On February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) issued a final rule on “Transparency Reports and Reporting of Physician Ownership or Investment Interests,” a.k.a. the “Sunshine Rule.” See 42 C.F.R. §403.900 et seq. (February 8, 2013). The new Sunshine Rule requires “applicable manufacturers” of drugs, devices, biologicals, or medical supplies that are covered by Medicare, Medicaid or the Children’s Health Insurance Program (CHIP) to report to CMS payments or other transfers of value provided to U.S. physicians and teaching hospitals.
Entities that meet the definition of “applicable manufacturer” will be required to comply with the new rule.
“Applicable manufacturer” means an entity that is operating in the United States and that falls within one of the following categories:
- An entity that is engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply, but not if such covered drug, device, biological or medical supply is solely for use by or within the entity itself or by the entity’s own patients. This definition does not include distributors or wholesalers (including, but not limited to, repackagers, relabelers, and kit assemblers) that do not hold title to any covered drug, device, biological or medical supply.
- An entity under common ownership with an entity in paragraph (1) of this definition, which provides assistance or support to such entity with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological or medical supply.
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“Common ownership” refers to circumstances where the same individual, individuals, entity, or entities directly or indirectly own 5 percent or more total ownership of two entities. This includes, but is not limited to, parent corporations, direct and indirect subsidiaries, and brother or sister corporations.
“Applicable manufacturers” are required to report detailed information about all payments and other transfers of value provided to U.S. physicians and teaching hospitals, including:
- Consulting fees
- Speaker fees
- Research funding
- Royalties or licenses
- Charitable contributions
- Food and beverage fees
- Travel and lodging fees
- Education fees
- Grants
Accordingly, “applicable manufacturers” should be aware of the certain dates that are set forth in the new rule:
- August 1, 2013: The first reporting period is August 1, 2013 to December 31, 2013. Data related to reportable payments and other transfers of value provided to U.S. physicians and teaching hospitals must be collected starting August 1, 2013.
- March 31, 2014: The first disclosure reports must be submitted to CMS on March 31, 2014, and will cover payments and other transfers of value made from August 1, 2013 through December 31, 2013. However, after the first reporting period, disclosure reports will cover the previous calendar year and be due on March 31 of each year.
- September 30, 2014: CMS will post reports submitted by applicable manufacturers on a public website by September 30, 2014.
The new rule provides for significant civil monetary penalties for failure to record accurate information or to make timely reports. See 42 C.F.R. §403.912.
Accordingly, it is critical that any business entity dealing in the manufacture or distribution of drugs and/or medical devices determine: (i) whether it is an "applicable manufacturer" under the new rule; and (ii) if so, whether it is ready to begin collecting reporting information starting August 1, 2013.
If you have any questions, please contact John Rice at (610) 797-9000.