THE PHYSICIAN PAYMENT SUNSHINE

ACT AND ESIGNATURES: ACHIEVING

SUSTAINABLE COMPLIANCE

EXECUTIVE SUMMARY

Applicable pharmaceutical and medical device manufacturers could face

fines up to $1.15 million annually for failing to correctly report payments

made to physicians, as mandated in the Transparency Reports and

Reporting of Physician Ownership or Investment Interests section of the

Patient Protection and Affordable Care Act, commonly referred to as

the “Physician Payment Sunshine Act.” Although the Act’s writers and

prominent figures within the healthcare industry have urged for swift

adoption, final approval was just released February 1, 2013 – one full

year after the public comment period closed. The industry has been

abuzz, trying to identify best practices in aiming their processes and

technologies for what is finally a confirmed, albeit ambiguous, target.

Pharmaceutical and medical device manufacturers recognize that

compliance with the Sunshine Act will require strict, granular accounting

of the payments and other transfers of value (TOV) to physicians and

teaching hospitals. As public companies scrambled to comply with

the Sarbanes-Oxley Act via electronic discovery in the early 2000s,

pharmaceutical companies and medical device manufacturers are

scrambling to find a solution that will not require undue burden or

expense.

This paper discusses the outstanding questions and possible solutions

for streamlining the transfer of value reporting while improving the

accounting and verification processes.

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INTRODUCTION TO THE SUNSHINE ACTOn February 1, 2013, the Centers for Medicare and Medicaid Services (CMS)

released the final rule implementing the Sunshine Act, mandating transparency

within physician-industry relationships. The long-awaited final rule gives

pharmaceutical and medical device manufacturers more clarity in the CMS’s plans

for the implementation.

Applicable manufacturers of pharmaceuticals, medical devices, biologicals or

medical supplies in addition to applicable group purchasing organizations (GPOs)

are required to report expenses or compensation made to physicians and teaching

hospitals (collectively referred to as covered recipients). They must also report

on physicians with ownerships and investment interests. The reports must be

submitted electronically to the Secretary of the Department of Health and Human

Services (HHS) on an annual basis.

According to Dan Carlat, psychiatrist and Prescription Project Director at The

Pew Charitable Trusts and an influential voice in urging for fast adoption of the

Sunshine Act, “The Sunshine Act doesn’t do anything with regard to regulation. It

simply will reveal the nature of what’s going on now.”

“At least some [industry-physician]

relationships are associated with new, more

expensive drugs.”

-MedPAC

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Pharmaceutical & Medical Device

Manufacturers

Physicians & Teaching Hospitals

Government Oversight

AFTER

Pharmaceutical

& Medical Device

ManufacturersPhysicians &

Teaching Hospitals

BEFORE

“Transparency will shed light on the nature and extent of relationships, and will

hopefully discourage the development of inappropriate relationships and help

prevent the increased and potentially unnecessary health care costs that can arise

from such conflicts,” according to the final rule.

Those costs refer to the initial recommendation of MedPAC in 2009 that influenced

this transparency initiative. The Medicare Payment Advisory Commission (MedPAC)

is an independent Congressional agency established by the Balanced Budget Act

of 1997 to advise the U.S. Congress on issues affecting the Medicare program.

According to MedPAC’s recommendation, “At least some [industry-physician

relationships] are associated with rapid prescribing of new, more expensive

drugs…. [and] concern that manufacturers’ influence over physicians’ education

may skew the information physicians receive.”

This contrasts the belief of some industry thought leaders that federally-

regulated transparency is unnecessary because behaviors and TOV are already

being successfully self-regulated. Industry ethical standards like PhRMA Code on

Interactions with Healthcare Professionals and AdvaMed Code of Ethics have been

encouraging ethical interactions and reasonable expenses between manufacturers

and HCPs since 2002 and 2004, respectively. While PhRMA Code and AdvaMed

Code of Ethics are within the spirit of the Sunshine Act, each serves a unique

purpose.

PENALTIES OF NON-COMPLIANCEThe penalty for not submitting the required information can be $1,000 – 10,000

for each payment not fully reported, with a fine cap of $150,000 a year. The

penalty for knowingly failing to submit these payments is ten-fold. These fines are

$10,000 - $100,000 for each payment, with fine cap of $1 million a year. Penalties

for knowing and unknowing failure to report will be aggregated separately, with a

combined maximum penalty of $1.15 million.

