Healthcare Business News
Physician Perks

Already feeling the heat

Docs rethinking payments as Sunshine Act looms

By Jaimy Lee
Posted: June 29, 2013 - 12:01 am ET

Dr. Nogah Haramati, a radiologist based in New York, recently cancelled a meeting with a vendor—one of the many equipment manufacturers and software developers who routinely offer free dinners and lectures to ply their wares.

Haramati, who works for Albert Einstein College of Medicine and Montefiore Medical Center in the Bronx, said he was concerned that even attending a lecture with a dinner would lead to his name being listed in a public database outlining that tie to the company. Such disclosures could put him in conflict with policies set out by his employer.

“It's very easy to run afoul of that database,” he said.

Similar thoughts are going through the minds of thousands of physicians across the country with the imminent rollout of new federal regulations that require medical device and drug manufacturers to disclose their financial dealings with all healthcare providers. “Physicians as well as teaching hospitals are going to be wary of accepting some of the transfers or payments that they may have taken in the past now that these things will see the light of the day,” said Robert Hussar, a lawyer with Manatt, Phelps & Phillips.

The legislation requiring public disclosure of the financial relationships between healthcare vendors and physicians has been widely discussed in policy circles for years. Critics claimed payments for speaking, consulting, research or even the small trinkets and meals delivered during routine sales calls unduly influenced physician choices and inflated healthcare costs. To combat those effects, Congress required public reporting of those payments in a publicly accessible database. The legislation, labeled the Physician Payment Sunshine Act, was included in the 2010 healthcare reform law.

Starting in August, manufacturers and providers will begin collecting data about so-called “transfers of value” that they make to physicians and teaching hospitals. The data will be reported to the CMS, which is expected to make it public for the first time in September 2014.

The rollout of the Sunshine Act sets up several likely responses by the companies and the physicians and is expected to alter the long-standing and sometimes lucrative financial relationships between the two parties.

Some physicians will probably see ending relationships with manufacturers as the wisest course, since there's not much income at stake and they fear having the data misinterpreted if found in the public database.

Others with extensive ties to industry may scale back their lucrative dealings in order to appear less beholden to individual firms.

On the industry side, some companies may begin looking for new ways to influence physician behavior. That could lead to stepped-up advertising in print or online and increased contributions to professional societies, which write clinical practice guidelines. Others may simply cut back spending on physicians as they prepare for increased scrutiny over the nature of the transfers of value.

“Whether transparency will lead to fewer relationships is really the million-dollar question,” said Dr. Daniel Carlat, director of the Pew Charitable Trusts' Prescription Project. “The kinds of relationship that may drop off may well be the most inappropriate relationships.”

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One of the biggest concerns that physicians have is that patients may begin questioning a doctor's reasons for prescribing certain drugs if publicly available data links them to the drugmaker. At the American Medical Association's annual meeting last month, physicians expressed fears that inaccurate reports provided by manufacturers could negatively reflect their relationships with patients.

“The media can really sensationalize this,” Dr. Lynda Young, a pediatrician from Worcester, Mass., and former president of the Massachusetts Medical Society, said at the meeting.

Although the burden of collecting and reporting data falls to manufacturers, the AMA is urging doctors to review the disclosures and demand correction of inaccuracies during a 45-day review period established by the law. However, it's up to manufacturers and not regulators to handle the corrections. The CMS can mark the data as under dispute, but has said it will not mediate disagreements between physicians and companies.

“The AMA fought to ensure physicians have the ability to appeal any inaccurate information that is reported about them through the Sunshine Act disclosure process, but it is best to correct any errors before they are publicly reported,” AMA President Dr. Ardis Hoven said in a statement.

Some hospitals have started educating physicians about the potential impact of Sunshine Act reporting. Many teaching hospitals have adopted stricter conflict-of-interest policies in recent years.

The University of Arkansas for Medical Sciences in Little Rock, for instance, notified its medical staff and faculty about the public disclosures.

The academic medical center strengthened its conflict-of-interest policy about 2 years ago to further address relationships between industry and physicians. “It is fair to say that we recognized that there were going to be more public disclosures and we wanted to be sure we had our act together,” said Dr. Charles Smith, executive associate dean for clinical affairs for the university's College of Medicine.

It's expected that drug and device manufacturers will seek new ways to keep frustrated physicians from walking away from valued consulting or research-based relationships. If “doctors are unhappy, then those doctors may choose to end those relationships,” Pew's Carlat said. “That's not something the companies want to see.”

The Sunshine Act requirements will be very familiar to companies that in recent years have been forced to sign corporate integrity agreements to settle government lawsuits alleging the companies had used physician payments to improperly market drugs for off-label uses or as kickbacks to get them to use specific devices. Dozens of drug and device companies disclosed their financial relationships with physicians under the settlements.

Six states have also adopted payment-disclosure laws. The Sunshine Act will be the first federal law to require such reporting for all drug and device companies.

For providers, insurers and government payers, the good news is that some research has indicated that disclosure may lead to lower healthcare costs.

Patients “might be less inclined to accept treatment recommendations from these physicians or even to receive care from them,” noted the authors of a May article in the New England Journal of Medicine. “Given the evidence that greater physician financial involvement with manufacturers is associated with higher utilization of expensive, brand-name products, such dynamics could reduce costs.”

The rule mandates that manufacturers report any payment or transfer of value that costs more than $10 or any aggregate amount that exceeds $100 a year. In addition, it requires manufacturers and group purchasing organizations to report ownership or investment interests held by physicians and their families.

Several sources say they expect to see changes in relationships between physicians and manufacturers. Yet it is unclear whether the implementation of what the CMS is calling the Open Payments program will lead to fewer financial relationships except in instances where the relationships clearly were improper.

“If some of the money is used inappropriately, then those payments would presume to be under more scrutiny and be less common in the long run,” said Dr. Kevin Bozic, vice chairman of the orthopedic surgery department at the University of California at San Francisco.

Bozic said it seemed the deferred prosecution agreements reached between the U.S. attorney's office in New Jersey and five orthopedic manufacturers in 2007 led to fewer financial relationships with surgeons for several years and only recently returned to their pre-2007 levels.

Physicians tend to think, “This doesn't apply to me. I would never be influenced by these things,' ” Bozic said. “The research shows otherwise.”

The disclosures will shed light for the first time on many previously undisclosed relationships that exist in the medical-device industry.

The drug industry, by comparison, has had much more experience with court-mandated disclosure. Many of the largest drug companies, such as Eli Lilly and Co., Novartis, and Pfizer, have been required to report varying information about their agreements with physicians as part of corporate integrity agreements. Amgen will begin posting information about its payments to physicians later this week.

Within the medical-device sector, there are financial relationships between physicians and manufacturers for products ranging from infusion pumps and catheters to MRI machines and operating tables. “It's for every type of device,” said lawyer Kristian Werling, a partner with McDermott Will & Emery. “They all need physician input. It's definitely wide-ranging.”

Despite the level of detail in the final rule, there are possible loopholes that may allow manufacturers to bypass physician-specific reporting.

In a May 14 letter to the CMS, Pew urged the regulator to address a number of concerns, including defining large-scale conferences as more than 500 attendees to encourage individual reporting of meals and gifts at smaller events. It also wants clarification that indirect payments made to professional physician organizations will not be exempt from reporting unless they are designated for nonphysicians.

Such physician organizations often set practice guidelines that can influence adoption of drugs and devices.

“If the grant is designed as unrestricted, it looks like the companies will not have to attribute payments to specific physicians,” Carlat said. “We're talking about millions of dollars being spent on different activities.”

Follow Jaimy Lee on Twitter: @MHjlee

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