Corporations are at war with disclosure in many important fields. Two notable fronts have recently opened in health care:
1) Fracking processes have become highly controversial because secret chemicals may end up compromising water supplies. Pennsylvania has now limited doctors’ ability to speak about their concerns:
Under a new law, doctors in Pennsylvania can access information about chemicals used in natural gas extraction—but they won’t be able to share it with their patients. . . .Pennsylvania law states that companies must disclose the identity and amount of any chemicals used in fracking fluids to any health professional that requests that information in order to diagnosis or treat a patient that may have been exposed to a hazardous chemical. But the provision in the new bill requires those health professionals to sign a confidentiality agreement stating that they will not disclose that information to anyone else—not even the person they’re trying to treat.
Protection of property rights uber alles appears to be the guiding principle here. If only the doctors wanted to market drugs, maybe their free speech rights would trump the frackers’ trade secrecy privileges.
The Food and Drug Administration Reform Act of 2012, H.R.5651 . . . would keep potentially important health and safety information away from the public. Section 812 would, according to a letter to leaders of the House Oversight and Government Reform Committee penned by several [advocacy] groups, deny the public access to information relating to drugs obtained by the U.S. Food and Drug Administration (FDA) from any government agency — local, state, federal, or foreign — if that agency has requested that the information be kept confidential.
Filed under: Bioethics, Drugs & Medical Devices, Transparency
CMS has published proposed rules for its implementation of the Physician Payment Sunshine Act (SUNSHINE ACT or Act), which was enacted by Congress as part of the 2010 Patient Protection and Affordable Care Act. In short, the SUNSHINE ACT requires life science companies to report annually to CMS their conferral of anything of value, whether it be payment for services or a dinner, in connection with a particular product of the paying company. By requiring CMS to post the information on its website, the Act seeks to ensure that interested patients become aware of physicians’ conflicts of interest that could affect their prescription of a branded drug or choice of a specific medical device.
The SUNSHINE ACT represents another example of the transparency movement, which has had varying degrees of success in either changing the behavior of the parties subject to disclosure, and/or enabling consumers to make better decisions based upon their access to the disclosed information. It is likely that the SUNSHINE ACT will impact physicians and manufacturers’ behavior more than it will enlighten consumers about conflicts of interest. Some physicians will simply conclude that accepting certain gifts or benefits from pharmaceutical or medical device companies isn’t worth having their names on the CMS website. Some companies have already discovered that they haven’t necessarily reaped the value of the costs of gifting many physicians, or that the cost of recording certain activities simply isn’t worth the return on investment. Unquestionably, certain transactions will continue to be valuable to both physician and company, and will continue.
It is unlikely that most patients will access the information either before or after a physician visit, or know what to do with the information even if they discover that their physician has an equity interest in the knee she plans to use in next week’s surgery – does such a close relationship with the knee manufacturer signal that the physician is great, or that something nefarious is going on? The information is likely to be used by consumer watchdog groups, as well as hospital formulary committees and medical school deans interested in knowing the sources and amounts of outside income being earned by faculty. Divorce attorneys are likely to find the information useful if their client’s soon-to-be ex-spouse hasn’t reported significant pharma consulting fees as income.
CMS rulemaking is behind schedule, thereby delaying the SUNSHINE ACT’s implementation. It is likely, however, that the ultimate rules will still require that 2012 data be submitted, even if not by the deadline originally contemplated by Congress.
The statute requires manufacturers of drugs, devices, biological or medical supplies covered by Medicare, Medicaid or the Children’s Health Insurance Program (CHIP) (“applicable manufacturers”) to report annually to HHS payments or transfers of value to physicians and teaching hospitals (“covered recipients”). Failure to comply will result in Civil Monetary Penalties. HHS, in turn, must publish this information on a public web site which is searchable, downloadable and able to be aggregated. Compliance with the SUNSHINE ACT’s reporting requirements does not exempt applicable manufacturers from application of fraud, waste and abuse laws.
