Federal Physician Payment “Sunshine” Provisions for Financial Relationships

September 30, 2010 | Corporate | Health Services

As of January 1, 2012, information must be collected identifying the amount and nature of any compensation, reimbursements or other payments that physicians and teaching hospitals receive from manufacturers of pharmaceutical drugs, medical devices, biologicals and medical supplies, for consulting services or other arrangements.  This information will be made publicly available beginning on September 30, 2013, with certain exceptions discussed below.  As part of the Patient Protection and Affordable Care Act, signed into law on March 23, 2010, this information must be submitted to the U.S. Department of Health and Human Services (HHS) and will be subsequently available to the public through a searchable website.

The payment reporting provisions apply to manufacturers of drugs, medical devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program.  Commencing on March 31, 2013, covered manufacturers must annually report to HHS any payments or other transfers of value made to a physician or teaching hospital, including:

  • the name and address of the recipient;
  • for physicians, their specialty and national provider identifier;
  • the amount of the payment or transfer of value and the dates when provided;
  • a description of the payment or transfer of value, indicated as cash or cash equivalent; in-kind items or services; stock, stock options, or other ownership interest, dividend, profit, or other return on investment; or any other form of payment or transfer of value;
  • a description of the type of payment or transfer of value, including consulting fees; compensation for services other than consulting; honoraria; gift; entertainment; food; travel (including the specified destinations); education; research; charitable contribution; royalty or license; current or prospective ownership or investment interest by the recipient; direct compensation for serving as faculty or as a speaker for a medical education program; grant; or other type of payment or transfer of value.

In addition, if the payment or transfer of value is related to marketing, education or research specific to a drug, device, biological or medical supply, the manufacturer must disclose the name of the product.

Also beginning on March 31, 2013, all covered manufacturers (and group purchasing organizations that purchase, arrange for, or negotiate the purchase of covered drugs, devices, biologicals, or medical supplies (“GPOs”)) must report to HHS any ownership or investment interest (other than an ownership or investment interest in a publicly traded security or mutual fund) held by a physician (or an immediate family member of the physician) in the manufacturer or GPO, including:

  • the amount invested;
  • the value and terms of each ownership or investment interest; and
  • any payment or other transfer of value provided to a physician holding an ownership or investment interest (or to an entity or individual at the request of, or designated on behalf of, a physician holding an ownership or investment interest), including the information required to be disclosed under the physician payment disclosure provisions discussed above.

The law exempts from the payment reporting requirements, items including:

  • the transfer of anything valued at less than $10 (unless the aggregate amount transferred to, requested by, or designated on behalf of the recipient by the manufacturer during the calendar year exceeds $100);
  • free product samples intended for patient use;
  • educational materials that directly benefit patients or are intended for patient use;
  • the loan of a covered medical device for a short-term trial period, not to exceed 90 days, to permit evaluation of the device by the recipient;
  • items or services provided under a contractual warranty, including the replacement of a covered device, where the terms of the warranty are set forth in the purchase or lease agreement for the device;
  • a transfer of anything of value to a recipient when the recipient is a patient and not acting in the professional capacity of a covered recipient;
  • discounts (including rebates);
  • in-kind items used for the provision of charity care; and
  • dividends or other profit distributions from, or ownership or investment interest in, a publicly traded security or mutual fund.

In order to protect certain potentially proprietary information, the law allows for the delayed reporting of payments made under product development agreements or for clinical trials.  The law directs HHS to provide each state with an annual report summarizing the information disclosed by manufacturers or GPOs during the preceding calendar year regarding covered physicians and teaching hospitals located in their respective states.

A manufacturer or GPO that fails to submit required information in a timely manner will be subject to a civil money penalty of not less than $1,000, but not more than $10,000, for each payment or transfer of value or ownership or investment interest that is not reported (with an annual cap of $150,000 per year). For knowing failures to submit information in a timely manner, a manufacturer or GPO will be subject to a civil money penalty of not less than $10,000, but not more than $100,000, for each payment or transfer of value that is not reported (with an annual cap of $1 million per year).

For payments or other transfers of value received by a covered recipient on or after January 1, 2012, the federal law will preempt duplicative state statutes or regulations, but will not preempt state statutes or regulations requiring disclosure of additional information. 

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