Federal and State Physician Payment Sunshine Law Update

November 10, 2011

This client alert provides a brief update on the status of the regulations to be issued pursuant to § 6002 of the Patient Protection and Affordable Care Act (PPACA), which is commonly known as the Physician Payment Sunshine Act (“Sunshine Act”). This alert also provides an update on certain state laws related to marketing expenditures by life sciences companies. The Sunshine Act requires covered manufacturers to track and report certain financial and ownership relationships with physicians and teaching hospitals. The Sunshine Act requires the Center for Medicare and Medicaid Services (CMS) to issue regulations that provide details on the process and requirements for reporting of physician payments and financial relationships as required by the Sunshine Act provisions. The Sunshine Act requires the government to issue regulations no later than October 1, 2011, to allow reporting entities time to adapt before January 1, 2012, when such entities are required to commence data collection. As of November 8, 2011, CMS has not yet issued regulations or provided stakeholders with a timetable in which it will issue these regulations.

On October 3, 2011, Senator Herb Kohl, the ranking member of the Senate Special Committee on Aging, issued a letter to CMS Administrator Donald Berwick expressing his dismay at the delay in the issuance of these important regulations. Commissioner Berwick responded without providing a timetable for issuance. Senator Kohl and Senator Charles Grassley commented on the commissioner’s response, expressing disappointment over the lack of new information provided by the commissioner in his letter. Grassley labeled the response “inadequate” and concluded his comments by stating, “I’ll continue to press for answers from CMS.” Additionally, a coalition of medical device and pharmaceutical trade organizations has urged CMS to issue the Sunshine regulations without further delay.

Until CMS issues the regulations providing direction on how and what to report to CMS, pharmaceutical and medical device companies are left with only the statutory guidance to prepare for the January 1, 2012, start date for data collection. The statute leaves a number of questions unanswered regarding what information must be collected, and how reports must be made. For example, CMS may define additional categories and forms of payment to be reported (above the categories and forms provided in PPACA), and the definition of “group purchasing organization” is subject to regulatory definition, leaving many companies in the dark regarding whether they will need to make disclosures regarding physician ownership. Upon promulgation of regulations, reporting companies may need to dedicate significant time and money to customize systems, train employees and ensure compliance with the requirements of the rules.

State Update: Vermont

Vermont law prohibits pharmaceutical and medical device manufacturers from providing gifts to healthcare professionals. Additionally, Vermont requires registration with the Attorney General’s Office and reporting of certain expenditures, including expenditures on samples and clinical trials. Vermont recently issued draft guidance and processes for its gift restriction and sample reporting requirements to be effective in 2012. Notably, the reporting requirements apply not only to pharmaceutical manufacturers but also to medical device companies. Certain of the Vermont reporting obligations are preempted by the Sunshine Act but some obligations remain. The Vermont Office of the Attorney General will hold a conference call to obtain feedback on the draft guidance on Wednesday, November 16, 2011, at 1 p.m. (EST). Participants can join by dialing 888.757.2790 (Pass Code: 134936#).

State Update: Connecticut

In 2010, Connecticut enacted Senate Bill 428, which requires pharmaceutical and medical device manufacturers to adopt a compliance plan and take certain additional actions. Connecticut requires all medical device and pharmaceutical manufacturers to adopt a marketing code of conduct that is consistent with the AdvaMed Code, the PhRMA Code and the compliance guidance issued by the United States Department of Health and Human Services. Additionally, the state of Connecticut requires pharmaceutical and medical device companies to establish an annual limit of marketing dollars that will be expended on individual physicians. This limitation is similar to the requirement that has been promulgated by the state of California.

State Update: Maine

On July 8, 2011, the state of Maine officially repealed its pharmaceutical transparency and reporting requirements. Me. Rev. Stat. Ann. tit. 22, § 2698-A, required manufacturers and labelers that employed or used marketing representatives in Maine to submit an annual report of certain marketing costs to Maine’s Department of Health and Human Services. The Maine law would have largely been preempted by the federal disclosure law. Following repeal, Maine no longer has any marketing transparency reporting requirements, code of conduct or other marketing limitations that apply to pharmaceutical and medical device manufacturers.