Pharmaspective

U.S. Protectionism: An Increasing Barrier to Foreign-based Drug Manufacturers

By: Frank Fazio and Rachael E. Garrison

Foreign drug and medical device manufacturers looking to enter the U.S. market often begin operations with a small U.S. based office staffed by a handful of people transplanted from the overseas headquarters.  This provides them with a U.S. address for the sales and marketing of products while ensuring that the U.S. personnel understand the corporate culture of the parent and can communicate effectively with overseas counterparts.  However, when applying for licensure as a wholesaler or manufacturer, company officers are often posed the question, “Are you a U.S. citizen?”  In the case of small foreign subsidiaries, the answer is often “no.” What does it mean to be a United States citizen? United States citizens are individuals born in the United States or individuals granted citizenship status by the Immigration process.  United States citizens have proof of citizenship, such as a birth certificate, a social security card, a U.S. passport or a certificate of citizenship.   

 Whether the life science company is new or previously established,  it  may encounter many obstacles as a result of the alien status of its employees. Key positions such as designative representatives and corporate officers are often foreign nationals legally present in the U.S., but not necessarily citizens.

 The immigration status of corporate officers is increasingly problematic as more states are requiring proof of citizenship for wholesalers and manufacturers. Some states are more stringent than others. Georgia requires the top (5) corporate officers to fill out a Personnel Certification form. This form requires personal information such as name, address, date of birth, social security number, telephone numbers, position held at the firm and questions regarding licensure.  In addition, Georgia also requires the applicant to complete the Affidavit of Applicant. This affidavit requires the applicant to answer yes to one of the following statements: 1) “I am a United States citizen 18 years of age or older” or 2) “I am not a United States citizen, but I am a legal permanent resident of the United States 18 years of age or older, or I am a qualified alien or non-immigrant under the Federal Immigration and Nationality Act 18 years of age or older with an alien number issued by the Department of Homeland Security or other federal immigration agency.”  Not only does the applicant need to attest to the fact they are a U.S. Citizen or resident alien and allowed to work in the U.S., they need to submit secure and verifiable documentation. The state will accept the following documentation as proof of citizenship: driver’s license, passport, immigration document(s) which includes either your Alien number or your I-94 number and, if needed, SEVIS number.  Importantly, Georgia will not accept officers who are legally in the U.S. on a work visa.

 Other states such as, Alabama and Hawaii require the applicant to be a U.S. citizen, however, their requirements are less burdensome. In the state of Hawaii, an applicant must be a U.S. citizen or an alien authorized to work. Hawaii requires wholesaler and manufacturer applicants to submit documentation of officer proof of citizenship. Alabama on the other hand simply requires the wholesaler or manufacturer applicants to answer the question, “Are you a U.S. citizen?” If the applicant answers the question, No, then they must submit documentation of legal status in this country.

 California does not necessarily have an explicit citizenship requirements, however, all officers are required to disclose their social security number. If the corporate officer does not have a social security number, they will not be allowed to be added to the corporate officer list. This effectively rules out non-citizen officers. 

 As more states require proof of citizenship, drug and medical device companies may have difficulty securing necessary distribution licenses.  This can delay a launch  or preclude a market resulting in lost sales.  Foreign companies seeking to establish a presence in the United States must consider the citizenship requirements in staffing their U.S. based subsidiaries.  Likewise, domestic corporations should consider these requirements when hiring key senior level personnel.

CMS Accepting Comments on the Sunshine Act

By:  Sarah M. Canberg and 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 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 recently published a notice in the Federal Register permitting interested parties to submit comments regarding the Sunshine Act.  Specifically, CMS is collecting information related to the following requirements of the Sunshine Act:

•  Registration:  Applicable manufacturers and GPOs required to report payments and transfers of value must register with CMS within 90 days of the end of the calendar year for which a report is required;

• Attestation:  Applicable manufacturers’ and GPOs’ reports must include a certification that the information reported is timely, accurate, and complete;

• Dispute Resolution:  Applicable manufacturers, GPOs, and covered recipients will have the opportunity to review and submit corrections to payments and transfers of value reported to CMS;

• Submission of an assumptions document: Applicable manufacturers and GPOs may submit an assumptions document containing assumptions and methodologies used to produce the reports; and

• Record retention requirements.

To be assured consideration, comments and recommendations must be received no later September 20, 2013, either electronically to http://www.regulations.gov or by mail to the following address:

CMS Office of Strategic Operations and Regulatory Affairs
Division of Regulations Development
Attention: Document Identifier OMB Control Number CMS-10495
Room C4-26-05
7500 Security Boulevard
Baltimore, Maryland 21244-1850

With Sunshine Act data collection to commence on August 1^st, CMS continues to provide resources and guidance to the life sciences industry.  In recent weeks, CMS developed and released a mobile app to assist physicians and applicable manufacturers and group purchasing organizations in tracking of payments and transfers of value.  CMS also continues to issue informative responses Frequently Asked Questions on the Open Payments website.  On August 8^th, CMS will hold a conference call from 1:30 to 3:00 p.m. EDT titled, Open Payments – Policy Updates on Payments and the Physician Resource Toolkit. The Data Sharing & Partnership Group within the Center for Program Integrity will discuss topics including updates on program policy, focusing on Third Party Payment, Indirect Payments, and the Physician Resource Toolkit. It is anticipated that as a result of this request for comments, CMS will release additional guidance regarding Sunshine Act data capture and reporting requirements.