Although commenters generally supported higher penalties for knowing failures

to report and these penalties may not seem to be a significant deterrent for larger

pharmaceutical manufacturers with established and marketed products, think of

the resulting transparency as a house on fire situation.

CMS does not have the authority to impose fines for anything other than failure

“Transparency will shed light on the nature and extent of relationships.”

-CMS final rule

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to report timely, accurate information. The reported data, however, will be public

record – aggregated, easily searchable public record. Additionally, CMS will be

required to submit annual reports to Congress and each state.

All the necessary financial evidence for any indication of wrongdoing will be

placed directly in the hands of those who can take action. Like a mob boss being

taken down for tax evasion, transparency could result in litigation and significant

fines from other areas of the government.

Further, consolidated reporting is now allowed for entities at the company or

operating division levels following comments that consumers might not know

names of small divisions of large corporations, rendering the publicly-available

information useless. This does, however, have financial implications as well. For

example, a large corporation submits a report for itself and two small divisions.

That large corporation will be held responsible for all three companies individually.

Instead of an annual maximum penalty of $1.15 million, that corporation now faces

a maximum penalty of $3.45 million annually.

Additionally, both large and small companies stand to risk their public image and

reputation with non-compliance.

PREPARING TO COMPLY WITH SUNSHINE ACTFor an entire year after CMS closed public comments on the Sunshine Act,

companies awaited guidance from CMS as to exactly what level of detail they will

have to collect and report TOV and by what deadline to avoid fines.

The day of release initiated the 180-day countdown applicable manufacturers

were given to prepare for compliance.

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“You don’t want to be in a position where

a doctor reads a transparency

report listing a payment with

which they disagree. This is especially

important once the payments

are placed on a publicly available

website.”

-Dr. Dan Carlat

Initial Recording PeriodAug. 1, - Dec. 31, 2013

First Report Due byMarch 31, 2014

45-Day Review & 15-Day Corrections Periods

Dates: TBD

First Annual ReportSubmitted from CMS to

Congress byApril 1, 2015

First Publication of Records & First Annual Reports Submitted

from CMS to Each State bySept. 30, 2014

As of September 30, 2014, the public will be able to see the total TOV by recipient,

from each manufacturer. This aggregated data will be downloadable, searchable

and understandable. Additionally, information on any enforcement activities as a

result of failure of the manufacturer to report these expenses will also be published.

PHYSICIAN’S ROLE IN THE SUNSHINE ACTBeyond the negative sentiment in the general public, non-compliance and

erroneous reporting can create frustration with those companies want to please

the most - the individual physicians. Physicians want to ensure their TOV is

reported accurately to the CMS and the public.

CMS will not monitor or require a pre-submission approval process. However,

signed attestation certifying the timeliness, accuracy and completeness of data

by the manufacturer’s CEO, CFO, CCO or other officer will be required at the time

of submission. Failure to attest will be considered failure to submit.

Third-party vendors are creating software solutions to help automate this

accounting process. Additionally, CMS will be providing an online portal to allow

companies and recipients to reconcile the reported TOV prior to publication.

These portals, according to Dr. Carlat, “are extremely important for maintaining

a good relationship between the pharmaceutical companies and the physicians

because you don’t want to be in a position where a doctor reads a transparency

report listing a payment with which they disagree.”

The seamless communication between companies and recipients is essential for

agreement and accuracy of the reported payments.

Applicable manufacturers, GPOs, covered recipients, and physician owners or

investors will be able to sign into a secure site to review the data for a 45-day

window prior to publication. As soon as a dispute is initiated, manufacturers can

begin resolving and correcting. They will have an additional 15 days to resolve

disputes, attest and submit updated data. Disputes not resolved by the end of that

60-day period will be published as originally attested and labeled “disputed” to

incent active, timely resolution. No extensions will be granted.

Only payments made related to the research of new products will be granted a

publication delayed to protect proprietary information.

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Physician-Industry

relationships will become transparent

upon publication of

the data on Sept. 30, 2014.

“This is especially important once the payments are placed on a publicly available

website,” according to Dr. Carlat. “Physicians are very sensitive to their reputations,

and they don’t want there to be payments that are inflated. They don’t want their

patients and others to get the idea that they’re being somehow bought out by the

pharmaceutical industry.”

