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Proposed rule implementing the Sunshine Act of of the ACA
Proposed rule implementing the Sunshine Act of of the ACA

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Published by: Govtfraudlawyer on Feb 12, 2012
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Federal Register
/Vol. 76, No. 243/Monday, December 19, 2011/Proposed Rules
DEPARTMENT OF HEALTH ANDHUMAN SERVICESCenters for Medicare & MedicaidServices42 CFR Parts 402 and 403
[CMS–5060–P]RIN 0938–AR33
Medicare, Medicaid, Children’s HealthInsurance Programs; TransparencyReports and Reporting of PhysicianOwnership or Investment Interests
Centers for Medicare &Medicaid Services (CMS), HHS.
Proposed rule.
This proposed rule wouldrequire applicable manufacturers of drugs, devices, biologicals, or medicalsupplies covered by Medicare, Medicaidor the Children’s Health InsuranceProgram (CHIP) to report annually to theSecretary certain payments or transfersof value provided to physicians orteaching hospitals (‘‘coveredrecipients’’). In addition, applicablemanufacturers and applicable grouppurchasing organizations (GPOs) arerequired to report annually certainphysician ownership or investmentinterests. The Secretary is required topublish applicable manufacturers’ andapplicable GPOs’ submitted paymentand ownership information on a publicWeb site.
To be assured consideration,comments must be received at one of the addresses provided below, no laterthan 5 p.m. Eastern Standard Time onFebruary 17, 2012.
In commenting, please referto file code CMS–5060–P. Because of staff and resource limitations, we cannotaccept comments by facsimile (FAX)transmission.You may submit comments in one of four ways (please choose only one of theways listed):1.
You may submitelectronic comments on this regulationto
.Followthe ‘‘Submit a comment’’ instructions.2.
By regular mail.
You may mailwritten comments to the followingaddress only: Centers for Medicare &Medicaid Services, Department of Health and Human Services, Attention:CMS–5060–P, P.O. Box 8013, Baltimore,MD 21244–8013.Please allow sufficient time for mailedcomments to be received before theclose of the comment period.3.
By express or overnight mail.
Youmay send written comments to thefollowing address only: Centers forMedicare & Medicaid Services,Department of Health and HumanServices, Attention: CMS–5060–P, MailStop C4–26–05, 7500 SecurityBoulevard, Baltimore, MD 21244–1850.4.
By hand or courier.
Alternatively,you may deliver (by hand or courier)your written comments only to thefollowing addresses prior to the close of the comment period:a. For delivery in Washington, DC—Centers for Medicare & MedicaidServices, Department of Health andHuman Services, Room 445–G, HubertH. Humphrey Building, 200Independence Avenue SW.,Washington, DC 20201.(Because access to the interior of theHubert H. Humphrey Building is notreadily available to persons withoutFederal government identification,commenters are encouraged to leavetheir comments in the CMS drop slotslocated in the main lobby of the building. A stamp-in clock is availablefor persons wishing to retain a proof of filing by stamping in and retaining anextra copy of the comments being filed.) b. For delivery in Baltimore, MD—Centers for Medicare & MedicaidServices, Department of Health andHuman Services, 7500 SecurityBoulevard, Baltimore, MD 21244–1850.If you intend to deliver yourcomments to the Baltimore address, calltelephone number (410) 786–1066 inadvance to schedule your arrival withone of our staff members.Comments erroneously mailed to theaddresses indicated as appropriate forhand or courier delivery may be delayedand received after the comment period.For information on viewing publiccomments, see the beginning of the
Erica Breese (202) 260–6079.
Inspection of Public Comments:
Allcomments received before the close of the comment period are available forviewing by the public, including anypersonally identifiable or confidential business information that is included ina comment. We post all commentsreceived before the close of thecomment period on the following Website as soon as possible after they have been received:
.Follow the searchinstructions on that Web site to viewpublic comments.Comments received timely will also be available for public inspection asthey are received, generally beginningapproximately 3 weeks after publicationof a document, at the headquarters of the Centers for Medicare & MedicaidServices, 7500 Security Boulevard,Baltimore, Maryland 21244, Mondaythrough Friday of each week from 8:30a.m. to 4 p.m. To schedule anappointment to view public comments,phone 1–(800) 743–3951.
