The document outlines the Sunshine Act and its implications for vendor relationships in the healthcare sector, emphasizing the reporting requirements for applicable manufacturers regarding financial transactions with covered recipients. Key provisions include the definition of covered products, the disclosure of compensation details, and the penalties for non-compliance. Additionally, it addresses relevant federal fraud and abuse laws and offers guidance for navigating state regulations on vendor arrangements.

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The Sunshine Act and Other Laws
Affecting Vendor Relations
Kelly S. McIntosh
February 13, 2014
Roadmap
 Here Comes the Sun – New Transparency for
Vendor Relationshipsp
 To Whom Does the Sunshine Act Apply?
 What is the Disclosure Process?
 What are the Penalties and Consequences?
 Other Laws and Legal Considerations for Vendor
RelationsRelations
– Conflicts of Interest
– Drug Samples
– Fraud and Abuse Laws

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Preliminaries
 Presentation will be recorded and available for
download at www.hhhealthlawblog.comg
 If you have questions, please submit them using
chat line or e-mail me at
ksmcintosh@hollandhart.com.
 If you experience technical problems during the
program, please contact Luke Kelly at
lskelly@hollandhart.com
Preliminaries
 This program offers an overview of legal
considerations for vendor relations, but the
applicability to specific arrangements and
providers will vary
 This program does not establish an attorney-client
relationship
 This program does not constitute the giving of
legal advice

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History of the Sunshine Act
History of the Sunshine Act
 March 2010 – Affordable Care Act Enacted
– Section 6002 – Provisions known as “Sunshine Act”Section 6002 Provisions known as Sunshine Act
 December 19, 2011 – CMS publishes Sunshine
Act proposed rule
– 76 Fed. Reg. 78742
 February 8, 2013 – CMS publishes Sunshine Act
final rulefinal rule
– 78 Fed. Reg. 9458

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Key Terms
 Is there an Applicable Manufacturer or Applicable
GPO?
– Applicable Manufacturers are entities that produce,
prepare, propagate, compound, or controvert a covered
product, unless only for the entity’s use
 Operating in the US
 Applies to certain entities under common ownership (5% directpp p (
or indirect ownership)
 Distributors, wholesalers or repackagers that do not hold title to
Covered Products are excluded
Key Terms
 Is there an Applicable Manufacturer or Applicable
GPO?
– Applicable group purchasing organizations (GPOs) are
entities that purchase, or arrange for purchase of, a
covered product, unless only for the GPO’s use
 Operating in the US
 CMS specifically referenced physician-owned distributorsp y p y
(PODs) in this category

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Key Terms
 Is it a Covered Product?Is it a Covered Product?
– Covered drugs, devices, biologicals or medical supplies
include in effect any product that is a prescribed drug or
FDA approved or cleared device or medical supply
which is available for payment under Medicare,
Medicaid or CHIP.
Key Terms
 Is there a Covered Recipient?
– Covered Recipients include teaching hospitals andCovered Recipients include teaching hospitals and
physicians (except manufacturer employees)
 Residents are exempted
 Teaching hospital listing:
– http://www.cms.gov/Regulations-and-
Guidance/Legislation/National-Physician-Payment-Transparency-
Program/Teaching-Hospitals.html
– List organized by state and includes hospital names addressesList organized by state and includes hospital names, addresses
and taxpayer identification numbers
– Updated listing will be available approximately 90 days prior to the
start of each data collection period

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Disclosure of Compensation
 Applies to Applicable
M f t t GPOManufacturers – not GPOs
 Direct and indirect transfers of value
– Value is referred to as having “discernible economic
value on the open market”
Not the same definition used in other laws such as– Not the same definition used in other laws, such as
fraud and abuse laws
Disclosure of Compensation
 For each covered recipient, the following
information must be disclosed:
▪ Name ▪ Form of payment
▪ Address ▪ Nature of payment
▪ NPI number ▪ Covered product
▪ Specialty ▪ Eligibility for delayed publication
▪ State license number ▪ Payment to third parties
▪ Amount of transfer of value ▪ Ownership statement
▪ Date of transfer ▪ Optional contextual information

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Disclosure of Compensation
 “Nature of Payment” identifiers:
▪ Cash or cash equivalent ▪ Education
▪ In-kind items or services ▪ Research
▪ Ownership interest ▪ Charitable contribution
▪ Return on investment ▪ Royalty or license
▪ Consulting fee ▪ Ownership interest
▪ Fee for other type of service ▪ Compensation for speaking at
▪ Honoraria non-certified CME
▪ Gift ▪ Compensation for speaking at
▪ Entertainment certified CME
▪ Food and beverage ▪ Grant
▪ Travel and lodging ▪ Space rental or facility fee
Disclosure of Compensation
 No “other” category of payment identifiers –
eliminated in final rule
 Food and beverages
– The value of group meals can be divided by the
individuals actually partaking
– Buffets at large events can be disregarded

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Disclosure of Compensation
 CME
– Payments for speaking at events certified/accredited by
specified accrediting bodies do not need to be disclosedspecified accrediting bodies do not need to be disclosed
if Applicable Manufacturer does not pay the speaker
directly or select the speaker
 Research
– Required information is different
 Name of research institution or individual receiving payment
 Name of study
 Covered products subject to the study
 Amount of payment
 Principal investigator information
 clinicaltrials.gov identifier (optional)
Disclosure of Compensation
 Limitations on reporting:
– If less than 10% of total gross revenue comes from
Covered Products, only payments related to Covered
Products must be disclosed
– If the Applicable Manufacturer has separate operating
divisions that do not manufacture any Covered
Products, only payments related to divisions that do
manufacture Covered Products must be disclosed

