Life sciences companies that proactively communicate clear criteria for allocations and the management of reporting of various non-contrac¬tual expenses, as in the example of attendees who eat and attendees who choose not to eat at a dinner program, will be at a distinct advan¬tage in refining internal reporting mechanisms once the Final Rule is published

1. “I only had a salad and you are reporting $125.00”
– CMS Sunshine Act Proposed Rule Brings Urgency
to Managing Physician Expectations for Allocation
Decisions that Minimize Disputes
One regulatory issue is top of mind for life sciences and biopharmaceutical companies: the Phy- CONTACTS »
sician Payments Sunshine Act (PPSA) provisions included in the Patient Protection and Afford-
Kevin Cornish
able Care Act (Section 6002) which became law in 2010. The provisions, which require drug and
Practice Leader
medical device manufacturers to publicly report an aggregate of $100 or more in annual gifts and
Healthcare Disputes,
payments to each physician and teaching hospital, involve four important deadlines:
Compliance and Investigations
1. The 12/14/11 announcement of a Proposed Rule by the Centers for Medicare and 602.528.8090
Medicaid Services (CMS) – a release more than two months behind schedule which, when kevin.cornish@navigant.com
combined with a comment period to 2/17/12 for developing a Final Rule, will delay other
implementation dates. Saul B. Helman, M.D.
Market Segment Leader
2. The recording of all applicable transfers of value scheduled to begin 1/1/12, now delayed until
Life Sciences Disputes,
the Final Rule is determined.
Compliance and Investigations
3. The reporting of all applicable 2012 transfers of value scheduled to begin by March 31, 2013. 317.294.1228
4. The public posting by the Secretary of the Department of Health and Human Services of the saul.helman@navigant.com
2012 transfer amounts in a searchable on-line database scheduled to begin by 9/30/13.
Jack T. Tanselle
Within the Proposed Rule, there is a 45-day review period whereby covered recipients may 312.583.2119
bring to the attention of CMS any payments allocated to them with which they doesn’t agree. jack.tanselle@navigant.com
Assuming such a review period remains in the Final Rule, this should prove to be a worthwhile
step in the overall process for CMS in implementing the Sunshine Act. However, the existence of www.navigant.com
final regulations and a review period should not give manufacturers so much comfort as to not
continue to plan on when and how to communicate directly to physicians about the underlying
rationale for deciding the nature and valuation of reported transfers of value. Such relationship
management will have a significant impact on the volume of disputes physicians will raise with
manufacturers about such spending before, during and after the review period.
1 | LIFE SCIENCES D e cember 2011

2. Certain examples of transfers of value, such as consulting fees, travel pany determines the methodology to employ when having to allocate
expenses, honoraria, royalties and grants are obvious items for inclu- value, as in the example of meals, and then communicates the param-
sion, and are generally clearly defined in contracts or invoices as far as eters and methodology proactively with physicians. Key considerations
value is concerned. However, the CMS Proposed Rule makes it clear should be part of the communication process, including:
that other transfers of value, such as the value of food served to
»» The structure of technology processes and systems to collect,
physicians at a company-sponsored dinner program, should be part of
aggregate and report data, which most companies have been
the total event cost allocated to each attending physician, whether they
investing in for several years in preparation for the Sunshine Act.
ate or not. For example, if the full menu emphasized expensive items,
»» The modification of consulting agreements and procedures related
the attendee who ate only a salad, or who did not eat at all, could see
to non-consulting activities (e.g., sign-in sheets with explanation
the meal valued well in excess of the $10 per item reporting
of allocation at meals) to state specifically the parameters and
threshold due to cost averaging and allocation. This and other signifi-
methodology of value transfers to be reported.
cant changes make it even more imperative for companies to commu-
»» The development of communication mechanisms to
nicate directly with physicians in anticipation of events where
meal allocation will take place, in order to make sure the allocation ›› Mitigate disputes through information sharing even prior to the
requirements are understood. 45-day review period proposed by CMS
›› Resolve fee reporting disputes during and after the proposed
Disputes will arise between manufacturers and physicians about value
45-day review period.
posted online. However they can be mitigated through well-established
»» The processes involved for restating to CMS and the physician
valuation parameters that are put in place before valuation benchmarks
when calculations made by the manufacturer are not accurate.
(which each company must determine) are set. The dynamic involved
can be described as relationship management, in which each com- Life sciences companies that proactively communicate clear criteria for
allocations and the management of reporting of various non-contrac-
tual expenses, as in the example of attendees who eat and attendees
who choose not to eat at a dinner program, will be at a distinct advan-
tage in refining internal reporting mechanisms once the Final Rule is
published. This should minimize interpretation disputes over what is re-
ported once the process is underway. Concerns about getting the valu-
ation data right will be as important as ensuring that physicians and life
sciences companies are on the same page about the definition of that
data. Companies need to clarify their parameters now, and be ready
to communicate directly with covered recipients once the Final Rule is
published, not when questions are being asked during the first review
period sometime in 2013.
© 2011 Navigant Consulting, Inc. All rights reserved. Navigant Consulting is not a certified public accounting firm and does not provide audit, attest, or public accounting services.
See www.navigant.com/licensing for a complete listing of private investigator licenses.
2 | LIFE SCIENCES D e cember 2011