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CMS Issues Final Affordable Care Act Transparency Rules

Tuesday, February 5, 2013  
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February 4, 2013
Re: CMS Issues Final Affordable Care Act Transparency Rules

On February 1, 2013, the Centers for Medicare and Medicaid Services ("CMS”) published its Final Rule (the "Final Rule”) on the physician payment transparency provisions of the well-publicized Patient Protection and Affordable Care Act (the "ACA”). Several market research trade groups, led by PMRG with support and participation from CASRO and MRA, successfully lobbied Congress in 2010 for an exception from the ACA's reporting requirements. The applicable provision in the ACA, however, did not specifically mention market research, but, instead, provided that reporting would not be required for third party payments to physicians where the manufacturer was "unaware” of the identity of the recipient. Concerned that this exception could be abused, CMS, in its proposed rules issued in December, 2011 (the "Proposed Rules”), narrowly interpreted the provision in a way that jeopardized the research industry's ability to keep the identities of physician respondents confidential. CASRO submitted comments to CMS seeking to protect the research industry's ability to use this exception. The Final Rule, indeed, now specifically references market research and shields payments made to physicians as part of research where the respondent's identity is unknown to the manufacturer from the reporting requirements of the ACA.

The physician payment transparency provisions of the ACA were enacted to shed light on possible conflicts of interest in the pharmaceutical industry and thereby limit pharmaceutical companies' undue influence on prescribing behavior. The ACA requires that manufacturers of pharmaceutical drugs, medical devices, biologicals, and medical supplies that provide "payments or other transfers of value” to physicians or teaching hospitals provide an annual report to the Secretary of Health and Human Services ("HHS”) that describes in detail the identity of all recipients, descriptions of the date, nature, amount of, and reason for the payments, and the name of the specific product with respect to which the relevant payment was made. The penalties on manufacturers for non-compliance can be as high as $1 million annually.

These rules threatened the research industry's ability to keep the identity of physician respondents confidential, and consequently, endangered the industry's efforts to recruit physicians for participation in market research. As mentioned above, thanks to extensive lobbying efforts on behalf of the research industry, the ACA's definition of a "payment or other transfer of value” provided an exception from the reporting requirements for blinded market research. Specifically, Section 6002 of the ACA, "Transparency Reports and Reporting Physician Ownership or Investment Interests,” included the following general definition:

The term ‘payment or other transfer of value' means a transfer of anything of value. Such term does not include a transfer of anything of value that is made indirectly to a covered recipient through a third party in connection with an activity or service in the case where the applicable manufacturer is unaware of the identity of the covered recipient.

Therefore, in the case of survey research, no disclosure would be required where a payment from a research company was made to a physician in connection with the physician's participation in survey research, and the manufacturer did not know the identity of the physician respondent.

While the research industry initially believed that this exception would be sufficient to protect the industry, CMS interpreted the exception extremely narrowly in its Proposed Rules. CMS proposed that awareness of the identity of the physician by an agent of the manufacturer would also be attributable to the manufacturer. Although research companies are not typically agents of their clients, this interpretation by CMS could have effectively destroyed the exception to be relied upon by research companies that manufacturers hire to provide research services and, therefore, payments to physicians for survey research could have been reportable. Seeking to preserve the exception, CASRO submitted comments to CMS on its Proposed Rules, in which CASRO requested that CMS provide specific guidance that the applicable exception protects market research from the ACA's reporting requirements.

CMS responded to CASRO's comments by providing just such specific guidance. Here is the language from the Final Rule:

However, we want to clarify that, for purposes of this rule only, we will not consider an applicable manufacturer to be acting in deliberate ignorance or reckless disregard of a covered recipient's identity in situations when the reason a payment or other transfer of value is being made through a third party is that the identity of the covered recipient remains anonymous. For example, an applicable manufacturer may hire a market research firm to conduct a double-blinded market research study, which includes paying physicians $50 for responding to a set of questions. 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.

Consequently, the ACA does not require reporting payments by research companies to physicians as compensation for participating in survey research that is blinded to the manufacturer.

Currently, seven states and the District of Columbia have enacted statutes that either prohibit, or require disclosure of, payments to physicians as part of pharmaceutical marketing. Only Vermont currently prohibits payments made to physicians and other health care professionals as part of market research. No state currently requires the disclosure of such payments for market research. It has been CASRO's experience that with education of the nature and importance of market research, state regulators have agreed that their prohibitions and disclosure requirements were never intended to apply to payments made to physicians as part of market research. For example, Massachusetts's Department of Health interpreted its transparency statute to not apply to fair market value payments made in double blinded market research. In 2010, after extensive discussions with PMRG, MRA, and CASRO, Minnesota not only reversed its ban on market research payments, but also found them not to be reportable so long as the research was blinded to the manufacturer. Last year, after an extensive lobbying effort by CASRO, the District of Columbia also reversed course, and like Minnesota, no longer requires reporting where the research is blinded to the manufacturer.

In order to give manufacturers sufficient time to prepare, data collection will begin under the ACA on August 1, 2013. Manufacturers will report the data for August through December of 2013 to CMS by March 31, 2014 and CMS will release the data on a public website by September 30, 2014. CMS is developing an electronic system to facilitate the reporting process. Once federal reporting takes effect, the ACA will preempt any state statutes or regulations that mandate that a manufacturer disclose or report the types of information required to be disclosed by the ACA. The preemption would not, on its face, apply to state statutes that completely prohibit such payments to physicians or that require additional disclosures beyond those required by the ACA. As a result, preemption may create a confusing patchwork of requirements where it's unclear what information manufacturers must disclose only to HHS or to the relevant state authorities or both. Maine, ostensibly due to impending federal preemption, repealed its statute last year.

For More Information: Contact Russ Anderson, Counsel on Government Affairs, or Art Flanagan, CASRO VP Communications, at 631.928.6954



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