The Centers for Medicare & Medicaid Services ("CMS") recently released its final rule (the "Final Rule") interpreting the physician payment "sunshine" provisions of the Patient Protection and Affordable Care Act (the "Sunshine Act"). The Sunshine Act contains two (2) main requirements:

  1. "Applicable manufacturers" of a "covered drug, device, biological, or medical supply" must report annually certain information to CMS regarding "payments and other transfers of value" provided to physicians and teaching hospitals.
  2. "Applicable manufacturers" and group purchasing organizations ("GPOs") must report annually certain information to CMS regarding "ownership or investment interests" held by physicians and their immediate family members during the preceding calendar year.

Key Dates

"Applicable manufacturers" and GPOs must begin data collection in connection with these two requirements on August 1, 2013. The first reports must be filed with CMS by March 31, 2014. CMS will release the responsive data to the public through a CMS website by September 30, 2014.

Key Definitions

The Sunshine Act defines "applicable manufacturer" to mean any entity operating in the United States that is engaged in the production, preparation, propagation, compounding or conversion of a covered drug, device, biological or medical supply, including entities under common ownership (5% ownership or more) that provide assistance or support with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale or distribution of a covered drug or device for sale or distribution in the United States.

The Sunshine Act defines "payment or other transfers of value" broadly to capture anything of value given to a covered recipient, including direct and indirect payments, as well as payments made to a third party at the request of a covered recipient. However, the Sunshine Act specifically excludes (i) product samples; (ii) educational materials that directly benefit patients or are intended for patient use; (iii) in-kind items used in the provision of charity care; (iv) discounts and rebates; and (v) payments or other transfers of value made solely in the context of personal, non-business-related relationships. There is also a broad exclusion for transfers of value that are under $10, where the total value of all payments or transfers of value made to a single recipient do not exceed $100 during the reporting year (values are updated annually in accordance with the consumer price index).

Report Requirements

Reports regarding payments and other transfers of value provided to physicians and teaching hospitals must contain all of the following information with respect to each payment or other transfer of value:

  • Name of the covered recipient
  • Address of the covered recipient
  • Identifiers for physician covered recipients (i.e., specialty, NPI number, and professional license numbers)
  • Amount of payment or other transfer of value
  • Date of payment or transfer of value
  • Form of payment or transfer of value (e.g., cash, in-kind, etc.)
  • Nature of payment or transfer of value (e.g., consulting fee, gift, honoraria, food and beverage, education, etc.)
  • Related covered drug, device, biological or medical supply, if any
  • Additional information or context for payment or transfer of value (optional).

Reports regarding ownership or investment interests that were held by a physician (or his/her immediate family member) during the preceding year must contain all of the following information:

  • The name of the physician, and whether the interest is held by an immediate family member
  • The primary business address of the physician
  • The physician’s National Provider Identifier, state license number, and specialty
  • The dollar amount invested by the physician (or his/her immediate family member)
  • The value and terms of the interest
  • Additional information regarding any payment or other transfer of value provided to the physician holding the interest

Note that only ownership or investment interests held on or after August 1, 2013 must be reported to CMS. Therefore, the first report (due March 31, 2014) will cover interests acquired or held between August 1, 2013 through December 31, 2013.

In the event an "applicable manufacturer" or GPO discovers an error or omission in its annual report, the "applicable manufacturer" or GPO must submit any information necessary to correct such error or omission within 45-days. All books, contracts, records, documents, and other evidence sufficient to enable the audit, evaluation, and inspection by CMS or OIG of the "applicable manufacturer’s" or GPO’s compliance with the disclosure requirements must be retained for at least five (5) years from the date on which the payment or other transfer of value is published on CMS’s website.


Penalties for failing to timely, accurately, or completely report information as required by the final rule can be as high as $1,150,000 per "applicable manufacturer" or GPO, per each annual submission.


The Sunshine Act has many important implications for life science companies, GPOs and other health care professionals and organizations. All interested parties should (i) develop processes to track the information required to be reported, (ii) modify internal compliance plans to reflect the Sunshine Act requirements, and (iii) update its document retention policies.