Getting Ready for Sunshine

Health reform requires detailed tracking and full disclosure of fees to docs for marketing and research
Oct 01, 2010

Jill Wechsler
As part of the effort to transform the nation's health care system, the Affordable Care Act (ACA) promotes greater transparency in pharmaceutical industry relationships with health professionals. The aim of a provision commonly known as the Sunshine Act is to reduce inappropriate prescribing, curb drug marketing, and lower health care spending overall through public disclosure of payments from drug and medical product manufacturers, to physicians and teaching hospitals. In the process, the program promises to alter industry business practices and marketing strategies and raise a host of thorny legal issues.

Superficially, the Sunshine policy looks familiar. Companies have been tracking and reporting fees and gifts to healthcare professionals (HCPs) for several years to meet a range of state laws and other standards. The Pharmaceutical Research and Manufacturers of America (PhRMA) revised its marketing code in 2008 to address these issues by banning gifts to doctors and encouraging limits on fees. Furthermore, a number of pharma companies such as Eli Lilly, Merck, GlaxoSmithKline, and Pfizer are posting physician payments on their websites to comply with corporate integrity agreements negotiated to settle charges of illegal marketing activities.

Capture Everything

But the federal Sunshine Act expands disclosure requirements considerably and extends them to biotech and medical device manufacturers. These "applicable manufacturers" have to report a long list of "payments or other transfers of value" to "covered" recipients. Data submission includes recipient's name, address, medical specialty, amount received, date of payment, type of payment (cash, stock, in-kind products), and if the payment is related to a specific drug or product. Reporting applies to anything worth more than $10, or outlays that total up to $100 a year, and includes consulting fees, honoraria, payment for research, gifts, entertainment, travel, education, charitable contributions, royalties, licenses, grants, stipends to speakers, or anything else that the feds add to the list. Manufacturers and group purchasing organizations also have to report any "ownership or investment interest" held by a physician in that entity, a strategy designed to track whether investments in hospitals or drug companies spur doctors to purchase medical equipment or to prescribe particular medicines.

Because small amounts can add up quickly, every dollar has to be captured in "aggregate spend" software systems and tracked over time. That means collecting massive amounts of information on sales force activities, marketing programs, and clinical research projects.

The Department of Health and Human Services (HHS) is charged with implementing regulations by October 2011 to clarify which companies have to report what information about who. Everyone is looking for clearer definitions of "consulting fee," "honorarium," "teaching hospital," and how reporting applies to affiliated companies, product co-development partnerships, and third-party service firms.

The process for submitting data to HHS and for the feds to make this information public remains murky. So far there's been little clarification from Washington, even though companies have to start collecting required data in 2012 in order to file their first reports in March 2013. That may seem like plenty of time to launch new systems, but the standard-setting process can take months, and no one at HHS seems to be in charge.

Failure to comply with all the requirements "in a timely manner" carries fines that start at $1,000 for each reporting failure and jump to $1 million a year for firms that knowingly and deliberately disregard the new rules. Prosecutors and whistleblowers will have a sharp eye out for inadequate disclosure that can support anti-kickback cases and other charges. Because companies inevitably will file some spending information that turns out to be erroneous, False Claim Act cases will be "going through the roof," warned attorney Kirk Ogronsky of Arnold & Porter at the Center for Business Intelligence (CBI) aggregate spend forum in August.

Weak Pre-emption

Reporting systems also will continue to track state disclosure policies, as federal pre-emption in the Sunshine Act is fairly weak. PhRMA backed federal Sunshine legislation as a way to replace diverse state laws with a national standard, but differing state requirements remain in effect, such as reporting of DTC advertising costs.

Eight states, including Massachusetts, Vermont, Maine, Minnesota, and Washington, D.C., have enacted physician transparency policies with varying thresholds and timeframes for submitting information. The stated aim of these initiatives is to reduce health care spending, pointed out Vermont assistant attorney general Wendy Morgan at the CBI forum. Drug companies spend millions marketing to physicians, and this "affects the way doctors prescribe," said Illinois state representative Jack Franks. Vermont and several other states are moving from disclosure to outright bans on gifts to healthcare providers, as the HCPs more clearly aim to cut marketing expenditures. If you curb gifts, said Morgan, you eliminate "a huge chunk of money added to the cost of pharmaceuticals."

Yet, pre-emption may have some impact. Morgan said that Vermont will adopt federal definitions and standards as much as possible to avoid redundancies. And Franks said he won't continue to pursue an Illinois disclosure law because a uniform federal policy is "better than a hodgepodge of legislation across the country." But Franks added that he'll be watching closely to see how federal reporting affects prescribing trends.

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