Sunshine Act Putting the Heat on Healthcare Firms

Drug companies and medical device makers are searching for a miracle cure of their own these days—to solve the enormously difficult task of compliance with healthcare reform's new Sunshine Rules.

The rules require those two sectors to track and disclose all the payments they make to medical professionals; that might range from research grants paid to the local teaching hospital to free dinners handed out to doctors attending medical conferences. Proposed only months ago, the Sunshine Rules aren't even in final form yet, but since the official deadline to submit the data to regulators begins next year, businesses are already scrambling to build compliance policies, systems, and procedures.

The hardest part: not just collecting all that information, including data from third parties acting on a company's behalf, but verifying that the data—which will ultimately be posted on Websites managed by healthcare regulators and open for public view—is accurate.

“Most companies are probably more than halfway to the goal line”, says Seth Whitelaw, director in Deloitte's health sciences consulting practice, but “I think everybody is concerned about the level of accuracy they will yield.”

The Sunshine Act started as a standalone piece of legislation that ended up as Section 6002 of the health reform act. In addition to tracking payments, pharma and medical device companies must also reveal any investments or significant ownership interest that the physicians who receive payments (and their families) may hold in the company.

The rules are not intended to make such payments illegal, or to curtail them in any significant way. “These financial relationships are important for developing new therapies and technologies,” but “it is equally as important that these ties are disclosed to the public so that potential conflicts of interest can be managed,” U.S. Sens. Herb Kohl (D-Wisc.) and Charles Grassley (R-Iowa), co-sponsors of an early version of the legislation, reiterated in a letter to the Center for Medicare and Medicaid Services earlier this month. They urged CMS, which ultimately will host the data, to speed the path to final rules.

CMS released proposed rules last December with the details of how they would enforce the broad statute; the comment period on those rules closed in February with more than 300 comments. Grassley and Kohl are now pushing CMS to finish the rules by June “so that partial data collection for 2012 can commence.” The law originally required firms to report data for all of 2012 no later than March 31, 2013, but CMS has suspended the start date until the rules are finalized.

Drug companies are no strangers to the potential conflicts that can occur through their interactions with doctors, and some of the larger ones will benefit from the fires they have previously fought, says Glenn Engelmann, former general counsel for Astra Zeneca's U.S operations and now a partner with the law firm of McDermott Will & Emery. “Many of these large companies have begun to report some of this information already as part of corporate integrity agreements to settle legal charges, and others are doing it voluntarily,” he says. He expects the new reporting formats will not be incompatible with the older ones, although CMS has yet to specify those details.

Still, the additional reporting means more work, and added costs. “While it seems like an easy thing, it's actually a fairly complex task to pull all the information together in a usable format,” Engelmann says. That will be particularly true if the final rules require data from international affiliates to be included.

“While it seems like an easy thing, it's actually a fairly complex task to pull all the information together in a usable format.”

—Glenn Engelmann,

Former General Counsel,

Astra Zeneca

Peter Agnoletto, chief audit executive of Par Pharmaceuticals, says he began working to find an aggregate spend system back in 2009, when Grassley's and Kohl's bill was first introduced. Currently the company uses a cloud-based service to extract and collect the relevant items from its corporate expense reporting system. Other compliance officers he knows are taking a similar approach, even in the absence of final rules, “due to the complexities of identifying all areas of spend with physicians, and the associated accuracy of this information, especially related to pharmaceutical sales representative spend activity,” Agnoletto says.

The technology solutions that companies choose “are all over the map,” says Whitelaw, and largely depend on what fits their legacy systems the best. Those legacy systems can include salesforce activity and expense reporting tools, as well as systems to track clinical trials. Many in the industry are using outside consultants to help while they staff up internally, Engelmann says.

The complexities, however, often hinge on seemingly simple details. If a drug sales representative fails to enter a physician's name properly or to report the correct number of people who attended an in-office lunch, the numbers can skew quickly; that might make a pizza lunch for 20 look like an extravagant dinner for two.

SENATORS' CONCERNS

The following information from Policy and Medicine explains the concerns of Sens. Grassley and Kohl:

… Grassley and Kohl requested that the final rule on implementation of the Sunshine act be released “no later than June of this year so that partial data collection for 2012 can commence. The Senators also urged CMS to work closely with stakeholders to finalize the rules so that they comprise a feasible approach to providing data to the public.

The Senators encouraged CMS to be clear on guidelines and context so that the data posted online is meaningful and understandable. They urged CMS to narrowly define precise payment categories so that all stakeholders are operating under the same assumptions. They also told CMS to remove the proposed “other” payment category so that it does not obscure the true nature of some payments.

While the Senators comments are important, it is unlikely that CMS will be able to give the clarity and narrowness they seek. The magnitude and size of the database that CMS will eventually publish will be enormous, and to put the kind of detailed information for patients to truly understand the nature of these payments would take hundreds of millions of dollars for staff and other resources, which CMS clearly does not have.

The Senators also urged CMS to work with stakeholders to clarify reporting for indirect research payments to avoid unintended consequences. Specifically, they asked CMS to more clearly define instances when indirect research payments and indirect research payments to third parties are reportable and how and with what context these payments will be reported on the public website.

