CMS Issues Rule Regarding Reporting of Physician Payments from Drug and Device Manufacturers

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On February 8, 2013, CMS issued a final rule intended to increase public awareness of financial relationships between manufacturers of drugs, devices, biological and medical supplies.  The rule also seeks to reveal relationships between Group Purchasing Organizations (GPOs), and physician and teaching hospitals.  The final rule, titled: “Medicare, Medicaid, Children’s Health Insurance Programs; Transparency Reports and Reporting of Physician Ownership or Investment Interests,”  implements a tracking and reporting program for payments and other transfers of value made to physicians and teaching hospitals, as well as certain ownership interests held in the organizations by physicians and their immediate family members.  The information will be collected annually and published on the internet as required by the Affordable Care Act.

CMS notes that a financial relationship does not necessarily indicate an inappropriate relationship however, the new program is designed to:

  • Promote transparent information regarding financial relationships;
  • Disclose the nature and extent of financial relationships between the industry and the physicians and teaching hospitals;
  • Discourage inappropriate influences on research, education, and clinical decision-making; and
  • Curtail potential conflicts of interest that can compromise clinical integrity and patient care.

Most manufacturers and GPOs as well as suppliers of any drug and biologic, and/or device or medical supply for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, as well as hospitals that receive payment for Medicare direct graduate medical education, indirect medical education, or psychiatric hospital IME programs, will be subject to the new rule.  Industry data collection is scheduled to begin on August 1, 2013, which will provide an abbreviated 5-month report, compared to the 12-month cycles which will occur in subsequent years.  CMS is developing an electronic system for the reporting process.  The reported information will be easily aggregated, downloaded, and searchable on the program website.

The data collected annually will include:

  • Applicable manufacturers of covered drugs, devices, biological, and medical supplies must report payments or other transfers of value they make to physicians and teaching hospitals to CMS;
  • Applicable manufacturers and applicable GPOs must report to CMS ownership or investment interests held by physicians or their immediate family members.  Payments and other transfers of value to these physicians must also be reported; and
  • Applicable GPOs must report to CMS payments or other transfers of value made to physician owners or investors if they held ownership or an investment interest at any point during the reporting year.

The reportable payments and transfers of value include, but are not limited to: consulting fees, honoraria, gifts, entertainment, food and beverages, travel and lodging, and other items.  Research payments however, or other transfers of value may be delayed from publication on the website until the date of FDA approval or up to four years from the date of report (whichever is first), when made under a product research or development agreement, in certain circumstances.

Providers who are included in any report are entitled to at least 45 days to review and dispute the information related to them that was submitted by manufacturers and GPOs.  Any disputed payments or transfers of value must be resolved directly between the disputing party and the reporting manufacturer or GPO.  After the 45 days, the manufacturer or GPO will have an additional 15 days to submit corrections following any disputes.  Providers can assist in the review of relevant data by maintaining their own records of interaction with manufacturers and GPOs subject to this rule.

Failure to follow the reporting requirements will subject violators to Civil Monetary Penalties, capped annually at $150,000 for failure to report, and $1,000,000 for known failure to report.  The HHS OIG reserves the right to audit, evaluate, or inspect the records of manufacturers and GPOs for their compliance with the reporting requirements and therefore the manufacturers and GPOs must maintain all records and documents for at least five years from the date of payments or other transfers of value or ownership or investment interest is published publicly on the website.

The attorneys at Nicholson & Eastin, LLP are available to assist providers and reporting entity with complying with the reporting provisions and with addressing any disputed reports.