Last month, Senators Charles Grassley (R-IA) and Arlen Specter (R-PA), introduced a bill that, if enacted, will require extensive government reporting of product pricing by manufacturers of implantable medical devices.

The Transparency in Medical Device Pricing Act (S. 2221), introduced Oct. 23, would require as a condition of payment by Medicare, Medicaid or the State Children’s Health Insurance Program (SCHIP), that device manufacturers report on a quarterly basis the average and median sales prices for medical devices used in hospital procedures that involve implantation of a medical device. The bill would clearly apply to implantable devices themselves, such as pacemakers, hip and knee replacements and stents. Although the language is less clear, the bill might also apply to other medical devices – such as surgical saws, drills, or computer-assisted navigation equipment – that are used in a procedure in which any medical device is implanted.

The bill would require manufacturers to provide the Centers for Medicare & Medicaid Services detailed information, including the name and category of a covered device, procedures for which the device was used, average and median sales prices, and any other data the United States Department of Health and Human Services secretary deems appropriate. Sales prices would include volume discounts, cash discounts, free goods and services that are contingent on any purchase requirement, chargebacks and rebates, and any other discounts or price concessions the secretary requests.

Reporting would be required by April 2009 under the current version of the bill. Manufacturers who fail to report, or who submit false information, would be subject to civil money penalties of between $10,000 and $100,000 per violation (which in the case of false information, includes each day for which the false information is available).

In introducing the bill, Senator Grassley stated that the current lack of transparency in the implantable device sector leads to higher costs for hospitals, leaving less money for hospitals to devote to other important expenses, such as staffing, new technology systems and providing care to beneficiaries.

The bill could affect current industry sales practices, which often treat device pricing as confidential information. In addition, the bill presents the potential for government scrutiny of device price reporting, and of course, of the prices themselves.

While it is difficult to predict the future of any proposed legislation, given the prominence of Senator Grassley on health care issues, the apparent intensity of his interest in issues that could affect Medicare program expenditures, and the failure of any dissenting voices to emerge as of yet from other members of Congress, there may be real potential for this bill to become part of an omnibus budget reconciliation package. The Congressional Budget Office (CBO) is currently “scoring” the bill, and its potential for ultimate enactment could only increase if CBO finds that the bill would likely generate savings for Medicare.