I. Background
A. Statutory Background 
Section 6002 of the Affordable CareAct added section 1128G to the SocialSecurity Act (the Act), which requiresapplicable manufacturers of drugs,devices, biologicals, or medical suppliescovered under title XVIII of the Act(Medicare) or a State plan under titleXIX (Medicaid) or XXI of the Act (theChildren’s Health Insurance Program, orCHIP) to report annually to theSecretary certain payments or othertransfers of value to physicians andteaching hospitals. Section 1128G of theAct also requires applicablemanufacturers and applicable grouppurchasing organizations (GPOs) toreport certain information regarding theownership or investment interests held by physicians or the immediate familymembers of physicians in such entities.Specifically, manufacturers of covereddrugs, devices, biologicals, and medicalsupplies (applicable manufacturers) arerequired to submit on an annual basisthe information required in section1128G(a)(1) of the Act for certainpayments or other transfers of valuemade to physicians and teachinghospitals (collectively called coveredrecipients) during the course of thepreceding calendar year. Similarly,section 1128G(a)(2) of the Act requiresapplicable manufacturers andapplicable GPOs to disclose anyownership or investment interests insuch entities held by physicians or theirimmediate family members, as well asinformation on any payments or othertransfers of value provided to suchphysicians. Applicable manufacturersmust report the required payment andother transfer of value information toCMS in an electronic format by March31, 2013, and on the 90th day of eachcalendar year thereafter. Applicablemanufacturers and applicable GPOsmust report the required informationabout physician ownership andinvestment interests, including thoseheld by immediate family members, aswell as information on any payments orother transfers of value to suchphysician owners or investors in thesame format, by the same date.Applicable manufacturers andapplicable GPOs are subject to civilmonetary penalties (CMPs) for failing tocomply with the reporting requirementsof the statute. We are required by statute
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Federal Register
/Vol. 76, No. 243/Monday, December 19, 2011/Proposed Rules
to publish the reported data on a publicWeb site. The data must bedownloadable, searchable, and easilyaggregated. In addition, we must submitannual reports to the Congress and eachState summarizing the data reported.Finally, section 1128G of the Actgenerally preempts State laws thatrequire disclosure of the same type of information by manufacturers.2. Transparency OverviewCollaboration among physicians,teaching hospitals, and industrymanufacturers may contribute to thedesign and delivery of life-saving drugsand devices. However, while somecollaboration is beneficial to thecontinued innovation and improvementof our health care system, paymentsfrom manufacturers to physicians andteaching hospitals can also introduceconflicts of interests that may influenceresearch, education, and clinicaldecision-making in ways thatcompromise clinical integrity andpatient care, and may lead to increasedhealth care costs.We recognize that disclosure alone isnot sufficient to differentiate beneficial,legitimate financial relationships fromthose that create conflict of interests orare otherwise improper. Moreover,financial ties alone do not signify aninappropriate relationship. However,transparency can shed light on thenature and extent of relationships, andmay dissuade inappropriate conflicts of interest from developing. Given theintricacies of disclosure and theimportance of discouraginginappropriate relationships withoutharming beneficial ones, we sought to better understand the current scope of the interactions among physicians,teaching hospitals, and industrymanufacturers. We solicited stakeholderfeedback through a CMS Open DoorForum on March 24, 2011 in order toguide our implementation of section1128G of the Act. The transcript of thisOpen Door Forum can be found on theregulatory docket on Regulations.gov. Inaddition to this feedback, we consultedwith the Inspector General of theDepartment of Health and HumanServices (HHS), as required by thestatute.
II. Provisions of the ProposedRegulations
The following sections outline theagency’s proposals concerningimplementation of section 1128G of theAct, including clarification of the termsand definitions used in the statute, aswell as proposed procedures for thesubmission, review, and publication of the reported data. For terms undefined by the statute, we sought to provide,where necessary, appropriatedefinitions, and explanations of how wepropose to interpret them. Due to thetiming of the publication of this noticeof proposed rulemaking, a final rule willnot be published in time for applicablemanufacturers and applicable GPOs to begin collecting the informationrequired in section 1128G of the Act on January 1, 2012, as indicated in thestatute. We will not require applicablemanufacturers and applicable GPOs to begin collecting the requiredinformation until after the publicationof the final rule; however, we recognizethat some manufacturers and GPOs may begin to collect certain data voluntarily.We seek comment on the amount of time applicable manufacturers andapplicable GPOs will need followingpublication of the final rule in order to begin complying with the datacollection requirements of section1128G of the Act. We are considering apreparation period of 90 days, since we believe that was the time periodintended by Congress based on thetimeline indicated in the statute and arerequesting comments on whether that isa sufficient amount of time. Finally, wealso seek input on specific challengesthat applicable manufacturers andapplicable GPOs may face when settingup the necessary data collection andreporting systems.We hope to finalize this rule as soonas possible during calendar year (CY)2012 and, depending on the publicationdate of the final rule, we are consideringrequiring the collection of data for partof 2012, to be reported to CMS by thestatutory date of March 31, 2013. Weseek comments on the feasibility of submitting the required information forpart of CY 2012 by March 31, 2013.
