United States: Manufacturers Must Soon Track And Report Payments To Health Care Professionals: Are You Prepared?

The Patient Protection and Affordable Care Act of 2009 ("Health Reform Law") contains many provisions aimed at reducing health care fraud and abuse in the United States. One provision aims to ensure transparency in the relationships between manufacturers and distributors of pharmaceuticals, biologics, medical devices, and medical supplies ("Manufacturers") and physicians and teaching hospitals ("Covered Recipients"). Specifically, the Health Reform Law requires Manufacturers to report payments or other transfers of value in the 2012 calendar year to Covered Recipients in electronic format by March 31, 2013, and on the 90th day following each calendar year thereafter. As a result, Manufacturers must begin tracking payments and other transfers of value on January 1, 2012. The types of payments and transfers of value that must be reported include compensation for services (e.g., consulting) and speaking engagements, honoraria, gifts, entertainment, food, travel, education, research, charitable contributions, royalties/licenses, grants, ownership interests, and any other type of payment that future regulations dictate must be reported. Payments and transfers of value must be reported if made directly to a Covered Recipient and if made to an entity or individual at the request of or on behalf of a Covered Recipient.

Payments, Other Transfers of Value, and Physician Ownership Information to be reported: The following information must be contained in each report:

• The name and business address of the Covered Recipient;
• The National Provider Identifier of the Covered Recipient;
• The amount of the payment or other transfer of value, indicated as (i) cash or cash equivalent, (ii) in-kind items or services; (iii) stock, a stock option, or any other ownership interest, dividend, profit, or other return on investment, or (iv) any other form of payment or other transfer of value (as may be dictated by future regulations);
• A description of the nature of the payment or other transfer of value (e.g., consulting fees, honoraria, education, research, etc.);
• If the payment or other transfer of value is related to marketing, education, or research specific to a covered drug, device, biological, or medical supply, the name of the drug, device, biological, or medical supply; and
• Any other information that may be further defined by regulation.

In addition to the above-listed information, Manufacturers must separately report any ownership or investment interest held by a physician (or the immediate family member of a physician) in the Manufacturer. Specifically, the following information must be reported: (i) the dollar amount invested by each physician or family member with an ownership interest, (ii) the value and terms of each ownership interest, (iii) any payments or other transfers of value to physicians holding such ownership interests; and (iv) any other information that may be required by future regulations. This reporting requirement also applies to group purchasing organizations.

Exceptions: Some payments and transfers of value need not be reported. Examples of excluded payments/transfer of value include: (i) payments of less than $10 (unless the aggregate amount for the year exceeds $100); (ii) product samples not for sale and intended for patient use; (iii) educational materials directly benefiting patients or intended for patient use; (iv) short-term trials of a medical device; (v) warranties, (vi) discounts (including rebates), (vii) items used in charity care, and (viii) profits received from publicly traded securities or mutual funds.

Penalties: The penalties for failure to comply with the reporting obligations are significant. For failing to report as required, Manufacturers are subject to civil money penalties of $1,000 to $10,000 per violation (i.e., per payment/transfer of value, not per report), not to exceed $150,000 in the aggregate for a one-year period. For knowingly failing to report as required, Manufacturers are subject to civil money penalties of $10,000 to $100,000 per violation (i.e., per payment/transfer of value, not per report), not to exceed $1,000,000 in the aggregate for a one-year period.

Public Posting of Reported Information: The reported information will be made available to the public via the internet, starting on September 30, 2013, and each June 30 thereafter. National Provider Identifiers will not be made public, and payments reported in connection with research on a potential new medical technology or the development of a new drug, biologic, device or medical supply will not be made available to the public until the earlier of the date of FDA approval or four years after the payment was made.

Similar State Law Obligations: In addition to the Health Reform Law provision discussed in this article, many states (e.g., Massachusetts, Minnesota, Vermont, and others) and the District of Columbia have in place laws that require similar disclosures of transfers of value made by Manufacturers to certain types of health care professionals (each law is different). While the Health Reform Law provision preempts (i.e., overrides) any state laws that require disclosure of the same information required to be disclosed by the Health Reform Law provision, it does not preempt any portion of any state law that requires disclosure of information that is different or in addition to the information required by the Health Reform Law provision. Therefore, it is critical for Manufacturers making payments of other transfers of value to health care professionals in states with disclosure laws to understand the specific requirements of, and comply with, those state laws. There is currently no such state disclosure law in Texas, but one was proposed in 2008 and it is always possible that it could be re-introduced, adding another dimension of disclosure requirements to Manufacturers making payment to Texas physicians and teaching hospitals.

Ensuring Procedures and Capability to Collect and Report Required Information: It may seem like March 31, 2013 is a long time from now, but because payments must be tracked starting January 1, 2012, it is important for Manufacturers to quickly begin implementing procedures pursuant to which the information required by the Health Reform Law provision (and any applicable state law) is collected. Depending on the volume of a particular Manufacturer's payments and other transfers of value to physicians and teaching hospitals, it may also be necessary to implement new information technology programs that are capable of capturing the payments and other transfers of value and producing reports detailing such payments and other transfers of value. The procedures and systems implemented by Manufacturers should be capable of modification, as future regulations may require additional information to be reported and new state disclosure laws may be adopted that require the reporting of additional types of information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.