Physician Payment Sunshine Act

The Physician Payment Sunshine Act (PPSA) was not established to replace state laws, but to build on them and remove redundancies. The PPSA requires “applicable manufacturers,” defined as “a manufacturer of a covered drug, device, biological, or medical supply,” to disclose payments and additional transfers of value to physicians or teaching hospitals. The Act defines “physician” as a doctor of medicine, a podiatrist, a dentist, a chiropractor or an optometrist.

In addition to disclosing all payments and transfers of value to physicians, the PPSA also requires that manufacturers report aggregate marketing expenses by state. Since several states and the District of Columbia have established their own laws related to disclosure of payments/gifts to physicians, the PPSA includes a preemption clause that overrules state laws that require disclosure of the same types of payments, or transfers of value. Aside from this, nearly all existing state regulations are kept intact. As a result, however, manufacturers may be required to report payments to the U.S. Department of Health and Human Services as well as state health care authorities.

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In addition to the gift ban laws discussed in our last series post, certain states require drug companies to adopt general compliance programs. Both Connecticut and California require drug companies to adopt such programs in accordance with the Office of Inspector General’s “Compliance Program Guidance for Pharmaceutical Manufacturers.” There are several elements in the guidance for manufacturers to consider when developing a compliance program, including:

• Written policies;
• Training program;
• Designation of a compliance officer and other appropriate bodies;
• Line of communication between all employees and compliance officer;
• Risk evaluation to monitor compliance;
• Policies for investigating noncompliance; and
• Development of policies to deal with employees and entities excluded from participation in federal healthcare programs.

This legal requirement is generally not burdensome for manufacturers thanks to the autonomous nature of the laws and the broad language of the guidance.
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In the first part of our Physician Payment Sunshine Act blog series, the experienced pharmaceutical litigation lawyers at Robinson Calcagnie Robinson Shapiro Davis, Inc. discussed existing disclosure laws of several jurisdictions. The disclosure of high-cost gifts was one of the stipulations of these laws, but there are also states which have established laws banning certain gifts from medical device and pharmaceutical manufacturers.

Vermont, Minnesota and Massachusetts outlawed certain gifts outright while other states, such as Nevada, Connecticut and California, and the District of Columbia, require device and drug companies to comply with the “Code on Interactions with Health Care Professionals,” written in by the Pharmaceutical Research and Manufacturers of America (PhRMA). In Colorado, certain gifts were banned for physicians affiliated with state university hospitals.

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The Patient Protection and Affordable Care Act of 2010 includes, among its provisions, the Physician Payment Sunshine Act (PPSA), which generally requires that pharmaceutical companies disclose payments to physicians for the marketing of their products. It is the first Congressional effort in the regulation of disclosure-related pharmaceutical marketing. The PPSA took effect in January 2012, but, as a federal law, does have an effect on any existing state regulations of drug marketing practices.

In this five-part blog series, we will identify particular state regulations in place before the Sunshine Act and then discuss the ultimate effect the federal law has on these state regulations.

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For years, the pharmaceutical industry has targeted physicians and teaching hospitals to help them market their products. Drug companies provide free samples of their product for physician’s to use and offer lucrative opportunities for those who promote their drug, including gifts, dining and entertainment, lecturing opportunities in resort destinations and other forms of payment. This relationship helps the pharmaceutical company and the physician but not necessarily the patient. A physician who is being paid to promote a product may not be objective when determining the most effective medication for a patient.

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