The proposed rule merges the SUNSHINE ACT definition of “manufacturer of a covered drug, device, biological, or medical supply” with the statutory section clarifying that the entity covered by the SUNSHINE ACT must be “operating in the United States, or in a territory, possession, or commonwealth of the United States” to define applicable manufacturer as one
(1) Engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply for sale or distribution in the United States, or in a territory, possession, or commonwealth of the United States; or
(2) Under common ownership with an entity in paragraph (1) of this definition, which provides assistance or support to such entity with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological, or medical supply for the sale or distribution in the United States, or in a territory, possession, or commonwealth of the United States.
The operative activity that invokes statutory coverage, then, is sale of a product in the United States, as opposed to where the product is produced, or where the entity is located or incorporated. Pursuant to the rationale that risks inhere in conflicts of interest irrespective of where the manufacturer is located if the product is sold in the United States, any entity under common ownership with the manufacturer that is involved in the production, distribution or sale of at least one covered product in the United States must report all payments and conferral of value upon covered recipients. Further, as proposed, the product sponsor (i.e., the entity that obtained FDA approval) is subject to the reporting requirement, even if the sponsor is not involved in the manufacture of the covered product. CMS is considering alternative interpretations of the common ownership concept.
Covered Drug, Device, Biological, or Medical Supply (“covered product”)
The SUNSHINE ACT focuses upon those products for which Medicare, Medicaid and CHIP pay. This is relatively straightforward in many contexts, but CMS seeks to ensure that it captures situations where such products are part of a composite rate payment, such as the inpatient or outpatient hospital reimbursement, or the end-stage renal disease prospective payment system. As such, CMS proposes to define “covered drug, device, biological, or medical supply” as:
Any drug, device, biological, or medical supply for which payment is available under Title XVIII of the Act or under a State plan under title XIX or XXI (or a waiver of such plan), either separately, as part of a fee schedule payment, or as part of a composite payment rate (for example, the hospital inpatient prospective payment system or the hospital outpatient prospective payment system). With respect to a drug or biological, this definition is limited to those drug and biological products that, by law, require a prescription to be dispensed. With respect to a device or medical supply, this definition is limited to those devices (including medical supplies) that, by law, require premarket approval by or premarket notification to the Food and Drug Administration.
CMS seeks comments on its plan to exclude from the scope of regulation those manufacturers who produce and sell only over the counter (OTC) products. More specifically, this exemption would not extend to a manufacturer who sells even one prescription product who is otherwise subject to the reporting requirements of the SUNSHINE ACT. Similarly, CMS seeks to interpret the SUNSHINE ACT to cover only those medical devices that require premarket approval, on the theory that this is the segment of the market most likely to have extensive provider relationships. If a device manufacturer produces a single product that requires pre-market approval, it would have to report all payments and conferrals of value to covered recipients.
The SUNSHINE ACT defines “covered recipients” as (1) a physician, other than a physician who is an employee of an applicable manufacturer; or (2) a teaching hospital. The term physician includes both doctors of medicine and osteopathy as well as podiatrists, optometrists and licensed chiropractors. CMS interprets the statute to include within its scope those who act on behalf of covered recipients. Teaching hospital is not defined by the statute; CMS seeks comments on its proposal to identify such entities by virtue of their receipt of Medicare graduate medical education funds. CMS will publish this list annually on its website for manufacturers’ reference.
CMS plans to utilize the National Plan & Provider Enumeration System, which it maintains on its website, to collect the data regarding covered recipients required by the SUNSHINE ACT: covered recipient’s name and business address, and, for physicians, the National Provider Identifier and specialty.
Payments or Other Transfers of Value
The report must also include the date, form (i.e., cash, stock, ownership interest), nature (i.e., education, research, consulting fees, food) and amount of payment, and the market name of the product associated with the payment. CMS continues to consider how to handle payments made to a single covered recipient related to multiple products. CMS seeks to generate data in a form most easily understood by consumers.
The statutory definition requires such conferrals to be reported irrespective of whether they were requested by the physician or hospital and includes those made by third parties as long as the applicable manufacturer knows the identity of the covered recipient. CMS proposes that payments made through a group practice be reported under the specific recipient physician’s name. If a physician requests the conferral to be directed to another physician or entity, the manufacturer should report the conferral under the requesting physician’s name as well as the name of the actual recipient.
