Shining Light on the Sunshine Act

After the Physician Payment Sunshine Act (PPSA) passed in March 2010, most companies took a “wait-and-see” approach. They planned to wait until they absolutely, positively had to deal with its requirements. And with companies juggling so many priorities, it’s understandable that it would slip to the bottom of the list.

The PPSA has now forced its way to the top. On February 4, 2013, the Centers for Medicare and Medicaid (CMS) issued the final rules related to the PPSA.  That means the clock is ticking. By August 1, 2013, you must begin collecting data related to how you compensate physicians. By March 1, 2014, you must begin reporting payment data.

What you need to report

The details of the Sunshine Act are probably not something you’d peruse on a Friday unless you enjoy diving into 285 pages of lawyer-speak.  Here’s a summary of some of the data that you need to collect, as well as a couple of key items that you don’t:

  1. Drug and device companies will have to collect data about payments, gifts, and other transfers of value to physicians and teaching hospitals. This includes shares or ownership in a company.
  2. Manufacturers and group purchasing companies will be responsible for reporting such data, including physician ownership and investment interests.
  3. “Covered recipients” include physicians other than those who are employees of an applicable manufacturer or a teaching hospital.
  4. Payment includes consulting fees, compensation for services other than consulting, honoraria, gifts, entertainment, food, travel (including specifying destinations), education, research, charitable contribution, royalty or license, and current or prospective ownership or investment interest. It also includes direct compensation for serving as faculty or as a speaker for a medical education program, grants, any other nature of the payment, or other transfer of value.
  5. There is a de minimis provision of $10 per gift, or annual total of $100, which do not need to be reported.
  6. Discounts and rebates need not be reported.
  7. Product samples are excluded from reporting.

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Impacts of the Sunshine Act

For pharma companies, there is little doubt that implementation of the Sunshine Act will be difficult.  From people, systems, and risk to the fundamental question—“Are we doing the right things to be compliant?”—Sunshine will be an ongoing challenge at least through the year 2014. Here are some suggestions to help navigate this change:

  1. Implement a Sunshine Act capability. Yes, every company needs to have a system to support the capture of the data. Just as important, you also need to have clearly defined processes, roles, and responsibilities, employee training, and formal accountability. Without a holistic approach, you might as well start writing checks to the FDA for non-compliance.  (Penalties for failure to report hefty.  Fines are $1,000 to $10,000 per unreported payment. The annual limit is $150,000 unless the payment is “knowingly” omitted. In that case, the penalty will be at least $10,000 with an annual limit of $1,000,000.)
  2. Embrace a focus on health outcomes. There is no doubt that pharma needs to change from a focus on prescriptions to a focus on health outcomes. Patients, government agencies, payers, and providers alike expect therapeutics to produce real health outcomes at the right price. Various physician financial incentives, in whatever form, are no longer possible. Don’t waste valuable time longing for the “good old days.” Instead, focus on providing products and services that support better health outcomes. Indeed, the Sunshine Act is forcing us to focus more on patients—not “pushing pills.” (I believe that in the long run, the Sunshine Act along with a renewed focus on outcomes will bring better times for the pharma industry.)
  3. Expect pushback. Some of the people who benefited from physician spending will likely push back. Any change requires champions to point out long-term benefits and navigate through short-term pains. Again, don’t be nostalgic about times gone by. Embrace the value of focusing on patients—and use it to create better days for our industry.
  4. Consider a new role. CMS has predicted that pharma companies will need to hire a compliance officer to implement the Sunshine Act. To be sure, these compliance officers will have the ear of executives, along with a great deal of authority and backing to ensure compliance.

Focusing dollars on what matters

The Sunshine Act is driving enormous change, and some of it will be painful in the short term but beneficial in the long term. There’s still one key benefit that I haven’t yet covered: return on marketing dollars. I view a lot of traditional physician spend as marketing dollars. Until now, how much transparency have pharma companies had for what they spend on physicians? Do they really know exactly how much they’re spending? More importantly, do they know how much value they’re realizing from those investments?

Let me answer my own questions: Very few have those kinds of insights. Your organization may be complaining about the cost of ensuring Sunshine compliance. However, imagine how much money you can save by better capturing and analyzing physician spend. I can already hear sales and marketing folks making their case about needing to spend a certain amount on certain doctors. They’ll argue that doing so will increase sales. But will it really?

If pharma companies focus on providing great products and services that focus on health outcomes, physicians will be happy to write the prescription. After all, most physicians have not chosen their livelihood for the money. Most chose it so they could make a difference in people’s lives.  With that in mind, let’s welcome the PPSA as a stern reminder to focus on what is important—to physicians, to patients, and to pharma.

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