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Physician Sunshine Act: Opening the Windows on Physician Financial Involvement with Medical Product Manufacturers

Feb 21, 2016 03:32PM ● By MED Magazine

By Scott Leuning

Physicians have long played an important role in the development and use of medical devices and new pharmaceuticals.  For many years the financial role that physicians had with medical manufacturers was kept behind the scenes.  However, in 2010, as part of the Affordable Care Act (ACA), the Physician Payments Sunshine Act (“Sunshine Act”) was enacted into law.  Under this provision of the ACA, medical product manufacturers became required to disclose to the Centers for Medicare and Medicaid Services (CMS) any payments or other transfers of value made to physicians or teaching hospitals.  The Sunshine Act also requires certain manufacturers and group purchasing organizations (GPOs) to disclose any physician ownership or investment interests held in those companies.  The data collected by CMS will be published annually in a publicly-searchable database.

It is not uncommon for there to be a financial relationship between medical product manufacturers and physicians, ranging from free meals to consulting or speaker fees to direct research funding.  Those relationships can have positive outcomes, particularly in the area of medical research, where consulting and research funding is often the impetus for the development of new devices or drugs.  However, those financial relationships can also create conflicts of interest, or at least perceived conflicts of interest, on issues such as what is the incentive behind a physician’s decision to utilize a certain medication for his/her patients.  In a 2009 nationwide survey, it was revealed that nearly 84 percent of physicians had some form of financial interaction with manufacturers of drugs, devices, biologicals or medical supplies.  While the majority of those interactions involved meals provided in the workplace, nearly 20 percent of the financial interactions involved reimbursements for attending meetings of continuing medical education (CME) events while almost 15 percent received payments for professional services.

Under the Sunshine Act three categories of payments or “transfers of value” must now be reported to CMS:  (1) meals, travel reimbursements and consulting fees; (2) ownership and investment interests in manufacturers held by physicians and their immediate family members; (3) research payments, including payments for participation in preclinical research, clinical trials, or other product development activities.  Any payments under $10 are not required to be reported unless the annual payments to an individual total more than $100 annually.

The reporting obligations under the Sunshine Act began in 2013, with data from those reports first being published on September 30, 2014.  A second round of data was reported in 2015.  Each year when data is collected and posted manufacturers, GPOs, physicians and teaching hospitals have forty-five days to review the data attributed to them and then fifteen days to dispute and correct the data.  If the dispute has not been resolved within fifteen days then CMS will publish the date and note that it is being disputed.

The Sunshine Act imposes penalties ranging from $1,000-$10,000 for each payment that a manufacturer or GPO fails to report, with a maximum annual penalty of $150,000.  If it is shown that a manufacturer or GPO willfully failed to report payments the penalties can range from $10,000-$100,000 per payment up to a maximum of $1 million.

The purpose of the Sunshine Act was to create transparency with respect to the financial relationship between medical device and drug manufacturers and the physicians to use and promote their products.  Although 2015 data has not yet been reported, the reports from 2014 revealed that 607,000 physicians received some level of payment from 1,442 medical device and drug manufacturers and that the total amount of payments reported was $6.45 billion ($6,450,000,000.00.).  Although there was partial reporting done in 2013, 2014 was the first full year for data collection under the Sunshine Act.  Therefore, the data collected from 2015 will provide more information as to whether the disclosure requirements of the Sunshine Act are causing medical device and drug manufacturers to alter their practices for providing financial compensation to physicians. 

One of the primary concerns regarding the Sunshine Act is that merely disclosing the amount of payments received by any particular physician does not distinguish between “appropriate” physician-industry interaction and payments from industry for “inappropriate” physician support of a product or device.  Although there is always a concern that physician payments from medical device manufacturers and pharmaceutical companies may skew the judgment of a physician, there are also many instances where physicians have assisted in developing important new medical technology.  Therefore the data collected under the Sunshine Act should be carefully scrutinized to ensure that it does not inhibit innovation.


Scott Leuning, Goosmann Law Firm