Charitable contributions by an applicable manufacturer to, at the request of, or on behalf of a covered recipient are reportable.
The SUNSHINE ACT excludes from its reporting requirement the following payments:
- Transfers of value less than $10, unless the aggregated amount exceeds $100 in a calendar year
- Product samples not intended to be sold that are intended for patient use
- Educational materials that directly benefit patients or are intended for patient use
- The loan of a covered device for a period not to exceed 90 days, to permit evaluation
- Items or services provided under a contractual warranty
- A transfer of value or payment to a covered recipient when that person is receiving the conferral in his/her capacity as a patient
- Discounts, including rebates
- In-kind items used for the provision of charity care
- A dividend or profit distribution from ownership or investment interest in a publicly traded security or mutual fund
- Self-insurance payments to covered employees by an applicable manufacturer
- Non-medical services
- Transfers of value made by third parties where the applicable manufacturer is unaware of the identity of the covered individual
CMS will be moving rapidly to respond to comments and finalize these rules, which will likely involve changes from the discussion here. State laws that pre-date the Act are pre-empted to the extent that they require reporting of the same information, which leaves them the discretion to retain those reporting requirements that are not redundant. States seeking to impose as much of a burden on manufacturers as possible are likely to retain their individualized reporting requirements, others may find the costs not worth the benefits now that the feds have finally stepped in.
 Section 1128G(e)(9).
 Subsection (e)(2) further clarifies that the entity covered by the SUNSHINE ACT must be “operating in the United States, or in a territory, possession, or commonwealth of the United States.”
Filed under: Hospital Finances, Insurance Companies, Transparency
Can a market work when buyers are kept in the dark about the prices they’ll pay? That’s an increasingly urgent question for fans of consumer directed health care. In vogue during the administration of Bush fils, CDHC is reemerging as Obamacare’s opponents seek a standard to rally around (other than “laissez mourir“). In theory, consumers could force doctors and hospitals to compete by shopping around for services. But when the rubber hits the road, informed consumption is easier said than done, as Josh Barro describes:
Recently, my employer switched to a high-deductible health insurance plan, which means I’m paying at the margin for most of my health care. As a result, I have become more aware of the true cost of the care I receive—and more aware of how difficult it is to figure out that cost. . . . if you ask doctors how much a service costs, they tend not to know. I once had an argument with my doctor, who did not want to give me a blood test for fear that my insurer would deny the claim for the expensive test. I later found out that this test costs all of $9.48 at my insurer’s negotiated rates, despite a list price of $169. When I got orthotics, my podiatrist told me they would cost nearly $600. But that was the list price; the actual insured price was less than $250. . . .
It doesn’t have to be this way. We could legally obligate hospitals and medical practices to disclose their full price lists—both the inflated list prices and the rates negotiated with each insurer that the practice accepts.
A commenter on Barro’s blog retorts:
I’m a little surprised to see a blogger at the [National Review Online] suggest that the government “require” price disclosure from private market participants. This goes well beyond the market interference that some other odious “mandates” require. Why don’t we mandate that everyone disclose exactly what they pay each employee? . . . If you have an HSA or High-deductible policy, I would suggest it’s incumbent on the insurance provider to help you figure it out. If consumers want it enough the system should respond, right? Why not switch to an HDP that is more transparent?
The problem, of course, is that lots of parties have to agree to provide transparency, and there is a great deal of inertia. If all the other insurers aren’t transparent, there’s little reason for one of them to try to distinguish itself if it already has a steady customer base. And when it stirs itself to do so, it will find a wall of resistance from providers, who say “why should we give all this information to you—no one else is demanding it?” (Moreover, the “prices” don’t really exist except on paper on a “chargemaster,” and they’re practically meaningless (except as opportunities to gouge the unlucky). The real price is the negotiated price, and that’s generated out of iterative interactions.) Moreover, many interventions involve multiple providers, as a reader of Andrew Sullivan’s blog explains:
A Well Placed Question by Professor Mirkay: “Should Medical-Related Charities Increase Disclosure of Their Donors?”
