CMS Eliminates CME Exclusion Under Sunshine Rule

November 4, 2014

By Jennifer D. Newberger & Alan M. Kirschenbaum

On October 31, 2014, the Centers for Medicare & Medicaid Services ("CMS") finalized changes to the regulations implementing the Affordable Care Act’s transparency reporting provisions, otherwise known as the Physician Payment Sunshine Act ("Sunshine Act").  The original Sunshine Act regulation, published on February 8, 2013 (which we summarized here), excluded from the reporting requirement payments to speakers at a certified continuing medical education ("CME") event if the event met certification or accreditation requirements and standards for continuing education established by one of the five accrediting organizations specified in the rule; the applicable manufacturer did not pay the covered recipient speaker directly; and the applicable manufacturer did not select the covered recipient speaker or provide the program provider with recommendations for speakers. 

In July 2014, CMS proposed to eliminate this exclusion on the ground that it is unnecessary because payments to CME program providers would already be excluded under the “indirect payment” rule.  An indirect payment is not reportable if the manufacturer does not know the identity of the covered recipient during the reporting year or by the end of the second quarter of the following reporting year.  42 C.F.R. § 403.904(i)(1).  In response to this proposal, industry stakeholders objected that the indirect payment rule would not exclude payments to CME organizations because the manufacturers could learn the identity of the physician speakers by looking at brochures and other informational literature. 

CMS has nevertheless proceeded to eliminate the CME exclusion, continuing to believe that it is redundant to the indirect payment rule.  The preamble explains that “payments or other transfers of value, including payments made to physician covered recipients for purposes of attending or speaking at continuing education events, which do not meet the definition of an indirect payment, as defined at § 403.902, are not reportable.” In other words, no reporting is required so long as the applicable manufacturer “does not require, instruct, direct, or otherwise cause the continuing education event provider to provide the payment or other transfer or [sic] value in whole or in part to a covered recipient,” regardless of whether the manufacturer knows or later learns the identity of the physician faculty.  See page 595. 

Thus, CMS appears to believe that the mere knowledge by an applicable manufacturer that a CME grant will be used by a program provider, in whole or in part, to subsidize physician faculty honoraria, travel expenses, registration fees, or other expenses is not sufficient to trigger Sunshine reporting, as long as the CME support agreement does not specify, and the manufacturer does not otherwise “require, instruct, direct, or otherwise cause” the funding to be used for such purposes.  In other words, CME funding provided without restriction as to the program-related expenses that the funding may be used to defray is not reportable.

CMS has also finalized two other changes to the Sunshine regulations.  The original Sunshine rule required an applicable manufacturer to report the marketed name for each covered drug or biological product related to a payment or other transfer of value, but there was no similar requirement for covered devices.  Instead, a manufacturer of a covered device could report either (1) the marketed name, or (2) the product category or therapeutic area of the covered device.  The new change will require reporting of both the marketed name on one hand and the product category or therapeutic area on the other.  CMS states this will align reporting requirements across all product categories and “enhance consumer’s [sic] use of the data.”  Id. at 597. 

The final change to the Sunshine rule pertains to reporting the form of a payment or other transfer of value.  Instead of permitting aggregate reporting of stock, stock options, and other ownership interests, the revised rule will require reporting these three forms of transfers in distinct categories.

All three changes are effective January 1, 2016.

Categories: Health Care