PAPERLESS TECHNOLOGIES STREAMLINE

RECONCILIATIONTo the great relief of the industry, the final rule has fundamentally removed reporting

of Continuing Medical Education (CME) events from the Sunshine Act. With

thousands of medical-sponsored education events throughout the year, the risk

of non-compliance and negative sentiment would be substantial. According to the

Accreditation Council for Continuing Medical Education (ACCME) Annual Report

Data 2011, there were more than 18,000 CME activities with commercial support

in 2011, servicing 2.3 million physicians and another 2 million non-physicians.

Companies contributed more than $736 million to these activities (excluding in-

kind support) and paid another $297 million for advertising and exhibits space.

Vendors were paralyzed with apprehension at the prospect of recording and

reporting the granular details required to determine TOV per physician and began

solving an extensive, ambiguous problem with several solutions. As of the final

rule, however, TOVs from accredited events do not have to be reported as long

as the sponsoring manufacturer has absolutely no influence in the speaker or

content, which is essentially the definition of a CME event anyway.

Manufacturers will still need technologies and processes implemented for non-

CME events. The non-CME events alone constitute hundreds of thousands of

healthcare industry events each year.

For example, Advanced Health Media supported 200,000 promotional and

speaker bureaus in 2011 alone, according to Nicole Davis, the company’s former

VP Operations and Service Delivery.

Advanced Health Media provides technology services designed to manage

physician-industry relationships. The events this one company supported for that

one year reached one million physician attendees. Those promotional and speaker

bureau transactions - plus millions of others - will need to be reported.

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Continuing Medical

Education events have

been excused from Sunshine Act reporting.

A diligent HCP reimbursement process for any event can be cumbersome

depending on the manufacturer’s compliance regulations. It can involve several

forms, agreements, and attendance verification, resulting in lengthy reimbursement

times and administrative costs.

Per many manufacturers’ compliance regulations, when an HCP agrees to

participate in a pharmaceutical or medical device meeting, the HCP signs off on a

range of TOV.

During the event, diligent hosts confirm the HCPs filled their event obligations

by taking attendance, via HCP signatures, five times a day for each the morning

session, the afternoon session, breakfast, lunch, and dinner. Judith Benaroche

Johnson, President and CEO of RxWorldwide Meetings with experience in internal

reporting of event transactions, noted that her company collects approximately

1,200 physical signatures during conferences. (An average of 120 participants

sign in to five events a day, for two days per conference.)

After the event, manufacturers or their event planners conduct a reconciliation

process for expense reimbursement. This begins when the HCP submits a signed

expense report. These forms then need to be printed, signed and faxed to the

manufacturer. The meeting planner conducts cross-references and data cleaning

to be sure the expense accounting is correct. Once expenses are approved,

the meeting planner reimburses the HCP and bills the expenses back to the

manufacturer. The expense reconciliation process relies on hundreds of HCPs to

fill out reimbursement forms accurately and completely.

Changing from a wet signature form to an electronic signature form greatly

reduces the process time. The Social Security Administration adopted an

electronic signature process in April 2012 for form SSA-827, Authorization to

Disclose Information to the Social Security Administration (SSA). Tony Notaro,

Social Security’s Office of Health Information and Electronic Policy, stated that

beneficiaries who use the electronic signature process of the SSA-827 save up

to 9 days in processing time over those who use the exact same form in its wet

signature format.

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Agreement on

TOV Range

Event Occurs,Take Regular Attendance

HCPs Submit ExpensesEvent Reconciliation

and Reimbursement

Bill the

Manufacturer

ManufacturerReportsto CMS

Changing from a wet signature

form to an eSignature form greatly reduces the

process time.

Agree on TOV Range

Event Occurs, Attendance

Taken Regularly

HCPs Submit

Expenses

Reconciliationand

Reimbursement

Billthe

Manufacturer

ManufacturerManufacturer

ReportsTo CMS

Electronic signature technologies allow manufacturers to acquire agreements

and forms from HCPs easily and enable manufacturers to quickly conduct simple

queries on the HCP obligations and payment seamlessly.