A. Transparency Reports
Section 1128G(a) of the Act outlinesthe transparency reporting requirementsand consists of two parts. The first part,section 1128G(a)(1) of the Act, outlinesthe required reports from applicablemanufacturers on payments or othertransfers of value to covered recipients.The second part, section 1128G(a)(2) of the Act, outlines the reportingrequirements for applicablemanufacturers and applicable GPOsconcerning ownership and investmentinterests of physicians, and theirimmediate family members, as well asinformation on any payments or othertransfers of value provided to suchphysician owners or investors. Whilethere is some overlap between thesesubmissions, we propose that these twotypes of information be reportedseparately to ensure that the relevantreporting obligations of applicablemanufacturers and applicable GPOs areclearly distinguished. We seekcomments on this general approach. Wewant to emphasize that compliance withthe reporting requirements of section1128G of the Act does not exemptapplicable manufacturers, applicableGPOs, covered recipients, physicianowners or investors, or anyone else fromany potential liability associated withpayments or other transfers of value, orownership or investment interests (forexample, potential liability under theFederal Anti-Kickback statute or FalseClaims Act).1. Reports on Payments and OtherTransfers of Value Under Section1128G(a)(1) of the Acta. Applicable Manufacturers(1) ManufacturersSection 1128G(a) of the Act requiresthat applicable manufacturers disclosecertain payments or other transfers of value to covered recipients. In definingapplicable manufacturer, we sought acomprehensive definition to ensure thefull transparency and completereporting envisioned by the statute.Section 1128G(e)(9) of the Act defines a‘‘manufacturer of a covered drug,device, biological, or medical supply’’as—:
Any entity which is engaged in theproduction, preparation, propagation,compounding, or conversion of a covereddrug, device, biological, or medical supply(or any entity under common ownership withsuch entity which provides assistance orsupport to such entity with respect to theproduction, preparation, propagation,compounding, conversion, marketing,promotion, sale, or distribution of a covereddrug, device, biological, or medical supply).
Section 1128G(e)(2) of the Act clarifiesthat an ‘‘applicable manufacturer’’ of acovered drug, device, biological, ormedical supply, is one which is‘‘operating in the United States, or in aterritory, possession, or commonwealthof the United States.’’Given these statutory definitions andrelevant considerations, we propose tointerpret ‘‘applicable manufacturer’’ forthe purposes of this regulation as anentity that is:
(1) Engaged in the production, preparation,propagation, compounding, or conversion of a covered drug, device, biological, or medicalsupply for sale or distribution in the UnitedStates, or in a territory, possession, orcommonwealth of the United States; or(2) Under common ownership with anentity in paragraph (1) of this definition,which provides assistance or support to suchentity with respect to the production,preparation, propagation, compounding,conversion, marketing, promotion, sale, or
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Federal Register
/Vol. 76, No. 243/Monday, December 19, 2011/Proposed Rules
distribution of a covered drug, device, biological, or medical supply for sale ordistribution in the United States, or in aterritory, possession, or commonwealth of the United States.
