While revised from its original format from 2,500 years ago, most graduating medical-school students still swear to some form of the Hippocratic oath upon finishing medical school.  Of course revisions have come along the way to catch up with modern medicine, but two of the most widely accepted principals that still apply include - treating the sick to the best of one's ability and preventing disease whenever possible. However the complex relationship between corporations and physicians is testing the application of this oath in medicine today.  One that comes to ind is the Physician Payment Sunshine Act . 

For instance as part of research based on executive oversight by US Senator Chuck Grassley, it was found that disparities existed between what drug company payments received and reported by leading medical research institutions like Harvard and Stanford.  The result of these findings from this research led to the Physicians Payments Sunshine Provision (aka Act) as part of the Patient Protection and Affordable Care Act of 2009 (H.R. 3590, section 602) or what is commonly referred to as “Obamacare”.

The provision is specifically meant to monitor the relationship between Health Care Providers (HCP) and U.S. medical manufacturers (drug, device, biologics and medical supplies covered under Medicare, Medicaid or SCHIP) by focusing on the impact gifts and benefits have on a physician’s decisions related to prescription and patient care. To influence the behavior of these two groups, the provision states that medical manufacturers will need to report compensation (payments or benefits) to the Centers for Medicare & Medicaid Services (CMS) paid to physicians and teaching hospitals, and any ownership or investment interest owned by physicians. CMS would thereafter publish the data from such reports on a publicly available website.

Payments or benefits made include any of the following: gifts, food, entertainment, travel, honoraria, research funding, charitable contributions, direct compensation for serving as a faculty, consulting fees, ownership or investment interest, royalties, license fees, speaking fees, dividends, profit distribution, stock/stock options. Failure to report can result in fines that consist of the following:

Penalty for Non-complinace of Physicians Payment Sunshine Provision

Essentially the challenge for medical manufacturers becomes twofold –

1. Public Disclosure – one of the criticisms of the new law is “perception becoming reality”.  In other words, large payments even if they are legitimate, could be misinterpreted as improper by a watching public.  While the CMS is required to provide context and background information on a public website for educating consumers about the relationships that exist between HCPs and the medical manufacturers, the potential impact of this legislation is an alienation of the relationship that could prevent increased awareness of new medicines and progress on research conducted in research hospitals.

2. Internal Reporting Process - Due to the structure of the law, medical manufacturers must also establish an internal data collection system and educate all employees on the new requirements. According to the Center for Business Intelligence (CBI) Audience Poll in 2012, of those involved with the developing new procedures for justifying physicians payments and ensuring the accurate reports of spending, 45% feel a moderate change will be necessary and 17% feel a significant change. Revealing however is that 26% are not currently doing any reporting. Furthermore the provision states that reporting requires the information to be electronic, searchable and easily downloadable.  Therefore it is not surprising that in the same audience CBI poll, that of the parties involved that need to develop new procedures for justifying physicians payments and ensuring the accurate reports of spending, 75% see software upgrades as a major source for education.

Based on our conversations here at HICX Solutions, it is clear to us that for those looking to help companies manage this new law, the issue basically comes down to data collection and reporting, both critical aspects to our forte - supplier management. This also brings into the question how medical manufacturers are going to do this, and who will be responsible for managing this - Legal? Sales? Procurement? Accounts Payable? Due to the relationships manufacturers maintain with HCPs, the dynamic becomes an interesting one requiring multiple players in the organization.  Furthermore, while the law does not directly apply to Contract Research Organizations (CROs), (since CROs do to report to CMS) the transactions most commonly involved in services include payments, training, samples, etc. – and are covered in the new law.

Ultimately the real question for medical manufacturers required to manage this will be their ability to share this information. For instance how easily can these organizations currently collect and report on this information within the existing expense management, event management, and spend tools to pull existing information, or as a standalone solution?

Therefore based on the challenge of regulation – here are some questions that should be considered as a litmus test for Physician Payments Sunshine Provision readiness  -

1. Do you have access to preconfigured reports and dashboards for management and government submissions?
2. Can you capitalize on preconfigured import/export templates to integrate with your ERPs (e.g., invoice), corporate card provider T&E tools (e.g., Concur), event management tool, or business intelligence platforms?
3. How streamlined are your current processes for requesting, approving, and onboarding HCPs?
4. Can you electronically distribute a unique HCP number to all necessary downstream and upstream systems (e.g., ERP, event management system, spend reporting system)?
5. What are your current capabilities for capturing relevant address, bank details, certificates, and Tax IDs?
6. Can you gather upfront agreement to Code of Conduct and disclosures required under the Sunshine provisions?
7. What tools are in place for allowing HCPs to self-maintain their information, including the import and submission of travel expenses?
8. Can you currently collect and report on second tier HCP payments made from third parties on your behalf?

Some final thoughts....

Although data collection was initially supposed to start at the beginning of 2012, CMS has not yet delivered final regulations, and data collection is not expected to start until 2013 at the earliest. Even though the CMS published a proposed rule on December 19, 2011, discussions in a roundtable discussion of the Senate Special Committee on Aging in September 2012 revealed that the CMS was struggling with addressing the large volume of public comments on the legislation. In fact during this meeting Senator Grassley was noted as commenting on one rumor, that even though the CMS has completed the final rule and sent it over to the Office of Management and Budget (OMB ), he OMB will not issue the final regulation until after the 2012 Presidential Election. 

While politics certainly plays a big part of any legislation put forth this election year, this delay puts the actions of many companies in abeyance and puts tremendous pressures on medical manufacturers trying to prepare for compliance.