The best-of-breed electronic signature solutions like DocuSign provide a

template for the electronically-signed TOV agreements and expense reports, to

be customized for the manufacturer’s reimbursement process. These documents

can include form validation, ensuring the forms are submitted thoroughly and

completely. Once these forms are signed, the document becomes part of both the

HCP and manufacturer’s document library. This eliminates the need for the HCPs

to print, sign, and deliver the expense report to the manufacturer. Furthermore,

this data can be imported into the manufacturer’s systems without faxing and

data entry.

HCP attendance via electronic signature and mobile devices eliminates the need

for planners to fax Excel spreadsheets to the audit department at the final hour. It

also eliminates the hours of post-processing sign-in sheets and enables the audit

department to run queries on HCPs immediately.

Best-of-breed solutions add another level of security by providing the signer’s

profile with the signer’s name, authentication level, photograph and GPS location

at the time of signing.

For purposes of Sunshine Act audits, manufacturers will be required to maintain

all books, records, documents, etc. for a minimum of five years from the date

of publication. In the case of delayed publication for new research (four years),

this could mean records must be retained for nine years. ESignatures makes this

process less of a hassle, enabling doctors to sign off on all payments in a format

that manufacturers can keep digitally for this period of time, easily accessible for

audits and adding an additional level of accountability in this multi-million dollar

sector of the healthcare industry.

TACKLING AGGREGATE SPENDRxWorldwide Meetings runs up to 150 health care meetings a year, with a TOV of

about $1,500 per health care professional. Some of their clients have Corporate

Integrity Agreements (CIA) with the government. These early adopters require

cost breakouts to a higher level of detail and perform internal audits to ensure that

Both internal & external audits are

necessary to capture the

details.

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physicians are booked in reasonable hotels and compensated for modest meals

and transportation. Dr. Carlat noted the intangible benefit of being an early

adopter, “Some companies such as Eli Lilly, which have been ahead of the game

with producing excellent transparency reports may very well have benefitted in

terms of their reputation for transparency because of those reports. An enhanced

sense of trust in a company is very hard to put a dollar figure on.”

Although these companies are ahead of the curve, Ms. Johnson expressed concern

about the lack of details CMS initially provided. “Nobody has figured out how to

do it, but yet it’s going forward,” she warned. Prior to release of the final rule and

some clarity into required reporting fields, Ms. Johnson’s team built the accounting

categories into their expense reconciliation platform as they interpreted them.

Additionally, MMIS, Inc. and other vendors went to market without knowing any

details of required reporting fields. MMIS offers MediSpend®, a SaaS solution for

aggregate spend tracking and reporting which includes a notification center for

the physician to review and confirm spend information before its reported.

Beyond aggregate spend, Lisa Keilty, Vice President at pmc2 and former Senior

Manager of Pfizer, explains that both internal and external audits need to show

a complete thread from the planning stages through engagement. Compliance

audits, for not only the Sunshine Act, but also other international, federal and state

health care regulations, want to know:

• Why was the program put together?

• What were the objectives?

• What happened (plans vs. actual proceedings, attendees, cost)?

• What were the outcomes?

• What are the next steps?

Ms. Keilty noted that many attendee management systems are challenged to

capture the granular information like no-shows and opt-outs. She envisions a tool

on the operations side of business that integrates attendee management systems

with front-end planning and budgeting. This tool would capture the granular detail

required by the Sunshine Act in addition to each physician’s acknowledgement of

the TOV. This information would then be reported back to the planner, manufacturer

and physician.

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Ombud, Inc.

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Vendors went to market without

knowing any details of required

reporting fields.

STILL WAITING FOR ANSWERSDespite the release of the final rule on the Sunshine Act, manufacturers are still

waiting for clarity for its implementation. CMS does not consider the financial

burden of compliance to be substantial, however, their vague implementation

guidelines to allow for flexibility make it difficult to determine the actual cost

implications. Applicable manufacturers and GPOs will have to report TOVs from

the later half of 2013 by March 31, 2014, regardless of this uncertainty in the

technologies and procedures necessary to document specific TOVs per event

and deliver that value to CMS.

