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Sunshine Act and Beyond: Improving Compliance

In the same vein, Applicable Manufacturers may have difficulty determining, or have incorrectly determined, whether they are eligible (or ineligible) for limited reporting based on earning less than ten percent of global gross revenue from Covered Products due to inadequate product analysis—a prevalent issue for companies with extensive and diverse portfolios. Companies with less than ten percent domestic and global gross revenue attributed to Covered Products are only required to report transfers of value specifically related to Covered Products.8Moreover, some companies that have correctly determined that they are eligible for limited reporting, and only have to report transfers related to Covered Products, struggle with developing consistent or defensible methods for distinguishing reportable transfers that are “related to a Covered Product” from those that are not. 

Further, certain complex corporate entities with several companies potentially under “common ownership” may have difficulty determining, or have incorrectly determined, whether such companies are Applicable Manufacturers and must submit required data. Companies are considered Applicable Manufacturers if they are under common ownership with another Applicable Manufacturer, and “provide assistance or support to [that Applicable Manufacturer] with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a [Covered Product].”9,10 “Assistance or support” is defined as “conduct that is necessary or integral to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a [Covered Product].”11 Importantly, CMS has published updated guidance providing examples of activities that may constitute necessary or integral assistance or support. One instance includes entities that produce active ingredients used to develop Covered Products.12 Further, an entity that leases a device to an Applicable Manufacturer that could not otherwise produce one of its products will be considered providing necessary or integral assistance or support.13 Thus, it appears that any entity under common ownership with an Applicable Manufacturer that provides materials, components or devices to the Applicable Manufacturer for the purposes of producing, promoting or distributing its products will be required to capture and report relevant transfers of value. In certain instances, parent companies may have omitted, or will omitt, identifying all companies that are directly or indirectly under “common ownership.” Further, the clarified guidance above has now appeared to substantially broaden the scope of whether an entity provides “necessary or integral assistance or support.” What may once have been an afterthought due to ambiguity may result in increased reporting responsibilities, not only involving determinations of whether or not an entity is an Applicable Manufacturer, but also whether reporting will be consolidated amongst commonly owned companies.

II. Defining What Must Be Reported
Applicable Manufacturers must identify all possible instances of reportable and non-reportable spend, and develop or improve processes for capturing required data—no easy feat, considering certain ambiguities and periodic shifts in guidance. Applicable Manufacturers are responsible for reporting transfers of value made directly to HCPs and teaching hospitals, as well as indirect transfers of value to HCPs and teaching hospitals so long as (i) the Applicable Manufacturer requires, instructs directs or otherwise causes the intermediary to provide the transfer and (ii) the Applicable Manufacturer is “aware” of the identity of the HCP recipient.14,15 In this context, CMS has published updated guidance stating that transfers of value provided indirectly by an Applicable Manufacturer’s distributor are reportable, even if the transfer is from the distributors own resources, so long as the Applicable Manufacturer instructs, directs or otherwise causes the distributor to provide the transfer.16 Additionally, indirect payments made by Applicable Manufacturers through intermediaries such as fellowshipsand specialty societies provided to HCPs may be reportable if the Applicable Manufacturer is “aware” of the HCP’s identity.17,18 Applicable Manufacturers are challenged with developing clear, standardized definitions or for activities where they are “unaware” of a HCPs identity, and otherwise preparing effective methodologies for capturing and tracking data for transfers of value through third parties. Significant issues with this requirement remain, such as how an Applicable Manufacturer will effectively and efficiently collect the required data related to indirect transactions determined to be reportable (particularly those not paid through a commercial or clinical vendor), and what potential backlash it will face from HCPs that may have not expected public disclosure of payments under such loose affiliations.

Further, Applicable Manufacturers are not required to report the loan of covered devices for the purposes of evaluation and training, including limited quantities of disposable items, so long as the items are returned or consumed within a 90-day period.19,20 CMS has stated that the 90-day exclusion period begins when the device is provided to the Covered Recipient, not when it is first used by the Covered Recipient.21 With regard to single-use or disposable products, the “loaner” exclusion applies to quantities of such items that patients would be expected to use during a 90-day period.22 Furthermore, the 90-day loan exclusion applies on a per-covered recipient basis, e.g., each loan of a covered device to separate Covered Recipients, regardless of whether they are the same Covered Device, will be separately eligible for exclusion from reporting so long as they are returned or consumed within 90 days. Additionally, CMS has provided recent updates to Open Payments, stating that the following circumstances are reportable transfers of value: (i) debt forgiveness related to a covered device owned by an HCP, and (ii) free repairs, services and/or additional training offered by Applicable Manufacturers that are not included in a respective contractual warranty.23,24 These nuances in reporting may raise operational and contractual challenges for many Applicable Manufacturers trying to improve Open Payments compliance, or who are beginning to build reporting systems, prior to the next submission deadline. For example, it appears that “loaner” devices or supplies not returned or consumed within 90 days will become a reportable transfer of value, but how would such a transaction be characterized by Open Payments’ limited “nature of payment” categories? Would this transfer be considered a gift? What value should a company allocate to this transfer? What policies or processes will the company use to facilitate the return of “loaner” equipment? What steps have Applicable Manufacturers taken in configuring loan or purchase agreements to ensure exemption or proper reporting under Open Payments, e.g., provisions regarding potential disclosure or rental charges for un-returned equipment?