Big Pharma's Newest Cost Center

Oct 31, 2013

Compliance with new standards on disclosure of industry promotional ties to health providers is emerging as a global policy challenge—the United States is no longer an outlier. While pharmaceutical and device companies began tracking payments made to teaching hospitals and physicians on August 1, under the US Physician Payments Sunshine Act (Sunshine Act), a similar trend is underway in Europe. In June 2013, the European Federation of Pharmaceutical Industries and Associations (EFPIA) adopted a code requiring disclosure of certain payments from pharmaceutical companies to healthcare professionals and organizations (Disclosure Code). As pressure for transparency continues across the globe, the costs of compliance are slated to rise for each pharmaceutical and medical device company affected by these initiatives. This column suggests cost-mitigating strategies for companies designed to comply not only with the technical requirements of these global initiatives but also the spirit of the law.

Sunshine precedent

Comparison of EFPIA and Sunshine Act
The Sunshine Act requires pharmaceutical and device manufacturers to report annually "any payment or transfer of value" made to physicians and teaching hospitals, who are collectively known as "covered recipients." The first reports are due to the Centers for Medicare and Medicaid Services (CMS) by March 31, 2014 for the tracking period of August 1 to December 31, 2013.

US law mandates that all transfers of value be reported, unless an exception applies. Important exceptions include:

» Payments less than $10, except when the annual value of such payments to a covered recipient exceeds $100.

» Educational materials that directly benefit patients or are intended for patient use.

Penalties for failure to report in a timely, accurate manner, range from $1,000 to $100,000 per payment not reported, with a maximum penalty of $1,000,000 for each annual submission.

EFPIA's Disclosure Code

Europe has opted to take a self-regulating approach to promotional disclosures but the aims are similar to what is occurring in the United States. The region's major industry association has endorsed a strong Disclosure Code that requires the constituent members of the EFPIA Associations in Europe and corporate members of EFPIA to disclose annually any transfers of value to healthcare professionals (HCPs) and healthcare organizations (HCOs). The Disclosure Code will be imposed on member companies through the implementing codes that the EFPIA national member associations are required to adopt by December 31, 2013.

The scope of the disclosure obligations is very broad, and includes:

» Transfers to HCOs:

  • Donations and grants
  • Contributions to costs related to events
  • Fees for services and consultancy

» Transfers to HCPs

  • Contribution to costs related to events
  • Fees for service and consultancy

Transfers of value must be disclosed and attributed on an individual basis for each recipient. Disclosures must be made within six months of the end of the relevant reporting period. The first reporting period will be 2015. The Disclosure Code allows companies to disclosure either on their website, or on a central platform, such as the one provided by the relevant government, regulatory body, professional authority, or member association. Unless expressly exempt by the Disclosure Code, transfers must be disclosed on an individual basis.

While the Disclosure Code does not provide for specific sanctions for noncompliance, it calls upon the national member associations to include sanctions for violations of their national codes.

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