient.  An example would be the request that the payment be provided to the physician’s practice or an affiliated entity rather than directly to the physician.  In circumstances such as this, the covered recipient is directing the path of the payment, not the applicable manufacturer.  The final regulations require that such payments must be reported in the name of the covered recipient.  The name of the entity that received the payment or, if an individual, the word “individual” would also be included in another field on the disclosure report.

A physician or teaching hospital may also direct an applicable manufacturer to provide a payment to a charitable entity as a donation on behalf of the covered recipient.  Similar to the above scenario where the payment is directed to a third party “at the request of” a covered recipient, when a covered recipient directs a payment be made to a third party, such as a charity, “on behalf of” the covered recipient, such payment must be reported in the name of the covered recipient; the disclosure must also include the name of the charity that received the payment at the direction of the covered recipient.

Indirect Payments: Exclusion Provision

Although the Sunshine Act and regulations provide an exclusion of indirect payments to third parties, this is applicable in very limited circumstances.   In order for an indirect payment to be excluded from reporting, the payment must (1) qualify as an indirect payment or transfer of value, and (2) the applicable manufacturer must be unaware of the identity of the physician or teaching hospital receiving the payment during the reporting year or by the end of the second quarter of the following report year. 

For an applicable manufacturer to be “unaware” of the identity of the physician or teaching hospital receiving the indirect payment, the applicable manufacturer must not have actual knowledge or act in deliberate ignorance or in reckless disregard of the truth or falsity of the information.

The preamble specifically provides that for this exclusion only, when an applicable manufacturer makes a payment to a third party with the intent of keeping the identity of the covered recipient anonymous, the applicable manufacturer will not be acting in deliberate ignorance or reckless disregard of the identity of the covered recipient and will be deemed “unaware” of the identity of the covered recipient.  The specific example provided is the engagement of a market research firm to conduct a double-blinded market research study.  The payment to the firm, part of which may ultimately go to physicians for participation in the research, would qualify as an indirect payment excluded from reporting because the physicians are intended to be anonymous in their participation.

Where a payment is made to a third party, and the third party is directed to make payments to an identifiable group of covered recipients, such as the top billing cardiologists in a certain city, the applicable manufacture would be deemed “aware” of the covered recipients and required to report against such covered recipients assuming that the covered recipients can be identified during the reporting year or through the second quarter (June 30th) of the subsequent year following the transfer of the payment to the covered recipient by the third party.  The applicable manufacturer must report such indirect payments in the calendar year that the third party provided payment to a covered recipient and the applicable manufacturer became aware of the identity of the covered recipient. For example, the applicable manufacturer makes a payment to a third party on August 31, 2013, but the third party provides the payment to a covered recipient on December 31, 2013.  Further, the applicable manufacturer does not become aware of the identity of the covered recipient until early in calendar year 2014.  In this circumstance, the payment would be reported for calendar year 2014. We view this example of reportable indirect payments as the most troublesome and potentially difficult for applicable manufacturers to track.  In this scenario, the applicable manufacturer must track the payment being provided by the third party, identify the covered recipient, and report payments provided by the third party to a covered recipient in the subsequent calendar year.

 

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 our other posts regarding the Sunshine Act Final Regulations:

The Who and the What of the Sunshine Act Regulations and Sunshine Act: Reporting Food, CME, and Research...Oh My!