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 Acts 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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At least some [industryphysician] relationships are associated with new, more expensive drugs.
-MedPAC

INTRODUCTION TO THE SUNSHINE ACT

On 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 CMSs 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.

BEFORE

Pharmaceutical & Medical Device Manufacturers Physicians & Teaching Hospitals

AFTER

Pharmaceutical & Medical Device Manufacturers Physicians & Teaching Hospitals

Government Oversight
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 doesnt do anything with regard to regulation. It simply will reveal the nature of whats going on now. Ombud, Inc. www.ombud.com 2 1877 Broadway, Boulder, CO 80302

Transparency will shed light on the nature and extent of relationships, and will
Transparency will shed light on the nature and extent of relationships.
-CMS final rule

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 MedPACs 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 federallyregulated 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-COMPLIANCE
The 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 Ombud, Inc. www.ombud.com 3 1877 Broadway, Boulder, CO 80302

You dont 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

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 ACT

For 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.
First Annual Report Submitted from CMS to Congress by April 1, 2015

Initial Recording Period Aug. 1, - Dec. 31, 2013

First Report Due by March 31, 2014

45-Day Review & 15-Day Corrections Periods Dates: TBD

First Publication of Records & First Annual Reports Submitted from CMS to Each State by Sept. 30, 2014

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PhysicianIndustry relationships will become transparent upon publication of the data on Sept. 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.

PHYSICIANS ROLE IN THE SUNSHINE ACT

Beyond 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 manufacturers 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 dont 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. Ombud, Inc. www.ombud.com 5 1877 Broadway, Boulder, CO 80302

Continuing Medical Education events have been excused from Sunshine Act reporting.

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 dont want there to be payments that are inflated. They dont want their patients and others to get the idea that theyre being somehow bought out by the pharmaceutical industry.

PAPERLESS TECHNOLOGIES RECONCILIATION

STREAMLINE

To 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 inkind 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 nonCME events. The non-CME events alone constitute hundreds of thousands of healthcare industry events each year. For example, Advanced Health Media, a provider of technology services designed to manage physician-industry relationships, supports 240,000 promotional and speaker bureaus annually. Each year, the events this one company supports reach one million physician attendees. Those promotional and speaker bureau transactions - plus millions of others - will need to be reported.

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Changing from a wet signature form to an eSignature form greatly reduces the process time.

A diligent HCP reimbursement process for any event can be cumbersome depending on the manufacturers 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.
Agreement on TOV Range Event Occurs, Take Regular Attendance HCPs Submit Expenses Event Reconciliation and Reimbursement Bill the Manufacturer Manufacturer Reports to CMS

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 Securitys 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.
Agree on TOV Range Event Occurs, Attendance Taken Regularly HCPs Submit Expenses Reconciliation and Reimbursement Bill the Manufacturer Manufacturer Manufacturer Reports To CMS

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Electronic signature technologies allow manufacturers to acquire agreements Both internal & external audits are necessary to capture the details. 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 manufacturers 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 manufacturers 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 manufacturers 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 signers profile with the signers 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 SPEND

RxWorldwide 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 Ombud, Inc. www.ombud.com 8 1877 Broadway, Boulder, CO 80302

Vendors went to market without knowing any details of required reporting fields.

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 its going forward, she warned. Prior to release of the final rule and some clarity into required reporting fields, Ms. Johnsons 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 physicians acknowledgement of the TOV. This information would then be reported back to the planner, manufacturer and physician.

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Manufacturers are still waiting for clarity on Sunshine Act implementation.

STILL WAITING FOR ANSWERS

Despite 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. 2. 3. Records and Reports of Payments or Other TOVs, Physician Ownership and Investment Interests Registration of Applicable Manufacturers and GPOs with CMS prior to the end of the reporting year 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. 5. 6. 7. Voluntary supporting documentation providing an explanation of reasonable assumptions and methodologies used in reporting Updates to the Review and Corrections Period by Physicians and Teaching Hospitals Notifications of Resolved Disputes 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, theres 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 Ombud, Inc. www.ombud.com 10 1877 Broadway, Boulder, CO 80302

reports and having to pay substantial fines if they are noncompliant. Were still in the dark on a lot of information. -Lisa Keilty 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. Were 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 theyre taken out to sporting events, that theyre 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 Ombud, Inc. www.ombud.com 11 1877 Broadway, Boulder, CO 80302

details between manufacturers and physicians will soon be public knowledge. Not being transparent means risking fines and patient scrutiny. 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.

RESOURCES
1. 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-transparencyreports-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 Administrations 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-sunshinefinal-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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