The price of transparency

Physicians, teaching hospitals, group purchasing organizations and drug and device companies will bear some financial burden when the CMS begins to ask for information about their financial relationships.

The 121-page proposed guidance issued last week estimates those costs and provides clarification about how the CMS expects drug, device, biologic and medical supply manufacturers and GPOs to collect and report data about payments and “transfers of value” made to physicians and teaching hospitals, as well as manufacturers' and GPOs' investment interests and physician ownership.

Under the Physician Payments Sunshine Act provisions in the Patient Protection and Affordable Care Act, the CMS will annually publish the data online. A list of covered teaching hospitals, which are defined in the proposed rule as facilities that receive Medicare graduate medical education payments, will also be published online by the CMS each year.

“While some collaboration is beneficial to the continued innovation and improvement of our healthcare system, payments from manufacturers to physicians and teaching hospitals can also introduce conflicts of interests that may influence research, education and clinical decisionmaking in ways that compromise clinical integrity and patient care, and may lead to increased healthcare costs,” the CMS said in the proposed rule.

The CMS estimates that about 334,500 physicians will have a financial burden of $24.3 million and 1,100 teaching hospitals of $715,000 during the first year of compliance with the law. The agency based the estimates on labor costs for physicians' offices and teaching hospitals. Physicians who receive payments and transfers of value from drug and device manufacturers will each pay an estimated $75 to review the information submitted by GPOs and manufacturers, while the estimated average total cost for each teaching hospital is $650.

The CMS said in the proposed rule that “teaching hospitals would have to review more payments or other transfers of value and have more complex relationships,” noting that it would take a representative at a teaching hospital an estimated 10 hours on average to review submitted data and up to 60 hours for teaching hospitals that have “lengthy disputes” about submitted data.

Teaching hospitals face an additional reporting requirement in August, when the National Institutes of Health's conflict-of-interest requirement goes into effect. The concern for teaching hospitals is that they will be obligated to review the CMS' data as well as the financial conflicts-of-interest data required by the NIH, according to Heather Pierce, senior director of science policy and regulatory counsel at the Association of American Medical Colleges. The data sets will likely look different, based on reporting periods and the categories.

Estimated costs for manufacturers, which are required to collect the data, and GPOs are higher. The estimated average total cost for 1,150 manufacturers is $169,815 and $9,760 for 420 GPOs during the first year of compliance. Of the 1,150 manufacturers, 1,000 are device and medical supply companies.

Some concerns about the nuances of the law, and how it defines certain actions, remain.

Christopher White, executive vice president and general counsel of the Advanced Medical Technology Association, said the group supports the law but plans to provide comments regarding the issue of context around payments and transfers of value, and how a financial relationship between a provider and a manufacturer can be beneficial. “It's very important for the public to understand,” White said.

The comment period ends Feb. 17.

Some of the 1,150 drug and device companies are already bound by corporate integrity agreements that require them to report varying levels of information about their financial relationships with physicians and hospitals, while others have submitted data under somewhat similar state laws in Minnesota, Massachusetts, Vermont and West Virginia.

Those companies “are more ready to capture data because they have been doing this at the state level for quite some time,” according to Manny Tzavlakis, a managing director at Huron Life Sciences. For other manufacturers, Tzavlakis said, “Now, it feels real.”

“The Sunshine Act guidance is a welcome, if late, step toward ensuring that the financial links between physicians and the drug, biologics and medical device industries are transparent,” Sen. Herb Kohl (D-Wis.) said in a statement.

Kohl and Sen. Chuck Grassley (R-Iowa), sponsors of the legislation, had advocated for HHS to move forward with implementation of the provision since November 2010.

The CMS later missed its Oct. 1 deadline, leading consumer groups and trade associations to write in an Oct. 25 letter to HHS Secretary Kathleen Sebelius that “an absence of established procedures could harm both the companies who are trying to comply with the law and the public who stands to benefit from increased transparency of these relationships.”

As a result of the delayed proposed rule, the CMS proposed that the manufacturers and GPOs that are required to report payments, transfers of value, investment interests and physician ownership submit a partial year of data, rather than begin data collection Jan. 1 as originally required by the law.

“Because of the complexity of the information that is to be collected—and eventually published—through this provision, it has been essential for companies to have adequate regulations to follow in order to standardize the data and its method of presentation,” Matthew Bennett, Pharmaceutical Research and Manufacturers of America senior vice president, said in a news release the day after the proposed rule was released.