Policy

Cost to comply with Sunshine Act could be nearly $200K per firm

Irrespective of how the U.S. Supreme Court rules this June about the constitutionality of the Affordable Healthcare Act, the federal Physician Payment Sunshine Act is coming. And it will be costly. The implementation of this bipartisan act that scrutinizes the financial relationship between physicians and teaching hospitals on one side, and drugmakers, device makers and […]

Irrespective of how the U.S. Supreme Court rules this June about the constitutionality of the Affordable Healthcare Act, the federal Physician Payment Sunshine Act is coming. And it will be costly.

The implementation of this bipartisan act that scrutinizes the financial relationship between physicians and teaching hospitals on one side, and drugmakers, device makers and other healthcare manufacturers on the other, has been delayed.

But make no mistake, it is likely going to come into effect sometime this year, said experts at a morning event organized by LifeScience Alley in Minnesota to educate people on the requirements of the act.

presented by

The government estimates that complying with the law will require an average of 1.74 full-time equivalents in the first year at a cost of $195,288 per organization

“That amount does not include outside legal counsel or IT infrastructure,” said Sheva Sanders, a Twin Cities lawyer with Leonard, Street and Deinard, who was one of the presenters. “I think the cost has been underestimated.”

She repeatedly exhorted the audience to prepare for implementation of the Sunshine Act.

“You cannot do this on a dime,” Sanders said. “It takes big effort.”

The Centers for Medicare & Medicaid Services were initially supposed to have proposed regulations in October 2011, but those didn’t come out until mid-December. Final regulations are expected sometime this year so that device makers can make a partial year report to the government on March 31, 2013.  Authors of the law are pushing for an issuance this summer.

While the federal government is finalizing regulations, some states are further ahead. Similar laws with various degrees of requirements, some including payment reporting by medical device makers, are already in place.

Massachusetts and Vermont are the two most onerous states in terms of compliance out of eight states that have “Sunshine” laws on the books,  said Mark Gardner, an attorney with law firm DuVal & Associates in Minneapolis.

Manufacturers there will have to make their report available to the state by July 1. There is a $2,000 filing fee and failure to comply will earn $5,000 per violation.

Vermont requires reporting by this past April 1 after a change in the law. It has a $500 filing fee and failure to comply carries a $10,000 fine per violation.

Nevada’s laws are less strict and the state has no filing fee. It simply recommends that companies follow industry associations’ recommendations on what is appropriate — codes adopted by PhrMA and AdvaMed — but does not require them to follow such codes. The report is due by June 1.

In Connecticut, an effort at a more stringent law failed and the state does not require any reporting of physician payments, although companies must have a code of conduct. Violations carry a $5,000 fine per violation and because the state does not do any reporting, competitors might send information about a violation, cautioned Gardner.

In California, it’s not clear whether device makers are exempt from the law. Gardner said. Drugmakers are required to adopt a compliance program, although there is no reporting requirement. Failure to comply carries a $2,500 fine per violation.

Minnesota like California is vague regarding its law’s applicability to medical device firms. Reporting of payments is due by May 1 and fines are $10,000 per violation.

The District of Columbia exempts medical device makers from reporting physician payments. It requires reporting to be due July 1 and requires reps or professional detailers to be licensed, and if they are not licensed but carry out marketing activities, fines are up to $10,000 and $1,000 per violation for failure to report. There is a $5,000 filing fee.

Similar to D.C., West Virgina exempts medical device makers. The report was due this past April 1. The state does not impose a filing fee.

Topics