Maintaining a strong and effective working relationship between the pharmaceutical industry and healthcare professionals (HCPs) is essential to driving medical innovations and improvements in patient care. Financial relationships between physicians and pharmaceutical manufacturing has always been an intrinsic part of drug advancement. To develop new medicines that improve health and save lives, pharmaceutical companies need to collaborate with outside experts, including researchers who support the scientific development of new molecules and physicians who understand how they will be used in clinical practice.

When the US Congress passed the Affordable Care Act in 2010, they added The Physician Payments Sunshine Act to make financial relationships more transparent between pharmaceutical manufacturers and physicians. The goal was to help patients in their choice of healthcare professionals and in their treatment decisions. The Act was also meant to discourage inappropriate financial relationships from influencing doctors’ prescribing habits, as well as to contain healthcare costs.

While the Sunshine Act was passed in 2010, the regulations did not come into effect until 2013 when data collection began, with reports being submitted to the CMS (The Centers for Medicare & Medicaid Services). In September 2014, the first data were publicly released.

Leading up to the Act, certain states were already working to address the physician-manufacturer relationship, by developing their own codes of ethics and regulations concerning monies being paid to physicians. This ultimately let to the Sunshine Act.

What Is the Sunshine Act?

The Sunshine Act was designed to shed light on the financial relationships between physicians, teaching hospitals and “applicable manufacturers of drugs, devices, biologicals, or medical supplies”.¹ The CMS fulfills the mandate of the law via the Open Payments Program, which collects and publishes annual data from manufacturers about payments made to physicians and teaching hospitals for things like consulting, honoraria, travel, education, research, as well as other transfers of value.

Read the complete Act and its accompanying rules and regulations.

The Sunshine Act requires annual reporting from manufacturers covered under Medicare, Medicaid or the Children’s Health Insurance Program (CHIP). Not only does the act require manufacturers to report payments made to physicians and teaching hospitals it also requires “applicable manufacturers and applicable group purchasing organizations (GPOs)” to report on ownership or investment interests held by physicians or their immediate family members in such organizations. (2)

Once manufacturers and GPOs submit their annual payment information, physicians and teaching hospitals have 45 days to review their Open Payments data and dispute any errors. This 45-day period is followed by a 15-day industry correction period. If physicians or teaching hospitals dispute reported information, those entries are still published on the CMS’ Open Payments Website as “disputed” until they are resolved.

What Must Be Reported?

The Sunshine Act requires that applicable manufacturers report payments such as consulting fees, honoraria, gifts, food, entertainment, travel, education, research, charitable contributions, royalties, licenses, grants, speaker payments, ownership or investment interests and any other transfers of value. Only transactions of $10 or more (with some exceptions) must be reported, unless the total annual value provided to a covered recipient exceeds $100.

How Can Manufacturers Mitigate Risk?

Failure to report and errors in reporting can lead to civil monetary penalties and harm a manufacturer’s reputation. The penalties for failing to pay in a timely manner are “not less than $1,000, but not more than $10,000, for each payment or other transfer of value,” to a maximum of $150,000 annually. For knowingly failing to report, the penalties are even steeper, “$10,000, but not more than $100,000, for each payment or other transfer of value,” to a maximum of $1,000,000 for each annual submission.¹

Several states also have their own laws that require financial relationship reporting, including California, Nevada, Minnesota, Louisiana, Vermont, Massachusetts, Connecticut, West Virginia and the District of Columbia. Some states only require reporting from pharmaceutical manufacturers, exempting medical device manufacturers. To avoid fines and mitigate risk, manufacturers should develop policies and procedures to comply with state and federal laws, and self-audit for compliance. International manufacturers must also remain apprised of the laws in other countries.

In Europe, for example, The European Federation of Pharmaceutical Industries and Associations (EFPIA) has its own Disclosure Code, by which all members agree to disclose payments and other transfers of value to healthcare professionals and healthcare organizations.

In Canada, ten pharmaceutical companies have agreed to voluntarily divulge aggregate amounts of money given to physicians and healthcare organizations each year. This initiative, endorsed by Innovative Medicines Canada (IMC), a national pharmaceutical organization, commences in 2017. Reporting will encompass overall payments, but will not include figures for individual physicians. Russell Williams, President of IMC, commented, "Society is moving towards this movement of disclosure. We think this is a helpful offering to help show the value of these relationships between our industry and health care professionals."<

What Are the Numbers?

After a slow start amid growing pains in 2013, the total US dollar value of reported payments grew from $3.91 billion in 2013 to $7.52 billion in 2015,³ a 92% increase. In 2015, the US held over 40% of the global pharmaceutical market, which was valued at around $413 billion.4 The over $7.5 billion in financial relationships in 2015 amounted to less than 2% of pharmaceutical sales that year.