On December 19, 2011, the U.S. Department of Health and Human Services (HHS) proposed rules regarding manufacturers’ and group purchasing organizations’ (GPOs) upcoming obligation to report payments made to physicians and teaching hospitals and investments held by physicians in such manufacturers and GPOs. This requirement is intended to increase transparency and reduce conflicts of interest between manufacturers and physicians.

Section 6002 of the Patient Protection and Affordable Care Act of 2010, as amended, added Section 1128G to the Social Security Act. Under this statutory provision, applicable manufactures of drugs, devices, biologicals, or medical supplies must report payments or other transfers of value to physicians or teaching hospitals (Section 1128G(a)(1)). Additionally, GPOs and manufacturers must report physician ownership or investment interests in such GPOs and manufacturers (Section 1128G(a)(2)). The Department of Health and Human Services is now issuing proposed rules implementing these requirements. The proposed rules define and clarify the terms to these two obligations.

Reporting of Payments or Transfers of Value To Physicians or Teaching Hospitals

The provisions of Section 1128G(a)(1) will apply to applicable manufacturers of drugs, devices, biologicals, or medical supplies sold or distributed in the United States. In addition the actual manufacturers, the definition of “applicable manufacturers” also includes those entities with Food and Drug Administration (FDA) approval, licenses, or clearance for a drug, device, or medical supply. Additionally, those entities in common ownership (including parent companies, subsidiaries, and brother/sister corporations) with such a manufacturer must report these payments.

These rules only apply to manufacturers of drugs, devices, and supplies for which payment is available under Medicare, Medicaid, or CHIP. Covered drugs and biologicals are those drugs and biologicals that require prescriptions (the production of only over-the-counter drugs does not subject a manufacturer to these rules). Likewise, covered devices and medical supplies are those that require premarket approval or notification to the FDA.

These manufacturers must report all payments or transfers of anything of value to physicians or teaching hospitals. Payments must be reported even if the recipient did not request the payment or the physician requested the payment to be made to another party. Covered recipients include all physicians not working for the manufacturer and all teaching hospitals receiving IPPS Indirect Medical Education, direct GMS, or psychiatric hospital IME payments.

The reporting details under the proposed rules requires the manufacturer to report the name, business address, specialty and National Provider Identifier (NPI), amount of payment, date of payment, associated covered drug, device, biological, or medical supply, form of payment, and nature of payment.

Transfers not subject to the reporting requirements include product samples not intended to be sold, educational materials, discounts, and in-kind items used for the provision of charity care.

The rules provide provisions for delayed reporting of payments made pursuant to product research and clinical investigations. This delay is designed to protect the confidentiality of proprietary information relating to the development of new drugs, devices, biologicals, and medical supplies.

Reporting of Investment Interests Held by Physicians in Manufacturers or Group Purchasing Organizations

The provisions of Section 1128G(a)(2) apply to the same manufactures defined above, as well as group purchasing organizations. Group purchasing organizations are defined as those organizations in the United States that purchase, arrange for, or negotiate the purchase of covered drugs, devices, or medical supplies for a group, and not solely for the entity’s own use.

Covered manufactures and GPOs must report ownership or investment interests held by any physician or their immediate family members. These interests cover both equity and debt instruments, including stock, non-compensatory unexercised stock options, partnership shares, LLC memberships, loans, and bonds.

Manufacturers and GPOs must report the physician’s name, specialty, business address, NPI, dollar amount invested, and the value and terms of each ownership or investment interest.

Public Availability

All information reported under these two requirements will be posted by HHS on a public website.

HHS will not require manufacturers or GPOs to collect any information until after the promulgation of a final rule. However, depending upon when this rule is issued, some information may need to be collected in 2012, to be reported on in 2013.

HHS will accept comments on these proposed rules until February 17, 2012.

Fraser Stryker is a leader in health care law, health care reform. Attorneys in the Firm’s Health Care & Physicians Practice Group advise hospitals, clinics, physicians, and other health care professionals throughout the region on all aspects of health care law and compliance. Attorneys on the Firm’s Patient Protection and Affordable Care Act & Health Care Reform Response Team advise businesses, political subdivisions and other governmental entities, health care organizations, and tax-exempt entities on all aspects of health care reform compliance. For more information on the proposed reporting rules, please contact Jim Quinlan or Kristin Crone.

This article is provided by Fraser Stryker for general informational purposes and is not intended to be and should not be construed as legal advice on any specific facts or circumstances.

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