Pharmaceutical and medical device manufacturers take note: In the recently issued calendar year (CY) 2022 Medicare Physician Fee Schedule Final Rule (Final Rule), the Centers for Medicare & Medicaid Services (CMS) finalized a number of important updates to the federal Physician Payment Sunshine Act (Sunshine Act) regulations and related Open Payments reporting system available on the CMS website. These revisions demonstrate CMS’ ongoing interest in enhancing both the integrity of the Sunshine Act reporting regime and the agency’s ability to engage in vigorous oversight of financial relationships between manufacturers and covered recipients. The stakes have never been higher, as CMS is updating the reporting rules against the backdrop of a new wave of enforcement in this area by the Department of Justice (as discussed here).
The Sunshine Act aims to promote financial transparency with respect to manufacturer-healthcare provider relationships by requiring manufacturers of certain drugs, devices, biologicals, and medical supplies that are reimbursed by CMS programs to report payments and other transfers of value made to certain “covered recipients” unless an exception applies. Covered recipients include physicians, teaching hospitals, physician assistants, nurse practitioners, and certain other healthcare providers. With this Final Rule, CMS aims to “increase the usability of the data” and “address concerns [CMS has] heard from stakeholders.” The Final Rule takes effect January 1, 2022, and applies to data collection beginning in CY 2023 and reporting in CY 2024.
The key Final Rule updates are as follows:
- Optional Annual Recertification. Reporting entities now have the option to recertify their registration in the Open Payments reporting system and attest that they have no reportable records for a particular year as a means to communicate their continued compliance with the law. According to CMS, this recertification option will not prevent entities from submitting later-discovered records and is not intended as a method of penalization.
- Prohibition of Record Deletion Without Reason. Although CMS states that it has not seen evidence of this, the agency stated it has concerns that under the prior regulations, entities may have been able to report and attest to payment records and later delete them such that they were never publicly available. Under the Final Rule, CMS finalized its proposal to amend 42 C.F.R. § 403.904 of the regulations to prohibit reporting entities from removing, deleting, or altering records in the Open Payments system unless the entity “discovers an error in the information furnished, or the record is otherwise believed to meet existing exceptions for reporting that were previously unknown.” The reason for a deletion must now be reported in the Open Payments system, and CMS warned that deletions “will continue to undergo additional scrutiny to ensure the integrity of the data.”
- Prohibition of Publication Delays for General Payments. Pursuant to the Sunshine Act, reported payments may be delayed from publication if they are made in connection with (i) research or development of a new drug, device, biological, or medical supply or a new application of an existing drug, device, biological, or medical supply or (ii) clinical investigations regarding a new drug, device, biological, or medical supply. According to CMS, as of December 26, 2020, over 20,000 general payment records (as opposed to research payment records) with a value of $26.4M were flagged for delayed publication. Based on the format required for submission of general records, these general payment reports do not include sufficient information in CMS’ view for CMS to verify within the Open Payments reporting system whether such payments, in fact, relate to research or a clinical investigation. To ensure delayed publication is applied only when warranted, CMS will no longer allow reporting entities to flag for delayed publication those payments that are reported within the Open Payments reporting system as a general (rather than research) payment.
- Short-Term Loan Exclusion. The Final Rule amended the regulatory definition of “short term medical supply or device loan” at 42 C.F.R. § 403.902 to state that the existing reporting exclusion for such short-term loans is limited to a 90-days-per-year loan for devices or a 90-day supply for medical supplies, based on average daily use.
- Addition of Payment Context Field for Teaching Hospitals. To address concerns raised by teaching hospitals that the Open Payments reporting system records do not contain sufficient detail for the hospitals to verify the records during the review and dispute process, CMS will add a mandatory context field in the Open Payment reporting system for payments or transfers of value attributed to teaching hospitals where the reporting manufacturer may include the check number or electronic wire number for the payment, related department of the hospital, or other pieces of relevant information that will help teaching hospitals verify reported payments.
- Updated Contact Information. Reporting entities are now required to keep their contact information current within the Open Payments reporting system for two years after their last reportable payment or transfer of value, pursuant to amended language under 42 C.F.R. § 403.908.
The Final Rule also made changes related to a new definition for “physician-owned distributorship,” an update of the definition for “ownership or investment interest,” and the removal of general records with the Nature of Payment category of “ownership” — which will now be reported as ownership records.
Companies subject to the Sunshine Act should consider policy, procedure, and audit plan updates based on the Final Rule updates in advance of the January 1, 2022, effective date. Furthermore, as CMS continues to fine-tune its reporting requirements under the Sunshine Act, regulated entities should also consider taking stock of their overall compliance infrastructure and training program surrounding their aggregate spend tracking and reporting activities and assess whether any strategic enhancements are warranted to mitigate the risk of noncompliance.
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