
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.
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