All is finally said and done. Despite some lingering clarifications, the mystery surrounding the Sunshine Act is now over. As of February 1, 2013, the Centers for Medicare & Medicaid Services (CMS) announced the final rule for the provision as part of the Patient Protection and Affordable Care Act (PPACA). The finalized Sunshine Act includes key changes such as clarification on how applicable manufacturers should report, characterize, and exempt payments or other transfers of value—including research and indirect payments—which compound the already intricate web of reporting requirements.

In essence, the ultimate provision requires manufacturers of drugs, devices, biologics or medical supplies to collect data on payments over $10 made to physicians, teaching hospitals and group purchasing organizations (GPOs) starting August 1, 2013. The first report will be due to CMS by March 31, 2014, for payments made between August 1 and December 31, 2013. The reported data will be released on the CMS public website by September 30, 2014. As recently defined, the Sunshine Act applies to all manufacturers that operate or sell products in the U.S., regardless of manufacturing location. To further promote financial transparency, manufacturers and GPOs are to also disclose ownership or investment interests held by physicians or their immediate family members.

The final rule of the Sunshine Act serves as a compromise between the initial draft and resultant feedback from healthcare, Life Sciences and consumer communities. Now, with revised guidelines in hand, manufacturers must address a pressing question: How do these fine-tuned details alter internal processes for data reporting that is due in less than six months?

Highlights From the Definitive Sunshine Act: Disclosure Details

The Sunshine Act retains its original principle: requiring any manufacturer who produces at least one covered product to disclose all payments or other transfers of value whether or not related to that covered product. Nonetheless, CMS made substantial changes to refine the disclosure requirement for manufacturers. For example, manufacturers must disclose both direct and indirect payments (or transfers of value), even those made by a third party, to a covered recipient.

Modifications were made to the categories of reportable information. National Provider Identifier (NPI) numbers have been confirmed as required data (whenever applicable), along with physician’s state of practice and appropriate state professional license number(s). Another noteworthy clarification is the limited preemption clause, stating that manufacturers are not required to report per state or local laws the same type of information required by the federal law. States such as Massachusetts and Vermont exist as exceptions to this clause since their additional requirements exceed those of the Sunshine Act and will continue to be upheld.

Exemption Breakdown

Meanwhile, the completed exemptions list is especially attractive for manufacturers. A relative victory for companies’ marketing initiatives, all discounts and rebates associated with covered products will be exempt—a particularly surprising decision considering that these items demonstrate clear value. All sampling activity, food and beverage for large scale events and educational materials for use with patients will be outside the realm of reportable information. Notably, payments related to specific certified Continuing Medical Education (CME) programs (i.e., those providing education on safeguards) are generally not to be reported as they are considered to counteract industry influence.

Surprising Separation of Research Data

The differentiation between research spend data and all other data is an unexpected revelation in the final rule. CMS established a separate reporting system, encompassing pre-clinical trials, Food and Drug Administration (FDA) Phase I-IV and product development. Although many companies may interpret this as an added burden, the fact that this information will be publicized may facilitate improved relationships. Companies can leverage this widely accessible evidence of research investment to better justify costs and increase transparency with payers, physicians and patients.

Impact of Penalties & Cost

Financial penalties for noncompliance range from $1,000–$10,000 for each payment or other transfer of value or ownership or investment interest not reported, with a total maximum of $150,000 per year. However, if a manufacturer consciously fails to submit information, those fines increase to $10,000–$100,000 respectively. The law states that the total penalties for this failure will not exceed $1,000,000 in a given year. Over time, the Sunshine Act will cost applicable manufacturers an estimated $269 million in the first year and $180 million in subsequent years.

Strategies for Best Practices in Compliance 2013

First and foremost, honestly assess spend capture capabilities with an in-depth, cross-organizational gap analysis. Insights gained can provide the roadmap for investment priorities and assignment of responsibility within an organization.

Establish a precedent for clean, accurate data with a customer master data management (MDM) system. MDM solutions afford a centralized data hub and 360-degree customer views across organizations and diverse spend source systems. Leverage MDM systems to create a unique customer record and identifier from disparate data sources to facilitate identification, help ensure consistency, maintain relationships/affiliations between customers and mitigate bad data.

Rather than jeopardizing client and organization relationships by publicizing spend data only on the CMS website, enable recipients to dispute expenditures through a secure portal before publishing data. This will allow HCPs and HCOs with the ability to review and alert the manufacturer of any discrepancies more conveniently for all involved parties.

As the annual report is due in a matter of months, employing an automated system has become more of a necessity rather than a convenience. The ideal automated system should capture, cleanse and augment spend data from all data sources, and it should strive to use the MDM system for consistency and accuracy. Moreover, effective solutions should aggregate, process and detect relevant data as per each state and federal regulation. Automatic legislation updates, report due-date reminders and spent threshold alerts will ensure that companies maintain consistent compliance.

Above all else, the Sunshine Act’s final form must propel companies to more proactively monitor and improve the public opinion regarding the relationship between the healthcare community and the Life Sciences. Enacting better reporting measures and systems will streamline efficiency and alleviate administrative burdens, as well as help to revitalize each industry’s image in the eyes of consumers.

 

  • Bill Buzzeo

    Bill Buzzeo is an authority on regulatory requirements facing today's pharmaceutical industry, specifically those involving the Prescription Drug Marketing Act (PDMA); international, federal, and state transparency and reporting requirements; and the Controlled Substances Act (CSA).

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