The Sunshine Act authors also urged CMS to update the website with correct information (corrections from manufacturers or doctors/teaching hospitals) when the Agency is first made aware of inaccuracies in the reported data. They stated that CMS should include mechanisms by which the agency can update errors on a quarterly basis because prolonged inaccurate data could cause confusion among patients, physicians and manufacturers. Again, while such comments in general are reasonable, CMS does not have the resources for such work and did not propose this within the projected budget.

Grassley and Kohl agreed that CMS should not be the default dispute arbiter between applicable manufacturers and covered recipients, however, the Senators called on CMS to develop mechanisms by which disputes can be reported as smoothly as possible. They asked that manufacturers share data with covered recipients before reporting it to CMS.

The Senators also recognized that the public Website where the data will be disclosed must be user friendly so that data can be searched, sorted and aggregated without duplication. They told CMS that the website should define the terms of transfers of value and provide context so that the public best understands what the payments are for and in what capacity, again recognizing that “financial relationships are important for developing new therapies and technologies.” Moreover, the Senators acknowledged the importance of research transfers, which are often “vitally important to the development of new therapies and technologies.”

However, without context, the Senators recognized that patients could find a large sum of money attached to his/her physician and not know for what the funding was provided. This could lead to decreased research and enrollment in clinical trials, making research even more difficult than it already is.

The letter also told CMS to increase its outreach to physicians and other covered recipients about Sunshine Act implementation because a recent survey of 500 compliance officers and physicians in the March 1, 2012 issue of “Inside CMS” reported that 47 percent had not heard of the Sunshine Act.

Implementation Questions.

Finally, the Senators asked CMS to answer a number of questions by April 18, 2012.

1.Can CMS commit to completing a final rule by this summer so that data collection can begin in 2012?

2.Since CMS missed the initial required Congressional deadline, has CMS increased the resources or personnel assigned to the implementation of the Sunshine Act, including a dedicated information technology lead?

3.Will CMS commit to issuing an RFP to begin designing the Website?

4.Does CMS have a dedicated working group assigned to the implementation of the Sunshine Act, and what technical expertise and program areas are represented?

5.Does CMS have a public education and outreach plan to raise awareness of the new law with the provider community and with health care consumers?

6.Has CMS allocated dedicated implementation funds for the Physician Payment Sunshine Act?

Source: Policy and Medicine.

And salespeople aren't the only ones contributing to errors. Physicians might spell their names differently, perhaps going by a nickname or omitting a middle initial, Engelmann says; that might lower the total attributed to them. And in a practice group where five or six physicians may attend a lunch, “How do you make sure you allocate that properly across the various therapeutic areas?” he adds. “It is a huge issue.”

Extended Enterprise, Extended Headache

Working with third-party vendors that spend money on the company's behalf at an event, for example, can also pose challenges. Tracking down the data from each vendor is one issue; when to give up is another. The proposed rules suggest that drug companies will be exempt from reporting data they can't obtain from those vendors, but “it's an open question as to what level you need to go to pull that data from them and what constitutes not being able to get the data,” Whitelaw says.

Life sciences firms are taking several approaches to scrubbing the data. Some, like Par, train sales reps on how to enter the information precisely and ask supervisors to match up the inputted data with expense reports and sign-up sheets collected at the events. “If you have a receipt for 10 meals, a sign-in sheet for five people, and only three names entered in the system, you know something is wrong,” says Jaimee Reid, senior compliance manager for Par.

Over time, Whitelaw says, companies are likely to move reps away from recording physician names in favor of a unique numerical identifier, such as a national prescriber number. “You can also eyeball the data,” he says. “If you set fair market value limits for various services, and then see something that is either incredibly large or small, you might be able to spot an error.”

Physicians are likely to provide an audit service of sorts on the reported numbers. Under the rules, physicians have 45 days to review the data before it is posted publicly and to dispute it. Practically speaking, experts say that timeframe may be too short, but that doctors and hospitals are likely to step up their own tracking systems to make better comparisons.

“I think the physicians will be the ones to find the errors,” Engelmann says. Indeed, he says, beyond the cost and time associated with compliance, his clients are most worried about “how many errors are going to be found and how that affects relationships.”

Adding to the unease: So far CMS has not spelled out a dispute resolution process, so nobody yet knows what will happen when a physician disagrees with the company's assessment.

Beyond the counter-balance that the physicians provide, CMS could independently audit the data or impose fines for inaccuracies, though Whitelaw considers that possibility far-fetched. “Will the data be scrutinized? Absolutely,” he says. “What will that lead to? It's an open question.”

Of course, even if the data is collected and disclosed correctly, that doesn't mean the public will understand it correctly. One of the most contentious parts of the proposed rules is the requirement to attribute all spending on a clinical trial to the principal investigator, or the single physician who is in charge of it. Large field trials, however, might employ scores of people in numerous countries.

“If the rule doesn't change, people have to understand the dollar amounts are large because this person is overseeing a huge enterprise,” Engelmann says. In the long term, “it would be unfortunate if physicians shy away from doing the research because they're worried about the dollar amounts being misconstrued by their patients.”