The Essential Elements of the Sunshine Act and the Corresponding Impact on Medical Device Companies

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It is well known that medical device companies rely heavily upon input from physicians to help identify and develop new ideas for innovative medical devices. But how will the impending Sunshine Act affect the relationships between manufacturers and physicians? Are there any loopholes? As a medical device professional, what else should you know about the Sunshine Act?

In this interview with Amy Dow, attorney with Epstein Becker Green, she helps us understand the requirements of the Sunshine Act and the issues surrounding its implementation. Amy currently represents medical device, pharmaceutical, and biotech companies on a wide variety of compliance and regulatory matters and is considered a leading expert on the Sunshine Act. Read on for her thought-provoking insight regarding the potential ramifications of the Sunshine Act.

Here’s What You Will Learn

  • What exactly is the Sunshine Act? Its purpose, scope, the 2 major requirements, etc.
  • The origin of the Sunshine Act and will we ever see it actually come to fruition?
  • Ramifications of the Sunshine Act for medical device companies. Amy covers the 2 major issues: Resource constraints and the short 90-day window.
  • How will the Sunshine Act affect physicians and hospitals? Also, will it impact small medical device companies the most?
  • What problems is the Sunshine Act trying to solve? Perhaps more importantly, will patients actually care? And will they even be able to decipher the Sunshine Act data?
  • Payment requirements that medical device companies need to consider in light of the Sunshine Act.
  • Two other problems that medical device companies may face when dealing with the Sunshine Act: 1) Associated link between payment and product; 2) The delayed research factor.
  • And much more!

This Is What You Can Do Next

1) You can listen to the interview with Amy Dow right now:

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4) Read the following 8 action points from the interview with Amy Dow. (If you don’t have time to listen to the entire interview, these action points will serve as your unofficial cheat sheet.)  Also, feel free to download the 8 action points by clicking here.

The 8 Action Points:

If you don’t have time to listen to the entire interview, take these 8 action points with you by clicking here.

The New Federal Law is Designed to Enable Transparency of Existing Financial Relationships between Physicians and Manufacturers

The Sunshine Act places two key requirements on pharmaceutical companies and medical device manufacturers. First, payments issued to physicians and teaching hospitals – such as consultation fees and research grant funding (transfers of value) – must be tracked and reported. Second, manufacturers and group purchasing organizations (GPOs) must disclose any physician ownership interests. This as a noteworthy consideration for medical device companies in particular because historically, ownership is used as a method of compensation for contributions to intellectual property, product development, and consulting arrangements. All collated data must then be reported to the Center for Medicare and Medicaid Services (CMS) and made publicly available on their website.

Implementation of the Sunshine Act Has Been Subjected to Delays by CMS

The Sunshine Act is just one section of the Patient Protection and Affordable Care Act that was signed by President Obama in March 2010. In October 2011, it was anticipated that CMS would inform the industry of what they had to do to implement the Sunshine Act. However, a proposal was not issued until December 2011 and as a result, we are currently in the midst of the ‘review period’ during which manufacturers have until December 2012 to submit their comments. With that said, the Supreme Court could still nullify the Patent Protection and Affordable Care Act altogether. So there remains a small possibility that the Sunshine Act may never come to fruition. However, Amy personally believes this scenario is highly unlikely.

Many Medical Device and Medtech Companies Have Already Begun the Necessary Due Diligence

Companies within the medical device industry have been aware of the impending regulations for two years and consequently are already implementing policies and developing necessary protocols. Amy points out that the challenge for medtech companies at this time is they don’t yet have detailed guidance on exactly what must be collected or how it needs to be reported. Although the proposed rule lists a number of categories of payments that need to be collected and reported, the finer details are currently still up for debate and need further clarification. Also of note, because of the current reporting requirements already in place in certain states, some companies have been able to draw on their existing experiences and apply them to the requirements of the Sunshine Act.

Resources Required to Implement the Act are the Biggest Concern for Companies, Particularly with the Impending Introduction of the Medical Device Tax

When it comes to implementing the Sunshine Act, human and financial resource requirements including appropriate electronic systems, new policy development, and the need to increase head count, are the primary concerns for many medical device companies. There is also an interesting paradigm as the upcoming medical device tax is causing some companies to actually reduce their workforce. This, coupled with pressure from congress to disclose device pricing to different hospitals, means that companies are ‘feeling the pinch from all sides’, especially the smaller players. The short proposed time window of 90 days between the release of the Sunshine Act and the date companies have to start collecting information is also of concern to many companies.

Willingness to Participate May Wane as Physicians Become More Aware of Their Public Image

The decision to take what were previously private arrangements and put them in the public view was made in order to prevent undue industry influence on healthcare decisions that are not in the patient’s best interests. However, if physicians become concerned about how they are perceived by patients, they may scale back their partnerships with medtech companies. Amy predicts this will be the case until we see how patients react to the information. Therefore, you could make the case that the Sunshine Act could actually negatively impact patients as there are clear benefits when industry and physicians partner together for the sake of medical device development.

Tech Savvy Individuals Taking Responsibility for Their Own Healthcare Will Seek Out Information

Although the number of people who will actually seek out information from the Sunshine Act will be limited, there is a subset of patients that are more tech savvy and tend to be more aware of their own healthcare. Amy believes that these are the types of people who will go online to find out what sorts of financial arrangements their healthcare providers have. The database is intended to be fully searchable, down to the physician name and specialty, national provider identification number, and business address.

There is the Risk of Data Being Misinterpreted By Patients

If patients misinterpret the available information, the unintended result is that patients may place less trust in their doctor. For example, if a patient sees that their physician has received what they perceive to be a large sum of money from a certain company, they will most certainly question their doctor’s decisions. However, in reality, this money may have been offered for assistance in certain areas of research and development and may not have necessarily enriched the doctor to any great degree. To attempt to combat this type of scenario, provisions have been made in the proposed rules to segregate research payment information from other payments via ‘category reporting’. For example, payment information may be categorized by consulting fees, compensation for non-consulting activities, food, travel, education, research etc. Also, anything under $10 does not have to be reported as long as it doesn’t amount to over $100 per recipient, per year.

Certain Issues Surrounding the Sunshine Act are More Applicable to Medical Device Companies Versus Pharmaceutical Companies

The requirement to report the product associated with each payment is a prime example of a stipulation more applicable to medical device manufacturers than to pharma companies. The challenge is that if a device manufacturer has a surgical system made up of different components and a physician speaks about the entire system, how will the payment be reported? Medical device companies are also concerned that by having to report research payments, confidential and proprietary business information will be released into the public domain. Although the Sunshine Act attempts to overcome this issue by delaying publication of reports until either the product has been approved or until 4 years has passed, there is ambiguity around which payments fall under the delayed publishing rule.

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