We recognize that there are otherdefinitions of ‘‘manufacture,’’‘‘manufacturer’’ and ‘‘manufacturing’’with which industry may be familiar(such as those in 21 CFR 207.3, 21 CFR210.3(b)(12), 21 CFR 820.3(o), and 42USC 1396r–8(k)(5)). We note that thisproposed definition, which generallytracks the statute, is somewhat morelimited than those definitions.Under this definition, manufacturersof a covered drug, device, biological, ormedical supply (under either paragraph(1) or paragraph (2) of the definition) aredeemed to be an ‘‘applicablemanufacturer’’ if their products are soldor distributed in the United States(U.S.), regardless of where the covereddrug, device, biological, or medicalsupply is actually produced or wherethe entity is actually located orincorporated. Given the global nature of these industries, we believe that anyentity manufacturing covered drugs,devices, biologicals, or medical suppliesfor sale or distribution in the U.S. (orany entity under common ownershipwhich provides assistance or support inthe production, preparation,propagation, compounding, conversion,marketing, promotion, sale, ordistribution of such items) should besubject to the requirements of section1128G of the Act. The opportunity forundue influence or inappropriaterelationships caused by payments ortransfers of value to covered recipientsis the same for manufacturers of drugs,devices, biologicals, or medical suppliessold or distributed in the United Statesregardless of where the product isactually manufactured, and we,therefore, propose to treat them thesame.We also seek to clarify that anymanufacturer that meets the definitionof applicable manufacturer by selling ordistributing in the United States at leastone covered drug, device, biological, ormedical supply is considered anapplicable manufacturer, even though itmay also manufacturer products that donot fall within that category (as definedlater in this section). We propose that allpayments or transfers of value made byan applicable manufacturer to a coveredrecipient must be reported as requiredunder section 1128G of the Actregardless of whether the particularpayment or other transfer of value isassociated with a covered drug, device, biological, or medical supply.Additionally, we seek to clarify that theproposed definition includes entitiesthat hold Food and Drug Administration(FDA) approval, licensure, or clearancefor a covered drug, device, biological, ormedical supply, even if they contractout the actual physical manufacturing of the product to another entity. Weinterpret these entities as being‘‘engaged in the production,preparation, propagation, compounding,or conversion of a covered drug, device, biological, or medical supply.’’ We seekcomment on this interpretation.As noted previously, section1128G(e)(9) of the Act states that certaincompanies which are under ‘‘commonownership’’ with an entity thatproduces, prepares, propagates,compounds, or converts a covered drug,device, biological, or medical supply arealso subject to the reportingrequirements under this provision, eventhough they themselves may not beinvolved in the ‘‘manufacturing’’process. Specifically, this applies toentities under ‘‘common ownership’’with an applicable manufacturer whichprovide assistance or support to theapplicable manufacturer with respect tothe production, preparation,propagation, compounding, conversion,marketing, promotion, sale, ordistribution of a covered drug, device, biological, or medical supply for sale ordistribution in the U.S., or in a territory,possession, or commonwealth of theU.S. We propose to define ‘‘commonownership’’ as when the sameindividual, individuals, entity, orentities, directly or indirectly, own anyportion of two or more entities. Thecommon ownership definition wouldapply to a range of corporatearrangements, including, but not limitedto, parent companies and subsidiariesand brother/sister corporations.We are also considering an alternateinterpretation that would limit thecommon ownership definition tocircumstances where the sameindividual, individuals, entity, orentities own 5 percent or more of totalownership in two or more entities. Thiswould be subject to the samerequirements as the proposed definitiondescribed previously, but would onlyapply to interests of 5 percent of more.We seek comments on our proposeddefinition of ‘‘common ownership,’’including, whether a more specificdefinition is needed and, if a minimumpercentage threshold is adopted,whether 5 percent is appropriate. Weintend to finalize the agency’s positionon this in the final rule based oncomments received.If two entities are under commonownership with one another, and bothindividually meet the definition of anapplicable manufacturer underparagraph (1) of the definition, then wepropose that the entities should reportseparately under section 1128G of theAct. For example, if company A andcompany B are both owned by companyC, and companies A, B and C all meetthe definition of applicablemanufacturer under paragraph (1), thenall three have to report separately.However, if only one company undercommon ownership meets the definitionof applicable manufacturer underparagraph (1), and the other company isrequired to report under paragraph (2) of the definition, then we propose that theaffected entities can choose whether ornot to report together. For example, if only company C meets the definition of applicable manufacturer underparagraph (1) and companies A and Bmeet the definition of applicablemanufacturer under paragraph (2), thenthe companies can decide whether toreport together. If an applicablemanufacturer under paragraph (1)reports for itself as well as for entitiesunder common ownership that arerequired to report under paragraph (2),the report should clearly name all of theentities that are included in the report.Given the various relationships betweenentities under common ownership, wepropose that if an applicablemanufacturer under paragraph (1)reports for at least one additional entityunder common ownership, theapplicable manufacturer may decidewhether to identify the payments asthose from the entity under commonownership, or whether to combine themwith their payments or other transfers of value.In addition to payments or othertransfers of value to covered recipientsmade by applicable manufacturersthemselves, applicable manufacturers(under both paragraphs (1) and (2) of thedefinition) are also required by statuteto report payments and other transfersof value provided indirectly to coveredrecipients through third parties, if theapplicable manufacturer is aware of theidentity of the covered recipient. This isaddressed in more detail in thediscussion of third party paymentsfound later in this preamble.(2) Covered Drug, Device, Biological, orMedical SupplyThe reporting requirements arelimited to applicable manufacturers of a‘‘covered drug, device, biological, ormedical supply.’’ The phrase ‘‘covereddrug, device, biological, or medicalsupply’’ is defined in section1128G(e)(5) of the Act as any drug, biological product, device, or medicalsupply for which payment is‘‘available’’ under Medicare, Medicaid,
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