Will Final Rule for Sunshine Act Decrease Medical Fraud?

On Friday, February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) published a long-delayed final rule for the Physician Payments Sunshine Act. The Sunshine Act requires all drug, medical device, and biological or medical supply manufacturers to carefully track and report all payments made to physicians and teaching hospitals. The Act also requires manufacturers and group purchasing organizations (GPOs) to disclose any ownership or investment interests that physicians and their immediate family members have in those entities. The purpose of The Act is to shed light on any potential conflicts of interest that could potentially affect treatment decisions and health care costs. The goal is to increase overall transparency, while also reducing the potential for healthcare fraud by gathering data about financial relationships between healthcare providers and manufacturers, then making it available to the public.

Details of a recent study released by the Journal of the American Medical Association shows that doctors who receive free lunches from these industries are more likely to be persuaded to prescribe expensive brand-name medications to their patients than those prescribers who do not. These results clearly show the need for disclosure of the financial relationships between industry and physicians to the public, ensuring that medicine that is evidence-based is being practiced, rather than medicine that is only marketing  and fraudulently based.

Putting a Stop to the Kickbacks

Starting Aug. 1, The Physician Payments Sunshine Act requires all drug, medical device, and biological or medical supply manufacturing companies begin reporting specific items, such as gifts, meals and payments made to doctors and teaching hospitals to the Department of Health and Human Services. Once the reports and data are collected, they will be made public by the CMS.

“Disclosure brings about accountability, and accountability will strengthen the credibility of medical research, the marketing of ideas and, ultimately, the practice of medicine,” Sen. Chuck Grassley (R-Iowa), who co-authored the legislation, said in a statement. “The lack of transparency regarding payments made by the pharmaceutical and medical device community to physicians has created a culture that this law should begin to change substantially.”

The final rule requires manufacturers and GPOs report the first round of data collection to the CMS by March 31, 2014. The data is then to be posted online by Sept. 30, 2014, or within 90 days of the last day for data submission. This is one full year after the original statute required within The Act.

The program’s first round of reporting will be limited to only five months of data, rather than a full 12 months. The timeline was essentially pushed back in order to provide physicians and manufacturers enough time to gather data and compile reports. Any violation of reporting requirements will be subject to civil penalties, capped annually at $150,000 for failure to report and $1 million for knowingly failing to report.

Finalizing the Sunshine Act

During the process of developing these rules, a final draft of The Act was delayed multiple times. The most recent was when the CMS missed their own deadline to issue a final rule by the end of 2012. However, both the CMS, which received 373 letters during the comment period, and other stakeholders say that the medical regulation is complex.

“Strong ethical standards are critical to ensuring appropriate collaboration between the medical device industry and physicians,” White said in the statement. “Additionally, because the effectiveness of a device often depends on a physician’s skill in using it, it is essential that physicians receive education and training.”

The program is expected to cost $269 million in its first year and $180 million each year thereafter, with an ultimate goal of decreasing the incidence of healthcare fraud. In a statement, Christopher White, general counsel and senior executive vice president of the Advanced Medical Technology Association, said the additional time would allow manufacturers to establish compliant business systems.