U.S. House of Representatives Passes Health Care Reform Bill: Nationwide Physician Disclosure Obligations May Soon be a Reality

U.S. House of Representatives Passes Health Care Reform Bill: Nationwide Physician Disclosure Obligations May Soon be a Reality

   By Brian K. French and Michele A. Masucci, Partners, Nixon Peabody

On Sunday, March 21, 2010, the U.S. House of Representatives passed the U.S. Senate health care reform bill and a reconciliation package that resolves certain differences between prior House and Senate proposals. As discussed in a previous Alert1, the Senate bill incorporates provisions of the Physician Payment Sunshine Act, which seeks to establish a nationwide standard requiring pharmaceutical and medical device manufacturers to report information regarding their payments to physicians to the U.S. Department of Health and Human Services (“HHS”). This information, which will identify the recipient, amount, and nature of each payment, will be posted on a publicly available, online database six months after the first report is due.

Although the first report is not required under the proposed law until March 31, 2013, companies must begin tracking payments for reporting purposes as of January 1, 2012. Accordingly, it is important that drug and device companies begin developing internal policies, procedures, and systems that will adequately track physician payments and identify the range of information that will need to be included in each report to HHS. Providers should also be aware that, as of January 1, 2012, information identifying the amount and nature of any compensation, reimbursements, or other payments they receive from industry for consulting services, speaker programs, or other arrangements will subsequently be made publicly available beginning on September 30, 2013, subject to certain exceptions discussed below.

Summary of physician payment disclosure provisions

The payment reporting provisions of the proposed law apply to manufacturers of pharmaceutical drugs, medical devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (“CHIP”). Under the legislation, beginning on March 31, 2013, covered manufacturers must report to HHS on an annual basis any payments or other transfers of value made to a physician or teaching hospital, including:

  • The name of the recipient;
  • The business address of the recipient and, for physicians, the specialty and National Provider Identifier;
  • The amount of the payment or transfer of value;
  • The dates on which the payment or transfer of value was provided to the recipient;
  • A description of the form of payment or transfer of value, indicated as:
    • Cash or cash equivalent;
    • In-kind items or services;
    • Stock, stock options, or other ownership interest, dividend, profit, or other return on investment; or
    • Any other form of payment or transfer of value;
  • A description of the nature of the payment or transfer of value, indicated as:
    • Consulting fees;
    • Compensation for services other than consulting;
    • Honoraria;
    • Gift;
    • Entertainment;
    • Food;
    • Travel (including the specified destinations);
    • Education;
    • Research;
    • Charitable contribution;
    • Royalty or license;
    • Current or prospective ownership or investment interest;
    • Direct compensation for serving as faculty or as a speaker for a medical education program;
    • Grant; or
    • Any other nature of the payment or transfer of value.
  • If the payment or transfer of value is related to marketing, education, or research specific to a drug, device, biological, or medical supply, the name of the particular product.

Also beginning on March 31, 2013, all covered manufacturers and group purchasing organizations (“GPOs”) that purchase, arrange for, or negotiate the purchase of covered drugs, devices, biologicals, or medical supplies, must report to HHS any ownership or investment interest (other than an ownership or investment interest in a publicly traded security or mutual fund) held by a physician (or an immediate family member of the physician) in the manufacturer or GPO, including:

  • The dollar amount invested by each physician holding an ownership or investment interest;
  • The value and terms of each ownership or investment interest; and
  • Any payment or other transfer of value provided to a physician holding an ownership or investment interest (or to an entity or individual at the request of or designated on behalf of a physician holding an ownership or investment interest), including the information required to be disclosed under the physician payment disclosure provisions discussed above.

The proposed law exempts certain items from the payment reporting requirements, including:

  • The transfer of anything valued at less than $10, unless the aggregate amount transferred to, requested by, or designated on behalf of the recipient by the manufacturer during the calendar year exceeds $100;
  • Free product samples intended for patient use;
  • Educational materials that directly benefit patients or are intended for patient use;
  • The loan of a covered medical device for a short-term trial period, not to exceed 90 days, to permit evaluation of the device by the recipient;
  • Items or services provided under a contractual warranty, including the replacement of a covered device, where the terms of the warranty are set forth in the purchase or lease agreement for the device;
  • A transfer of anything of value to a recipient when the recipient is a patient and not acting in the professional capacity of a covered recipient;
  • Discounts (including rebates);
  • In-kind items used for the provision of charity care; and
  • A dividend or other profit distribution from, or ownership or investment interest in, a publicly traded security or mutual fund.

To protect certain potentially proprietary information, the proposed law allows for the delayed reporting of payments made under product development agreements or for clinical trials. For payments made (1) under a product research or development agreement for services regarding (a) research on a potential new medical technology or a new application of an existing medical technology, or (b) the development of a new drug, device, biological, or medical supply; or (2) in connection with a clinical investigation regarding a new drug, device, biological, or medical supply, the information reported to HHS will not be publicly available until the date of the approval or clearance of the drug, device, biological, or medical supply by the Food and Drug Administration, or four calendar years after the date the payment or transfer of value was made, whichever occurs first.

Presumably to assist the states in identifying and targeting potentially abusive arrangements, HHS will provide each state with an annual report summarizing the information disclosed by manufacturers or GPOs during the preceding calendar year regarding covered physicians and teaching hospitals located in their respective states.

A manufacturer or GPO that fails to submit information required by the proposed law in a timely manner will be subject to a civil money penalty of not less than $1,000, but not more than $10,000, for each payment or transfer of value or ownership or investment interest that is not reported. The total civil money penalties that may be imposed against a manufacturer or GPO is capped at $150,000 per year. For knowing failures to submit information in a timely manner, a manufacturer or GPO will be subject to a civil money penalty of not less than $10,000, but not more than $100,000, for each payment or transfer of value that is not reported. The total amount of civil money penalties that may be imposed against a manufacturer or GPO for knowing violations is capped at $1 million per year.

For payments or other transfers of value received by a covered recipient on or after January 1, 2012, the proposed federal law will preempt any state statutes or regulations that require covered manufacturers to disclose or report the same types of information covered by the federal law. The federal statute will not preempt state laws or regulations that apply to a broader range of manufacturers or recipients than those governed by the federal law, or that require the reporting of information of a different type than that which must be reported under the federal law or that is exempt from reporting under the federal law (although the federal law will preempt state laws to the extent that they exempt de minimis payments of amounts greater than $10).

Nixon Peabody will continue to monitor these developments and will provide further updates as information about the new legislation becomes available. Any companies or providers that have questions about the proposed law or about how to prepare for the law’s eventual implementation should feel free to contact us.

Additional information is available from the Nixon Peabody website.