Filed under: 501(c)(3), Health Reform, Transparency
We’ve written a great deal here at HRW about the need for transparency in industry/profession interactions and the elimination of conflicts of interest–the Center for Health & Pharmaceutical Law & Policy here at Seton Hall Law has, in fact, over the course of the last two years, issued two White Papers on the subject–with another on the way. In the last, “Conflicts of Interest in Clinical Trial Recruitment & Enrollment: A Call for Increased Oversight,” the Center proposed legal and policy changes to address conflicts of interest in the relationships between industry and doctors that can create unwarranted risks to trial participants and to the scientific integrity of research. In the Paper prior, ”Drug and Device Promotion: Charting a Course for Policy Reform,” The Center recommends: (1) making payments by drug and device companies to doctors transparent, with public disclosure by industry and physicians of their financial relationships; (2) adopting federal legislation to ban gifts, meals and other benefits provided to doctors as part of the current marketing model; (3) setting new policies to give FDA the authority to require studies of safety and efficacy of drugs and devices used off-label; and (4) undertaking a fundamental change in funding for continuing medical education to end industry support.
But over at Nonprofit Law Prof Blog, Professor Nicholas A. Mirkay of Widener University School of Law, has a post–and an additional question–well worth considering:
Professor Mirkay points to a recent Chronicle of Philanthropy article which raises the issue as the National Alliance of Mental Illness (NAMI) has begun disclosing the names of corps and foundations who (does Citizens United make that “who” correct? Never mind appropriate.) donate more than $5,000. NAMI is said to have done so on the heels of an investigation by Senator Chuck Grassley into their financial relationship with the pharmaceutical industry. Mirkay writes:
NAMI’s actions have given Grassley further impetus to force 33 other nonprofit medical associations to follow NAMI’s lead. In a related article, the Chronicle reports that Grassley’s inquiry into these other groups represents a “broader effort by the senator and others to expose and curtail corporate influence on the medical field.” Grassley commented that “[t]hese organizations have a lot of influence over public policy, and people rely on their leadership. There’s a strong case for disclosure and the accountability that results.”
Professor Mirkay also writes
In December 2009, Grassley sent a letter to 33 such nonprofit associations requesting information on the amount of funds received from pharmaceutical, medical-device and insurance companies from 2006 to 2009, the identity of the donors and how their money was spent by the medical group, and additional information on the outside income earned by the groups’ top executives and board members.
The (partial) results of those queries are not particularly heartening, but are certainly worth considering. Mirkay writes:
The Chronicle acquired more than half of the solicited groups’ responses to Grassley’s letter, finding that such groups receive aggregately more than $100 million annually from medical-related companies via “donations, advertising revenues, exhibit fees, corporate memberships, and support for continuing medical education.” For some groups, this can represent as much as 78% of their revenue, while for others it only represents a small percentage of their total receipts.
Despite the longings of Elvis Costello, it’s hard to bite the hand that feeds you–and 78% of revenue pretty much constitutes (in)visible means of support. In pushing further with our (or more accurately, the Supreme Court’s) Citizens United “who” conceit, one might think 78% sufficient in some sense to constitute dependent status under the tax code–at least for purposes of context. Having said that, in addition to not biting, it’s not hard to imagine the dependent regularly fed doing that which it may to help assure the continued regularity of that feeding. Especially if the feedings are invisible.
It should also be noted that Mirkay rightly points out that “This effort is further evidence of Grassley’s commitment to increased transparency of tax-exempt nonprofits.” He’s right. And being that Senator Grassley follows HRW on Twitter, and as I have at times been critical of some of his positions in the past regarding other issues, it’s worth noting that the Senator should be roundly applauded for his efforts.
[And if you haven't been over to the Nonprofit Law Prof Blog, you should. It's in our blog roll for good reason-- their work is informative, brief and well written.]
