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Is Pharma Ready for the Sunshine Act?

At last.  Cue the Etta James music because the Centers for Medicare and Medicaid Services (CMS) released the final version of the Sunshine Act.  Is pharma ready for the Sunshine Act? As of February 8, the Sunshine Act will be included in the Federal Register and will go into effect shortly thereafter.  Finally, pharma and the rest of the healthcare industry can breathe a little easier as they shift away from eagerly — or perhaps reluctantly— awaiting further legislative updates to focusing on adhering to these now-finalized guidelines.

As anticipated, the Sunshine Act hopes to promote industry-wide transparency by publicizing pharma’s payments to physicians.  The act will require pharma and other players in the healthcare industry to disclose their direct physician payments as well as those that they have directed third party vendors to provide.  These payments include consulting fees, gifts, and travel reimbursements.

Beyond its reporting requirements, the final provision of the Sunshine Act also enumerates several exceptions to its mandated reporting procedures.  The act requires companies to report all research-facing payments involving CROs unless the payment:

  • Is less than $10
  • Results in patient-facing educational material
  • Is in the form of discounts, rebates or product samples
  • Is a short-term loan

Another reporting exception deals with accredited continuing education (CME) programs.  Under the final provision of the Sunshine Act, speaker payments associated with company CME programs are not considered indirect payments and are not subject to reporting so long as:

  • The CME program is accredited—meeting the standards set forth by ACCME, AOA, AMA, AAFP or ADA CERP.
  • Speaker selection is the exclusive responsibility of a third party vendor and the company does not provide this vendor with a speaker or list of speakers to be considered for the event.
  • The company does not directly pay the speaker.

In the event that a program does not meet one or more of these standards, companies must log the associated costs as indirect payments.

Finally, the Sunshine Act extends its coverage to areas associated with pharmacovigilance — specifically with risk evaluation and mitigation strategies (REMS).  As with CME programs, the nature of a company’s REMS activity determines whether it will need to report the associated costs.  If a company develops a REMS-facing educational program and either selects the speaker or reimburses “covered recipients” (physicians and/or teaching hospital employees) for costs associated with the program (including meals and travel expenses), the company must report its expenditures.  By comparison, companies are not required to report money spent to produce written materials that have undergone FDA approval.  Examples of such materials include medical information guides, which companies may distribute to physicians and/or patients as part of their REMS program strategy.

With the Sunshine Act finalized, pharma, device companies, supply companies, contract-manufacturing organizations (CMOs) and contract research organizations (CROs) will need to develop and implement strategies to help them track their interactions with “covered recipients”—specifically monitoring any direct or indirect payments made.  Because the Sunshine Act does not outline a specified tracking method, companies less familiar with the implications surrounding the Sunshine Act now must be especially diligent.

CMS-mandated data collection begins August of this year and companies have until March 31, 2014 to report all physician payments incurred between August and December 2013.  Following data submissions, CMS will post the information online.  At this point, physicians will have 45 days to review the information to ensure its accuracy.  Following physician review, the public website developed by CMS is set to go live on September 30, 2014.

Sarah Ray
Senior Research Analyst

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