Device and Drug Manufacturers Take Heed: It’s Time to Comply with the Physician Payment Sunshine Act

On Feb. 1, 2013, the Centers for Medicare and Medicaid Services released the long-awaited final rule on the Physician Payment Sunshine Act. The Sunshine Act is significant for applicable manufacturers of covered drugs, devices, biologicals and medical supplies. It mandates annual manufacturer reports that summarize virtually any “payment or transfer of value” that the manufacturer has made to any physician as well as detailed information about any physician ownership or investment in the manufacturer’s organization. These reports must be submitted to CMS, which will then publish the reports on a publicly available website.

The manufacturers must begin collecting the required data no later than Aug. 31, 2013. The process of data collection may be time-intensive and taxing for manufacturers, so it is important to get started soon. Manufacturers are expected to disclose all monetary – and even nonmonetary – arrangements with physicians. This would include such simple and seemingly inconsequential things as tickets to sporting events, meals and even parking. The required physician ownership details are also quite specific: the name, address and specialty of the physician owner(s); the dollar amount(s) invested; and the value and terms of the investment(s). The first reports are due to CMS on March 31, 2014.

The stakes are high. The manufacturer will be subject to a civil monetary penalty of $1,000-$10,000 for each payment, transfer of value, or ownership interest not reported as required, with an annual maximum of $150,000. The CMPs are higher for knowing failure to submit required information in a timely manner: $10,000-$100,000 per instance, up to an annual maximum of $1 million. Additionally, CMS has the authority to audit for compliance with the Sunshine Act.

To reiterate, complying with the Sunshine Act will be complicated, so manufacturers and their counsel should begin to consider now whether they are legally required to comply, and if so, how to achieve compliance in relatively short order. For example, applicable manufacturers would be well-served to develop, implement and strengthen internal systems and processes to track their physician payments, transfers of value and ownership interests. Manufacturers and their advisers will also want to focus on public relations concerns and fraud and abuse considerations in connection with their required disclosures.