Today, in anticipation for the Open Payments conference call, the Centers for Medicare & Medicaid Services (CMS) published a number of new and important frequently asked questions (FAQs) for the Physician Payment Sunshine Act. Below are all of the new FAQs posted today, August 8, 2013.
In the latest iteration of FAQs, CMS answered a number of questions about the status of "distributors" under the Sunshine Act; clarified reporting for certain materials and textbooks; explained several issues regarding medical devices and exclusions; and clarified addition terms and reporting requirements.
We have also subsequently updated our previous story that organizes all of the CMS FAQs thus far by category. In addition, where applicable, we have added commentary and analysis on these new FAQs.
Yes, a newsletter consisting of a few journal abstracts provided to physician covered recipients from an applicable manufacturer (directly or indirectly) is considered a reportable payment or other transfer of value for purposes of Open Payments if the newsletter is valued at $10 or more or the aggregate amount of payments or transfers of value provided to a covered recipient exceeds $100 in a calendar year. Applicable manufacturers must select the "nature of payment" category that they believe most accurately describes a payment or other transfer of value. (42 C.F.R. § 403.904(e)(2)) Therefore, applicable manufacturers must select the "nature of payment" category that best describes the provision of the newsletter to a covered recipient. The "nature of payment" category applicable to newsletters created by advertising or marketing agencies is "gift," depending on the circumstances of the transfer of value. Third parties, such as an ad agency, can maintain the information collected that is required for reporting by applicable manufacturers.
Analysis: this FAQ will likely raise further alarms in the medical communications industry, as the Washington Legal Foundation (WLF) and the Coalition for Healthcare Communications have already expressed concerns about CMS' position on materials that are protected under the First Amendment. This FAQ may be the last straw before WLF follows through on its warning to CMS for filing a First Amendment suit because this interpretation likely will "chill" protected speech.
Is a textbook donation to a medical center library for the general use of all employees reportable?
The textbook donation would be considered a reportable event if: 1) The medical center library is part of a teaching hospital; or 2) The donation was an indirect payment or transfer of value to a designated physician or group of physicians. Payments or other transfers of value provided to a third party at the request of or designated by the applicable manufacturer on behalf of a covered recipient, must be reported in the name of the covered recipient, as well as the name of the entity that received the payment at the covered recipient's request or designated on the covered recipient's behalf according to 42 C.F.R. § 403.904(c)(10). Additionally, an indirect payment, defined at § 403.902, is a payment or other transfer of value made by an applicable manufacturer to a covered recipient through a third party, where the applicable manufacturer requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value, in whole or in part, to a covered recipient. However, CMS does not believe that a payment that ultimately is passed on to a covered recipient has to be reported if the applicable manufacturer "did not intend or expect that a covered recipient would receive any portion of the payment or other transfer of value." (78 Fed. Reg. 9489).
Analysis: This analysis appears somewhat straightforward. If the donation is to a teaching hospital, it will be reportable regardless of what department it goes to (e.g., library, etc.). CMS did not note the $10 limit, so stakeholders should be aware that such textbook donations will be reportable if over $10 and tracking will be required if under $10. A textbook donation may be an "indirect payment" if a physician of that teaching hospital designates the donation in his/her name or requests the donation be made.
Are awards from specialty societies provided to physician covered recipients considered indirect payments if the awards are funded by grants from applicable manufacturers?
Yes. Open Payments requires reporting of direct and indirect payments or other transfers of value provided by an applicable manufacturer to a covered recipient. An indirect payment, defined by 42 C.F.R. § 403.902, is a payment or transfer of value made by an applicable manufacturer (or an applicable group purchasing organization) to a covered recipient (or a physician owner or investor) through a third party, where the applicable manufacturer (or applicable group purchasing organization) requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value, in whole or in part, to a covered recipient(s) (or a physician owner or investor).
If the applicable manufacturer causes the specialty society, acting as a third party, to provide a payment or transfer of value in whole or in part to a covered recipient, then this may be considered an indirect payment or other transfer of value. In this scenario, the transfer of value is the portion of the grant that would be used to create an award for a covered recipient.
However, an applicable manufacturer is not required to report an indirect payment/other transfer of value if, according to 42 C.F.R. § 403.904(i)(1), the applicable manufacturer is unaware of the identity of the covered recipient. An applicable manufacturer is unaware of the identity of a covered recipient if the applicable manufacturer does not know (as defined in §403.902) the identity of the covered recipient. The definition of "know" states that a person "knows" if he/she has actual knowledge of the information, or acts in deliberate ignorance or reckless disregard of the information. An example of an applicable manufacturer having the requisite knowledge that a covered recipient received an award from grant funds is if an applicable manufacturer allows a specialty society to use its name in an award for a covered recipient, the applicable manufacturer would easily be able to ascertain the identity of the award's recipient. Therefore, the applicable manufacturer could be deemed to be acting with deliberate ignorance if it did not follow up with the specialty society regarding the identity of the recipient.
Analysis: This explanation is also straightforward. Unless grant funds to a third party are unrestricted, it is most likely that any indirect payments made to covered recipients from such grant funds will be reportable.
Is a payment or other transfer of value considered indirect if an applicable manufacturer utilizes a market research company's services to conduct double-blinded market research with primary care physicians, which includes paying physicians for participating?
No, a payment or other transfer of value provided to a market research company to conduct double-blinded market research with physicians is not considered an indirect payment. The applicable manufacturer clearly intends a portion of the payment to be provided to physicians, but given that the reason for the third party's involvement is specifically to maintain the anonymity of the respondents and sponsor, we do not intend this to be considered a reportable indirect payment or other transfer of value. Additionally, under section 1128G(e)(10)(A) of the Social Sec
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