Physician Payments Sunshine Act Final Rule

June 3, 2014


The final rule provided definitions to clarify what kind of entity may be categorised as an “applicable manufacturer”. An “applicable manufacturer” under the rule includes any entity operating in the United States that is involved in the manufacturing or distribution of covered products. This means entities that produce or prepare drugs, devices, biologics and/or medical supplies for which reimbursement is available under Medicare, Medicaid or the Children’s Health Insurance Program. In the case of a drug or biological, a prescription must be dispensed for the product to be covered; in the case of a device or a medical supply that is a device, premarket approval by or notification to the Food and Drug Administration (FDA) is required.

Foreign entities that may contribute to the manufacturing of a covered product but do not have a business presence in the United States, as well as wholesalers and distributors that do not hold the title of a covered product, are not subject to the reporting requirements of the provision.

Those that constitute a “covered recipient” of the PPSA include physicians defined under the United States Social Security Act other than those that are employed by an “applicable manufacturer” or a teaching hospital. This includes physicians that do not see patients but are nevertheless licensed to practice in any state.


The final rule provides for the exemption of a number of items from the reporting requirements. For example, gifts or payments that are of a value of less than US$10 will not need to be reported unless the annual aggregate amount given to the covered recipient exceeds US$100.

Another example of something that does not need to be reported is compensation paid to speakers in accredited continuing medical education (CME) programmes, as long as three conditions were met:

  • the event the speaker is speaking at meets the standards of one of five recognised organisations
  • the speaker has not been directly paid by the applicable manufacturer
  • the applicable manufacturer has not selected the speaker.


The civil monetary penalties for failing to report and knowingly failing to report are aggregated separately, with the latter having a much higher maximum potential fine of US$1 million. It is confirmed in the final rule that a signed attestation from a CEO, CFO or CCO, certifying the timeliness, accuracy and completeness of data to the best of the signer’s knowledge and belief, must be submitted by each applicable manufacturer and group purchasing organisation.

The final rule also lists a number of factors that are considered when determining the amount of civil monetary penalties, including:

  • the duration of the failure to report
  • the amount in question
  • the level of culpability
  • the nature and amount of information reported in error
  • the degree of diligence exercised in correcting the error.

This means that companies should develop internal compliance systems to keep track of data collected and demonstrate good faith intentions to accurately report and minimise the possibility of errors. A well implemented internal declaration system can also help reduce the time of any failures to report. It is therefore important for companies to implement a sound internal system so as to reduce any potential penalties that may be accidentally incurred.

What does all this mean?

Some covered entities have projected positive feedback about the release of the final rule and have shown appreciation to the CMS for providing them with adequate time to prepare for compliance with the provision. However, there are also opinions that question the efficacy of the provision in promoting transparency and the usefulness of the implications that can be drawn from the data collected. Some commentators have argued that the data will not be detailed enough to give a good representation of the purposes of the payments or transfers of value to a covered recipient. Regardless, it is clear that companies who come within the ambit of the legislation must make a concerted effort to step up their coverage in addressing these requirements.

How technology tools can help

Keeping accurate records of all of payments can be a daunting prospect for many companies, particularly with large operations, vast geographical coverage and a high number of employees. It is therefore paramount that organisations give serious consideration to the implementation of tools which can facilitate an accurate reporting mechanism. Technology is a powerful tool for implementing, tracking and maintaining a global policy centred on monitoring payments to physicians as mandated by the new rules. Used effectively, technology can:

  • automate the gift approval process based on an organisation’s policies
  • flag any potential breaches of a policy for further investigation
  • track all payments in a secure system with a full audit trail for demonstrable compliance
  • save money and time on internal and external investigations and protect carefully crafted reputations.


Over the coming months, some questions which organisations affected by this legislation should be considering include:

  • What are the questions that should be asked when a completing a request for, or declaration of, a payment?
  • How many levels of approval and review will there be? Should certain requests be routed immediately to certain people? Can all requests be dealt with sequentially?
  • What is the expected volume and frequency of payments which might come within the ambit of the rules?
  • If implementing a technology platform to assist in the monitoring process, how do you want the users to be managed? Do you want different levels of users that can see and do different things within the technology?
  • Have you communicated the change and supported a changeover period, or thought about a pilot in certain regions?
  • Will there need to be integration with an existing expense claim process? Will someone on the expense approval system need to upload an approval from the technology?
  • How will your finance department or auditors conduct spot checks of the approvals?
  • How do you want to handle the situation where an approver is on leave or vacation? Can a delegate step in? If so, how?
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