Senators Charles Grassley and Herb Kohl have introduced the Physician Payments Sunshine Act of 2009 (the “Sunshine Act”). The Sunshine Act would require public disclosure of financial relationships between drug and device manufacturers and physicians. Manufacturers would make annual reports to the U.S. Department of Health and Human Services (“HHS”) of any payments to physicians that exceed $100 per year. Specifically, beginning March 31, 2011, any entity engaged in the “production, preparation, propagation, compounding, conversion, processing, marketing or distribution of a … drug, device, biological or medical supply” (including any subsidiary) that is eligible for any federal or state coverage must report any payment or other transfer of value to a physician, medical practice, or group practice that exceeds $100 per year. HHS would then make all of the reported information available over the internet in a searchable format. Manufacturers would face fines ranging from $1,000 to $10,000 for each payment that is not reported (up to $150,000 annually). Further, if a manufacturer knowingly violated the reporting requirements, it could incur penalties of $10,000 to $100,000 for each payment not reported (up to $1 million annually).

The Sunshine Act defines reportable transactions broadly to include items such as meals, entertainment, travel expenses, consulting fees, honoraria, and royalty payments. In addition, manufacturers and group purchasing organizations would be required to report any ownership or investment interests held by physicians or their immediate family members (except for publicly traded securities or mutual funds). Excluded from the reporting requirement are educational materials that directly benefit patients, product samples for patient use, and charity care contributions. Also, manufacturers may be able to delay reporting payments for up to two years pursuant to the development of a new drug, device, biological, or medical supply or in connection with a clinical trial.

Notably, the Sunshine Act does not prohibit such payments to physicians. However, the disclosure of such information would certainly arm enforcement agencies with ammunition to investigate violations of the Anti-Kickback Statute or Stark Amendment. In addition, other credentialing or health care entities can monitor compliance with various conflict of interest requirements.

If passed, the Sunshine Act would require a significant compliance burden for reporting and monitoring compliance. The Sunshine Act would only preempt duplicate state reporting requirements. However, states may still impose additional reporting obligations in addition to those contained in the Sunshine Act. In addition to the HHS Office of the Inspector General’s compliance program guidance for pharmaceutical manufacturers, both the PhRMA Code on Interactions with Healthcare Professionals and the AdvaMed Code of Ethics on Interactions with Health Care Professionals have provided guidance to the manufacturing industry with respect to relationships with health care providers. Such guidance should already provide entities with a roadmap for acceptable types of relationships.

The introduction of the Sunshine Act signals a desire by Congress to actively regulate the drug and device industry and the relationships with health care providers.