Sunshine Act Data Capture: CMS Has a Mobile App for That

By: Kerry Miele

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.

CMS  recently released two mobile applications (“apps”) to assist physicians and applicable manufacturers and GPOs with the implementation of the Open Payments program, and tracking of payments and transfers of value required by the Sunshine Act. 

The new apps, OPEN PAYMENTS Mobile for Physicians and OPEN PAYMENTS Mobile for Industry (for applicable manufacturers and applicable GPOs), were produced to ensure greater data accuracy and simplify required annual reporting. Among other things, physicians and applicable manufacturers and GPOs may utilize these apps for individual tracking of transfers of value in real-time  and to share  transfer of value information between physicians and applicable manufacturers and GPOs. Physicians are not required to report payments or transfers of value to CMS, but can use the physician targeted app to ensure accuracy of information regarding their financial relationships with industry.

CMS also posted Frequently Asked Questions regarding the functionality and usage of the apps:

http://www.cms.gov/Regulations-and-Guidance/Legislation/National-Physician-Payment-Transparency-Program/Downloads/Mobile-App-Public-FAQs.pdf. 

Additionally, for more information on the apps, please visit CMS’ Open Payments website at:

http://www.cms.gov/Regulations-and-Guidance/Legislation/National-Physician-Payment-Transparency-Program/index.html.   

Please note that CMS stated it “will not validate the accuracy of data stored in the app, nor will it be responsible for protecting data stored in the app.”  According to CMS, use of the OPEN PAYMENTS’ apps is optional and voluntary, and intended for information collection and storage purposes only. Both apps are now available for download for iOS (Apple™) and Android™ mobile phones.

Reporting Requirements for Wholesale Distributors and Manufacturers – the Onus is on You

By Frank Fazio and Heather M. Przyhocki

Pharmaceutical and device manufacturers are in a constant state of flux.  Companies are bought and sold and officers change.  Corporate offices move into bigger and better office space, or a contact individual or designated representative leaves the company.  What pharmaceutical and device companies must understand is that all of these changes must be reported to the state licensing agencies in which licenses are held at or about the time the change occurs.

 State distribution licenses are non-transferable.  They are both owner and address specific. Hence,  a change in ownership or location require new applications to be prepared and submitted.  Applications mandated by changes in ownership or location are the same as initial applications and completing them is a burdensome, time-consuming process.  The time limitations that apply to notifications related to such changes are extremely tight.  Although the timeframe to submit the change notification is short, the turnaround at the state level is not.  While a company can fully move over a weekend, it will take the states much longer to process the application and issue an updated license reflecting the new address.    

 The acquisition of a company clearly triggers change of ownership notification obligations. However, there are many other situations that may be considered a change of ownership for notification purposes.  A private company going public, a public company going private, or reorganizations of a parent and subsidiary to sister corporations are all events that may trigger change of ownership notification obligations.  Likewise, a change in corporate structure from a limited liability company to an incorporated entity may also trigger these obligations. 

 Most states require notification of changes in name, ownership, corporate officers, location, and/or designated representative within seven to thirty days.  While some states impose more stringent requirements.  For example, Georgia requires manufacturers and wholesalers to report any changes to the Board of Pharmacy prior to the change.  As per Georgia regulations, § 480-7-.03. Drug Wholesale Distribution Licensing Requirement:  “(c) Licenses become null and void upon the sale, transfer or change of mode of operation or location of the business  . . . (e) Changes in any information in this section shall be submitted to the Board prior to such change.”  In addition, most state licensing agencies require immediate notification of any disciplinary actions.  This can be problematic in the event of a merger or acquisition between publicly traded companies.

 Some states require more than written notification when a company undergoes a significant change.   For example, when a company changes its corporate officers, certain states require  a company to complete either a change in officers form and/or submit a background check/fingerprint cards for the new corporate officer(s).  Since background checks can take at least 4-6 months to process, it is crucial that companies stay proactive and are aware of these filing requirements.  To this end, notification timelines should be included in the planning process for such significant changes.  Further, corporate counsel should involve those in charge of state licensing when planning any significant corporate events.  If you have not been reporting these changes, then your company may not be compliant with state licensing requirements.

 

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.

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. 

Vermont Attorney General’s Office Posts Final “Guide to Vermont’s Prescribed Products Gift Ban and Disclosure Law for 2013 Disclosures”

By Hiramella Deonarine and Danielle Burke

In an effort to help manufacturers comply with the requirements of Vermont's Prescribed Products Gift Ban and Disclosure Law (Law) and to provide additional guidance for expenditure reports due on April 1, 2014 (the 2013 calendar year), the Vermont Attorney General's Office (AG’s Office) has posted on its website the final “Guide to Vermont’s Prescribed Products Gift Ban and Disclosure Law for 2013 Disclosures” (Guide).  Additionally, the AG’s Office posted the 2013 Expenditures Disclosure Form for 2013, and the Samples Disclosure Form for 2013.

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

In addition to the Guide, the AG’s Office also released a memorandum entitled “Common Errors in Compliance with Vermont’s Prescribed Products Gift Ban and Disclosure Law That May Result in Enforcement Action” (Common Errors).  This memorandum lists common errors made by manufacturers in previous disclosure reports submitted to the AG’s Office.  The Common Errors memo states that the AG’s Office “expects to take enforcement action against manufacturers with unjustified, obviously and egregiously incomplete or incorrect submissions.”

To view a copy of the Guide, the forms, and the Common Errors memo, please see the links above or visit the Vermont AG’s Office’s 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