Last Friday, the Centers for Medicare & Medicaid Services (CMS) published a final rule with comment period addressing, among other issues, changes to the reporting and data collection requirements imposed upon “applicable manufacturers” under the Physician Payment Sunshine Act (Sunshine). The rule is scheduled to be published in the November 13, 2014, edition of the Federal Register and is currently available here. Comments to the final rule with comment period must be received by December 30, 2014.

Very generally, under Sunshine, companies that are classified as “applicable manufacturers” (generally, manufacturers or distributors of pharmaceuticals or medical devices covered under Medicare, Medicaid or CHIP) are required to report all payments or other transfers of value made to “covered recipients” (physicians and teaching hospitals). The final rule with comment period changes the reporting requirements imposed upon applicable manufacturers and will impose new data collection requirement on manufacturers during calendar year 2016.

  • Deletion of the Continuing Education Exclusion in its entirety. This is arguably the most fundamental change implemented by the rule. Applicable manufacturers will begin collecting data in accordance with this rule in 2016 (and therefore presumably won’t be required to make reports based upon the new rules until 2017).   
  • Under the final Sunshine rules promulgated on February 8, 2013, applicable manufacturers did not have to report speaking fees paid to continuing medical education (CME) vendors accredited by certain organizations, provided that the applicable manufacturer did not pay the covered recipient speaker directly, and the applicable manufacturer did not select the covered recipient speaker or provide a third party (such as the CME vendor) with a distinct, identifiable set of individuals to be considered as speakers for the event.
    • The new rule eliminates this exception. In lieu of articulating a specific exception, CMS instead instructs applicable manufacturers to determine whether a particular payment is an “indirect payment” under other provisions of the Sunshine rules. The existing definition of “indirect payment” provides that such a payment exists only where the applicable manufacturer “requires, instructs, directs, or otherwise causes” a third party to make a transfer of value to a covered recipient.
    • CMS indicates that one result of this change is that, where the applicable manufacturer makes a payment to a CME vendor that is earmarked as a speaking fee for a physician speaker (even if the identity of the speaker is unspecified at the time of the payment), the applicable manufacturer will be required to report that payment, assuming it learns of the identity of the physician ultimately named as the speaker during a defined period of time. By contrast, where an applicable manufacturer makes an unrestricted payment to a CME vendor, the payment should generally be nonreportable, even if a portion of that payment is ultimately provided to a physician.
    • CMS clarified, in the preamble to the final rule, that this change is not intended to require reporting of manufacturer subsidies for physician attendance fees at CME events (except where such subsidies are steered towards specific covered recipients). CMS has indicated that it will provide sub-regulatory guidance “specifying” (and, hopefully, clarifying) this principle at a later date.
    • Required reporting of the marketed name and therapeutic area or product category of the related covered drugs, devices, biologicals, or medical supplies, unless the payment or other transfer of value is not related to a particular covered or non-covered drug, device, biological or medical supply. This is a technical change to the data elements that must be reported under Sunshine. Under existing rules, where a payment is related to a specific covered product, the applicable manufacturer must report certain data elements if the product is a medical device or supply, and others if the product is a drug or biological. Without getting too deep into the specifics in the changes to the data elements that must be reported, the changes are intended to require reporting of essentially the same data for all types of products. Applicable manufacturers will begin collecting data in accordance with this rule in 2016 (and therefore presumably won’t be required to make reports based upon the new rules until 2017).
    • Required reporting by applicable manufacturers of stocks, stock options, or any other ownership interest as distinct categories. This change requires more granular reporting of physicians’ ownership interests in applicable manufacturers. This provision of the final rule is effective January 1, 2015, so it is possible that CMS will require the more granular reporting in the Calendar Year 2014 reports that will be filed in 2015.
    • Deletion of the definition of “covered device.” This change is not substantive. It merely eliminates the redundancy between the definition of “covered drug, device, biological, or medical supply” and “covered device.” This provision of the final rule is effective January 1, 2015. 

The elimination of the continuing education exclusion has legal and customer relations implications for applicable manufacturers, CME vendors, and physician speakers. Applicable manufacturers will want to be mindful of the new rules as they provide payments to CME vendors, and physicians that serve as speakers at CME events will want to make inquiry of CME vendors and manufacturers, to learn how (and if) speaking fees will be reported to CMS. 

The changes to the data elements to be reported under Sunshine (regarding covered product information and ownership interests) may change the way that data are used by researchers and media outlets. Applicable manufacturers will want to be sensitive to changes such as this to make sure that their provision of value transfers (and the required reporting of such transfers) is consistent with the company’s image, mission, and goals. We will continue to assist clients with Sunshine issues and to monitor developments around Sunshine data collection and reporting.