Making Sense of the Sunshine Act

For decades now, financial relationships have existed between pharmaceutical companies and physicians and hospitals, some of which have come under scrutiny and caused considerable public controversy. One example of a common financial relationship are payments made by pharmaceutical companies to physicians for consulting services on experimental products under investigation or development. These transactions have involved research activities, gifts, speaking fees, meals, or travel, and often occur privately so that no one except for the parties directly involved knows the details of the transactions.

RELATED: Transcript from Sunshine and Aggregate Spend Conference

The typically private nature of these relationships has recently changed, as the Centers for Medicare & Medicaid Services (CMS) now requires public transparency about these transactions occurring on or after August 1, 2013. A newly enacted law, the Physician Payments Sunshine Act (also known as the Open Payments program) is intended to make information about these payments between pharmaceutical companies, physicians, and hospitals transparent. Open Payments requires that manufacturers of drugs, devices, biologicals, and medical supplies annually report to CMS most payments and "other transfers of value" that they make to covered recipient physicians and teaching hospitals. Manufacturers and group purchasing organizations (GPOs) will also report ownership and investment interests held by physicians or their immediate family members during the preceding calendar year and payments made to those physicians.

As a result of the Affordable Care Act (ACA), such financial relationships will be publically disclosed on a CMS Open Payments website so that healthcare consumers, clinicians, and stakeholders can be better informed about the nature and magnitude of these relationships. Industry data collection tracking these transactions began on August 1. Industry will register with the program and submit 2013 data by March 31, 2014. In the fall of 2014—a little more than a year from now—CMS will post the 2013 data on the Open Payments website, which will be accessible to the public. This public posting will occur ­annually.

You may be considering what this new law means for your organization and have serious questions. Is my organization ready for this new law? Do I know what we have to do to comply or how to go about doing it? How much will compliance cost? And, by the way, what will public transparency of this information mean—will it be helpful or will it distort public opinion and hamper beneficial relationships between our company and physicians?

Open Payments is designed to do what laws are supposed to do: address widespread public concerns, and in this case, create a window into an area of healthcare previously unavailable to the public. In 2009, the Institute of Medicine published a report, "Conflicts of Interest in Medical Research, Education and Practice" that described such concerns. The influential report also recommended implementing a national disclosure program for payments to healthcare providers and prescribers. The Open Payments program was created to address this and other calls for transparency of these financial relationships between the industry and physicians and teaching hospitals.

Like industry, CMS fully appreciates the benefits that accrue from ongoing collaborations among pharmaceutical manufacturers, physicians, and teaching hospitals. Those joint efforts have long contributed to the discovery, design, and development of life-saving drugs, and delivered better health to patients worldwide.

However, certain financial relationships may not be beneficial, and may in fact create conflicts of interest that negatively affect patients. Under Open Payments, the industry will disclose the nature and extent of such financial relationships. The data will help patients make decisions about the delivery of their healthcare. In the process, disclosure may also help to discourage improper influences exerted over research activities, education, and clinical decision-making that can potentially compromise clinical integrity and the quality of patient care—or potentially lead to higher healthcare costs.

Open Payments will serve as a valuable national resource, addressing a long-standing information void and providing more transparency about the healthcare market. It is in the spirit of transparency that CMS is striving to implement this law, with open engagement and input from the stakeholders.. We have worked closely with stakeholders to better understand the current scope of the interactions between manufacturers and physicians and teaching hospitals. Last December, for example, when finalizing the policy and rule for this program, CMS weighed feedback from nearly 400 interested parties, including pharmaceutical manufacturers. The final regulation was preceded by no fewer than 251 pages of commentary and explanations, an example of the deliberate approach to consider and integrate the comments received and make the rationale for final decisions clear and transparent.

Still, CMS understands these disclosure requirements will be a major undertaking for many companies. CMS is taking great care to simplify the procedures involved and provide support as industry undertakes this effort. Starting with the regulation, CMS has provided accommodations, such as a longer period of time than was required in the law—six months—for industry to prepare for the start of data collection.

Already, the CMS website offers considerable information, often in the form of fact sheets, in straightforward language to help make this program understandable. It has provided manufacturers with three customized file specifications to help implement their data collection. An electronic system is being developed to facilitate the registration and reporting process via a portal on a secure website. All participants will then have a voluntary opportunity—45 days—to review, dispute, and correct any information believed to be inaccurate prior to its publication. This review is very important to help ensure that the information made public is accurate and complete.

CMS has developed new free mobile apps, one for industry and the other for physicians, that can assist in Open Payments implementation. You can download the mobile apps directly from your app store (iOS Apple or GooglePlay) and search for Open Payments. It should be noted that the apps are used for tracking purposes only and do not directly transmit information to CMS

The benefits of compliance are extremely worthwhile. Several advantages are anticipated. Disclosure will enable patients to make informed decisions when choosing healthcare professionals and treatments. Payers will be better equipped to identify conflicts of interest and make better decisions regarding ordering or prescribing physicians. And providers will have more knowledge about those physicians publishing important data and establish guidelines and standards of care.

Compliance with this program is being taken extremely seriously, and the companies involved should understand the consequences for non-compliance. Violations carry consequences: civil monetary penalties are capped annually at $150,000 for failure to report and at $1,000,000 for knowing failure to report.

As implemention of this program in collaboration with the industry begins, CMS encourages you to ensure that your organization is prepared and ready to be in full compliance with the reporting requirements. Start early and integrate the processes into your business operations, and use the CMS website and its resources to help educate your employees about the program. The public deserves to be fully informed about ­financial ­relationships among healthcare providers, and industry should welcome the opportunity to be more transparent than previously required. We are all in the healthcare business. Healthcare means taking care of patients, and the new law will better enable all of us to keep ­putting patients first.

RELATED: Transcript from Sunshine and Aggregate Spend Conference

Shantanu Agrawal, MD, is Medical Director for CMS's Center for Program Integrity and the Director of Data Sharing and Partnership. He can be reached at Shantanu.Agrawal@cms.hhs.gov