Under the Physician Payment Sunshine Act (the “Sunshine Act”), which is part of the 2010 healthcare reform legislation (also known as Obama Care), manufacturers of drugs, medical devices and biologicals that participate in U.S. federal health care programs and operate in the U.S. are required to report certain payments and items of value given to physicians and teaching hospitals. This landmark legislation seeks to bring more transparency and accountability into the relationships and financial interactions among the pharmaceutical and drug manufacturing industry and doctors and teaching hospitals.

Over the last decade, the drug industry has come under significant criticism for the hundreds of millions of dollars it hands out annually to doctors in the form of gifts, payments, different benefits and consulting fees. This criticism drove Congress to introduce the Sunshine Act. The fundamental premise behind this legislation is that with more disclosure and visibility into these relationships and financial interactions, patients can better evaluate whether their course of treatment is affected by these relationships.

The first stage of the Sunshine Act is now in effect, and applicable manufacturers who operate in the U.S. pharmaceutical market are required to collect and track transfers of payment and ownership information to physicians beginning August 1, 2013. Each report must include the following information: (1) the amount of the payment; (2) the date on which the payment was made; (3) the form of payment; and (4) the nature of payment (gifts, consulting fees, entertainment or others). Applicable manufacturers will submit the reports to the Centers for Medicare & Medicaid Services (CMS) on an annual basis. The majority of the information contained in the reports will be available on a public, searchable website and physicians will have the right to review their reports and challenge reports to the extent they contain false, inaccurate or misleading information.

The reporting obligation is triggered for transfers of $10 or more per item or $100 in the annual aggregate. Exclusions from the reporting requirements include: (1) de minimis payments of less than $10 (unless the aggregate amount transferred by the applicable manufacturer is greater than $100 per year); (2) product samples; (3) educational materials directly benefitting patients;  (4) the loan of a medical device for a short-term trial period not to exceed 90 days; (5) items or services provided under a contractual warranty where the terms of the warranty are set forth in the purchase or lease agreement for the covered device; (6) a transfer of anything of value to a covered recipient (physicians) when the covered recipient is a patient and not acting in the professional capacity of a covered recipient; (7) discounts (including rebates); (8) in-kind items used for the provision of charity care; (9) a dividend or other profit distribution from, or ownership or investment interest in, a publicly traded security or mutual fund; (10) in the case of an applicable manufacturer who offers a self-insured plan, payments for the provision of health care to employees under the plan; (11) physicians in their capacity as patients; and (12) in the case of a covered recipient who is a physician, a transfer of anything of value to the covered recipient if the transfer is payment solely for the services of the covered recipient with respect to a civil or criminal action or an administrative proceeding.

KEY DATES FOR IMPLEMENTATION:

August 1 through December 31, 2013:  Manufacturers who operate in the U.S. market are required to begin collecting and tracking payment, transfer, and ownership information. Thereafter, they are required to report for each full calendar year.

January 1, 2014: It is anticipated that CMS will launch the physician portal that allows physicians to sign-up to receive notice when their individual consolidated report is available for review. This portal will also allow physicians to contact manufacturers if they want to dispute the accuracy of a report.

March 31, 2014: Manufacturers who operate in the U.S. market will report the data for 2013 to CMS.

June 2014: It is anticipated that CMS will provide physicians access to their individualized consolidated version of all manufacturers reports for the prior calendar year in June 2014. Physicians may access the consolidated reports via an online website portal maintained by CMS and will be able to seek correction or modification by contacting the manufacturer through the portal.

September 30, 2014: CMS will release most of the data on a public website.

With these dates approaching, it is important for manufacturers who operate in the U.S. pharmaceutical market or contemplate entering this market to make sure they are ready to comply with the reporting requirements of the Sunshine Act. Applicable manufacturers should determine how they intend to track and gather data as well as how they will compile and report the data.