Shine On: Lessons for Disclosure of Industry Payments to Physicians from New Empirical Research on Sarbanes-Oxley’s Conflict of Interest Disclosure Requirement
In Placebo Ethics: A Study in Securities Disclosure Arbitrage, an interesting (and very readable) article published earlier this year in the Virginia Law Review, Usha Rodrigues and Mike Stegemoller present the results of their empirical research into Section 406 of the Sarbanes-Oxley Act of 2002, which “requires companies to disclose their codes of ethics (or explain why they do not have them), and then to disclose any waivers from that code granted to top corporate officers.” Briefly, Rodrigues and Stegemoller found that “at least for related-party transactions, firms regularly engage in a kind of ‘disclosure arbitrage,’ neglecting to disclose ethics waivers at the time when transactions occur (in violation of Section 406 of Sarbanes-Oxley),” but complying with a regulation requiring disclosure of such transactions in their year-end proxy statements. Rodrigues and Stegemoller’s observations about Section 406 have relevance beyond securities law including (and of particular interest to readers of this blog) to recent efforts to regulate conflicts of interest in medicine through disclosure of relationships between physicians and the pharmaceutical and medical device industries.
For several years, a small number of states have required drug and device companies to report their relationships with physicians practicing in those states. Section 6002 of the Patient Protection and Affordable Care Act takes it to the next level, requiring “drug, device, biological, or medical supply” companies to report all of the payments they make to physicians and teaching hospitals in all of the 50 states. The Secretary of Health and Human Services is required to make the payment information public “through an Internet website,” in a form that is clear, understandable, and searchable, and in a format that is easily aggregated and downloaded. While drug and device companies do not need to submit their first reports under PPACA until March 31, 2013, those reports are to include all payments made to physicians and teaching hospitals in 2012. As a result, drug and device companies are hard at work right now putting systems in place to accomplish the information gathering and organizing that nationwide reporting will require.
In a number of important ways, the disclosure regime established by PPACA comports with Rodrigues and Stegemoller’s findings and recommendations. First, having found that disclosure via company websites (as is allowed under Section 406 of Sarbanes-Oxley) has a number of downsides, they recommend that disclosure be made through EDGAR, the SEC’s consolidated, easy-to-use, indefinitely accessible database. As Duff Wilson reports here, several companies have begun disclosing the payments they make to physicians on their own websites and downsides similar to those pointed out by Rodrigues and Stegemoller have been noted. For one, a patient interested in learning more about a given doctor’s relationships with industry would have to search each company’s website individually and then compile the results. The companies have not made this easy to do; most use formats that make it very difficult to aggregate or analyze the data they report. PPACA’s HHS-run website will solve these problems.
Relatedly, Rodrigues and Stegemoller found that, given the chance, companies will choose to bury “unsavory related-party transactions” “in the rubble of sundry disclosures.” This pitfall, too, should be avoided under PPACA’s disclosure regime. (If anything, the statute is too lean-and-mean, providing that payments be labeled with bare descriptors like “consulting fees” and “gift.”)
Finally, Rodrigues and Stegemoller suggest that one of the problems with Section 406 of Sarbanes-Oxley is that it sets forth a “soft” disclosure requirement; a company is permitted to determine for itself what its code of ethics permits or does not permit and, a fortiori, under what circumstances a (disclosable) waiver of that code will be required. Predictably, this leads to “companies evad[ing] illegality by watering down their codes to such a degree that they no longer forbid the very Enron-style conflicts of interest that led to the adoption of Section 406.” Section 6602 of PPACA, by contrast, sets forth a “hard” disclosure requirement. Companies have to disclose all payments, not just those that they have determined create a conflict of interest.
There is one concern raised by Rodrigues and Stegemoller with regard to Section 406 of Sarbanes-Oxley that may apply to Section 6602 of PPACA — the problem of enforcement (or lack thereof). They note that “the basic consequence of underenforcement is the imposition of disclosure requirements on paper that are ignored in real life.” Overlapping disclosure requirements (such as those that Rodrigues and Stegemoller exploited to conduct their research) are one way to determine whether required disclosures are made. With regard to physician payments, a valuable cross check would be provided by the draft Public Health Service conflict regulations’ requirement that any significant financial interest that (1) is still held by a principal investigator or senior/key person, (2) is related to government-funded research, and (3) is a financial conflict of interest must be disclosed to the public via the world wide web; the disclosures that physician-investigators must make to medical journals will also serve this function.