Direction has been provided for the following provisions, but the associated

procedures required for information collections remain unclear. There is no detail

in how companies will submit:

1. Records and Reports of Payments or Other TOVs, Physician

Ownership and Investment Interests

2. Registration of Applicable Manufacturers and GPOs with CMS

prior to the end of the reporting year

3. Attestation by the CEO, CFO, CCO or other Officer of the

applicable manufacturer or GPO that the information reported is

timely, accurate and complete

4. Voluntary supporting documentation providing an explanation of

reasonable assumptions and methodologies used in reporting

5. Updates to the Review and Corrections Period by Physicians and

Teaching Hospitals

6. Notifications of Resolved Disputes

7. Notifications of Errors and Omissions

It is also uncertain whether the systems manufacturers have already implemented

and will implement prior to the release of additional details will be compatible

with the data templates.

“When companies are in the dark about exactly what kinds of payments they

need to report, the risk is that they will overspend and overstaff themselves in

order to report transfers of value just in case those end up needing to be collected

and reported,” according to Dr. Carlat. “On the other hand, there’s also the risk

of companies not planning appropriately for comprehensive reporting, and that

then presents a risk of ending up being noncompliant with some transparency

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Manufacturers are still waiting

for clarity on Sunshine Act

implementation.

reports and having to pay substantial fines if they are noncompliant.”

CMS has finally answered most questions about what needs to be reported,

leaving early adopters to determine whether they have in fact wasted resources.

They have, however, remained ambiguous about how that data needs to be

reported.

“We’re still in the dark on a lot of information,” according to Ms. Keilty. She would

have loved to see the reporting template or physician portal, even if only in draft

form. More standardization guidelines for information collection would also be

helpful, according to Ms. Keilty.

Big pharmaceutical companies have been very aware of regulations and

the Sunshine Act iterations. They have been spent 2-3 years, if not longer,

developing robust accounting systems. However, the early absence of federal

terms of reference and accounting rules has allowed each company to come up

with a philosophy and practice as to how they are going to determine a TOV per

physician.

Most likely, those early adopters will become the leaders of the implementation

process. Like Sarbanes-Oxley, the technology to support the act will develop

before all of the implementation questions are answered by CMS.

While streamlining processes for compliance with the Sunshine Act, manufacturers

and physicians should keep in mind one return that cannot be limited to standard

ROI calculations - trust.

“I think the main benefit is going to be a renewed sense of trust, not only in

the companies,” according to Dr. Carlat. “The public believes that doctors are

still often being given large gifts, that they’re taken out to sporting events, that

they’re treated to Caribbean adventures on the drug company tab, and these

things are very rarely happening now. They used to happen, but these days they

happen very rarely, if at all. I think once transparency reports are published widely

the public will understand that the vast majority of physicians who are taking

payments are taking relatively small payments and that many of the payments

are for completely legitimate activities.”

Transparency, in the words of Ms. Keilty, “is just good business.” The expense

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“We’re still in the dark on a

lot of information.”

-Lisa Keilty

details between manufacturers and physicians will soon be public knowledge.

Patients will be scrutinizing those dollar amounts and the availability of

information. Any lack of reporting will not only result in fines, but also patient

scrutiny. Not being transparent – via accurate accounting and verification systems

– is risky.

RESOURCES1. Transparency Reports and Reporting of Physician Ownership or Investment

Interests: https://www.federalregister.gov/articles/2013/02/08/2013-02572/

medicare-medicaid-childrens-health-insurance-programs-transparency-

reports-and-reporting-of#t-1

2. Shining Light on the Sunshine Act http://www.cbinet.com/

shining-light-sunshine-act

3. ACCME Annual Report Data – 2011: http://www.accme.org/sites/default/

files/null/630_2011_Annual_Report_20120724.pdf

4. Legal Issues Presented by the Social Security Administration’s New

Electronic Signature Process for Authorizations to Disclose Information,

March 2012 http://www.americanbar.org/newsletter/publications/aba_

health_esource_home/aba_health_law_esource_0312_ssa.html

5. Physician Payment Sunshine: Final Rule Sent from CMS to OMB for Final

Review: http://www.policymed.com/2012/11/physician-payment-sunshine-

final-rule-sent-from-cms-to-obm-for-final-review.html

6. Electronic Discovery and the Challenge Posed by the Sarbanes-Oxley

Act: http://www.lawtechjournal.com/articles/2005/02_050530_garrie_

armstrong.pdf

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Not being transparent

means risking fines and patient

scrutiny.