On Friday, July 11, the Centers for Medicare & Medicaid Services (CMS) proposed potentially significant revisions to the federal Sunshine Act rules. Among other changes, CMS suggested eliminating the rule section that explicitly excludes certain continuing medical education (CME) speaker compensation from manufacturers’ transparency reports. The life-sciences industry had pushed hard for this exclusion prior to the final rule’s publication in February 2013, and specifically in response to the suggestion from CMS that industry-funded accredited CME faculty compensation counted as reportable indirect payments despite numerous accreditation agency controls in place to prohibit industry influence over CME meetings. It now appears that CMS may be signaling a willingness to back off its incredibly narrow interpretation of the “indirect-payments” exclusion by suggesting that payments to speakers at accredited CME should be counted as excluded “indirect payments” if applicable manufacturers are not actively involved in selecting, paying, or setting criteria for the speakers.  That is, mere funding and knowledge would not be enough to trigger a reporting duty.

Other proposed changes to the Sunshine Act (also known as the Open Payments program) regulations include (1) eliminating a definition determined to be duplicative, (2) requiring identification of the marketed name for associated drugs and devices, and (3) requiring the reporting of certain forms of payments to physicians and teaching hospitals to collect more specific data about these payments.

We encourage reporting entities to review the changes set forth in the proposed rule for the 2015 Medicare physician fee schedule, which was published in the July 11 Federal Register, and to reach out with any questions. Comments are due on September 2.

These proposed changes, if finalized, would take effect as of January 1, 2015. The industry has now completed Sunshine Act reporting of 2013 data related to certain payments to physicians and teaching hospitals and certain ownership interests of physicians and their family members, and the data should be available to the public this fall.

Continuing education exclusion: § 403.904(g)(1)

CMS promulgated the so-called CME exclusion in response to widespread industry concern that reporting payments to speakers at accredited CME would undermine the various accrediting organizations’ efforts to maintain a strict separation between industry influence and continuing medical education, and would stymie an important funding source for CME. Attempting to address these concerns, CMS set a very specific rule that explicitly exempted reporting of payments made by applicable manufacturers to support compensation paid to CME faculty if:

  • the event is accredited by the Accreditation Council for Continuing Medical Education (ACCME), the American Academy of Family Physicians (AAFP), the American Dental Association’s Continuing Education Recognition Program (ADA CERP), the American Medical Association (AMA), or the American Osteopathic Association (AOA);
  • the manufacturers does not directly pay the speaker; and
  • the manufacturer does not select the speaker or provide the CME event with a list of appropriate speakers.

78 Fed. Reg. 9458 (Feb. 8, 2013); 42 CFR § 403.904(g).

CMS has proposed entirely striking the CME payments exclusion in its entirety. According to CMS, it considered expanding the list of named accrediting organizations, but it did not want to imply any agency endorsement of certain continuing education providers over others. And although CMS also considered changing accrediting standards to allow for more organizations to qualify, this approach “would require evaluating both the language of the standards, as well as the enforcement of the standards of any organization professing to meet the criteria.” CMS now believes the CME exemption “is redundant with the exclusion in § 403.904(i)(1).” 79 Fed. Reg. 40384 (July 11, 2014).

At first glance, CMS’s proposal seems narrowly tailored to address specific CME payments reporting exemptions. However, it could be a coup for the industry. If CMS does in fact believe that payments to CME providers by applicable manufacturers to support faculty compensation could qualify for the indirect-payments exclusion, the proposed rule could signal a significant broadening of the indirect-payments exclusion to other contexts (consistent with, we believe, the intent of the statute). Here is why: CME faculty are often “known” to applicable manufacturers supporting the CME. Since at least February 2013, many manufacturers have been operating under the assumption that CMS created a specific CME exception because payments to speakers did not qualify for the indirect-payments exclusion—regarding support payments to CME faculty, manufacturers almost always “know” or could “easily ascertain” the identity of the speakers. 78 Fed. Reg. 9490. Further, CMS otherwise stated that “travel, lodging and meals . . . provided in conjunction with . . . accredited . . . CME . . . will need to be reported for physician attendees (who are not speakers).” Open Payments FAQ 8386. In other words, manufacturers have been operating under the assumption that meresupport (which “otherwise causes” payment to be made to attendees) and the ease of knowledge together made payments to speakers and attendees reportable unless explicitly excluded from reporting. To the consternation of manufacturers and CME providers alike, this effectively imposed collection and reporting burdens on a great many third parties not equipped to satisfy the myriad manufacturers’ data demands.

Now that CMS has suggested that CME faculty support could be excluded under the indirect-payment exclusion independent of accreditation, a fair conclusion might be that mere funding and ease of access to information may not be enough to make a payment reportable. Indeed, if payments to CME faculty can qualify for the indirect-payments exclusion, meals provided to physician attendees and payments to third parties to support faculty speakers at non-accredited CME could be excluded as indirect payments for the same reason. Even compensation for participating in single-blinded market research or consultant services paid to third parties who select physicians independent of manufacturer control or criteria could be excluded under the indirect-payments exclusion if the manufacturer does not select or pay the physicians directly. Perhaps CMS is responding to the industry’s insistence that manufacturer influence or control over the payment should trigger a reporting duty.

How could it be internally consistent to limit the following statement in the proposed rule to only CME contexts?

“[If a manufacturer] provides funding to a continuing education provider, but does not either select or pay the covered recipient speaker directly, or provide the continuing education provider with a distinct, identifiable set of covered recipients to be considered as speakers for the continuing education program, CMS will consider those payments to be excluded from reporting under §403.904(i)(1).”

CMS is specifically seeking comments on alternatives to removing the CME exclusion and has asked for suggestions about what standards, if any, CMS should incorporate.

Deleting the definition of “covered device”: § 403.902

CMS has proposed to remove the definition of a “covered device” at 42 CFR § 403.902 as “duplicative of the definition of ‘covered drug, device, biological or medical supply’ which is codified in the same section.”

Reporting of marketed name: § 403.904(c)(8)

The Sunshine Act’s final rule provided applicable manufacturers “with flexibility when it was determined that the marketed name for all devices and medical supplies may not be useful for the general audience.”  Now, CMS has proposed to revise 42 CFR § 403.904(c)(8) “to require applicable manufacturers to report the marketed name for all covered and non-covered drugs, devices, biologicals or medical supplies” to “facilitate consistent reporting for the consumers and researchers[.]” Manufacturers would be able to report product category or therapeutic area, along with the market name, for devices and medical supplies.

Reporting of ownership interests: § 403.904(d)(3)

Currently 42 CFR § 403.904(d)(3) requires the reporting of stock, stock option, or any other ownership interest as a single category. CMS has proposed to require applicable manufacturers to report these payments as distinct categories to enable the agency “to collect more specific data regarding the forms of payment made by applicable manufacturers,” to “increase the ease of data aggregation within the system, and also enhance consumer’s use of the data.” CMS seeks comments “on the extent to which users of this data set find this disaggregation to be useful, and whether this change presents operational or other issues on the part of applicable manufacturers.”

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