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Disclosure of Compensation
 Exclusions from reporting:
– Indirect transfers where the identity of the Covered
Recipient is unknown to the Applicable Manufacturer
– Transfers of value of less than $10 (not to exceed an
aggregate of $100 in a year)
 Amount will increase each year based on CPI
 Items of less than $10 value provided at large-scale events do
not need to be tracked (ex. pens distributed at a conference)
– Samples and coupons for patient use
– Educational materials for patients
Disclosure of Compensation
 Exclusions from reporting:
– Short-term loans (not exceeding 90 days)
– Items or services under warranty
– Discounts
– In-kind items used for charity care
– Dividends on publicly traded stock
P t l t d l i l t l l d i i t ti– Payments related exclusively to legal or administrative
proceedings
– Transfers of value in a personal relationship

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Disclosure of Ownership
 Applicable Manufacturers and Applicable GPOs
must disclose
 Applies to physicians and their family members
– Similar to the definition of ownership or investment
interest used in the Stark Law
 The following information must be disclosed:
▪ Name ▪ Dollar amount of investment
▪ Address ▪ Current value and terms ofAddress Current value and terms of
▪ NPI number ownership interest
▪ Specialty ▪ Direct and indirect transfers of
▪ State license number value made to or on behalf of
the physician
Timing and Form of Reports
 Required to be submitted by the 90th day of each
calendar year
 Payments reported for previous calendar year
– For 2013 reporting, the period to be covered in reporting
is from August 1, 2013 to December 31, 2013
 First annual report due March 31, 2014
BUT
 Just last week, CMS released information on the
two-step process for submitting data in the 2013
program cycle

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Timing and Form of Reports
 Requires Applicable Manufacturers to register in
two separate systems
 Phase 1 – February 18, 2014 to March 31, 2014 –
Applicable Manufacturers may register in the CMS
Enterprise Portal (EIDM system) and submit
corporate profile information and aggregate 2013
payment data.
 Phase 2 - Begins in May 2014 and extends for no
fewer than 30 days - includes registration in the
Open Payments system, submission of detailed
2013 payment data, and legal attestation to the
accuracy of the data.
Timing and Form of Reports
 After the conclusion of Phase 2, by August 1,
2014, information will be available for healthcare
providers and manufacturers to review and correctproviders and manufacturers to review and correct
inaccuracies
 CMS notes that no action is needed from Covered
Recipients at this time.
 More information on Phase 1 and Phase 2 and
l t l t il blsample templates available:
– https://www.cms.gov/Regulations-and-
Guidance/Legislation/National-Physician-Payment-
Transparency-Program/Data-Submission-and-
Attestation.html

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Timing and Form of Reports
 Attestation required
– Information timely, accurate and completeInformation timely, accurate and complete
 Optional to file assumptions document
– Not publicly available even if filed
– Enforcement agencies can obtain from CMS
 Disclosure of research payments may be
postponed until 4 years from transfer or until FDApostponed until 4 years from transfer or until FDA
approval of the product, whichever is earlier
– Responsibility of Applicable Manufacturer to notify CMS
if a payment is eligible for delayed publication
Timing and Form of Reports
 After reporting, CMS notifies Covered Recipients
of information available for reviewof information available for review
– Physicians and teaching hospitals can voluntarily
register with CMS to facilitate notification
 45 day review period
 Additional 15 days to resolve disputes
 CMS makes data publicly available by September CMS makes data publicly available by September
30th each year
 First CMS report to Congress: April 1, 2015

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Timing and Form of Reports
 CMS must publish the data online, available
publicly
 Must be searchable and understandable
 Must be able to be aggregated and downloaded
 Must include any enforcement activities taken
 Will not include physician NPI numbers
Dispute Process
 Covered Recipients provide notice of dispute to
CMS
 CMS forwards the dispute to the reporting entity
 Disputes not timely resolved result in CMS’
indication that the data is the subject of a dispute
 If a dispute is resolved after the dispute period, the
initial data will be reported with the dispute notedinitial data will be reported with the dispute noted
and the correction will be published when CMS
next publishes data

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Civil Monetary Penalties
 Failure to report (without intent) = fines up to
$10,000 per instance with a cap of $150,000$ , p p $ ,
 Failure to report (with intent) = fines up to
$100,000 per instance with cap of $1,000,000
 Records must be maintained for 5 years - CMS
has the right to conduct audits
Resources
 CMS Resources:
– http://www.cms.gov/Regulations-and-
Guidance/Legislation/National-Physician-payment-
Transparency-Program/index.html
– Questions can be submitted to:
openpayments@cms.hhs.gov

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Other Laws on Vendor Relations
AKSStark
Drug
Samples
Sunshine
Act
Conflicts of
Interest
Samples
PHS Financial Conflicts of Interest
 Institutions which receive research funding fromInstitutions which receive research funding from
the Public Health Service (PHS) are subject to the
related Financial Conflicts of Interest (FCOI) rules
– Most recent final rule issued August 25, 2011 (76 Fed.
Reg. 53256)
 Require the management and disclosure of FCOI

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PHS Financial Conflicts of Interest
 Investigators must disclose “significant financial
interests” to their institutions and update within 30p
days of any new interest
 Financial interests must be disclosed regardless of
if related to PHS-funded research
 Includes:
– Amounts over $5000Amounts over $5000
– Ownership interest valued at over $5000 in publicly
traded company or any value in privately held entity
– Intellectual property rights
PHS Financial Conflicts of Interest
 Each institution must:
– Have a conflicts of interest policy and provide educationHave a conflicts of interest policy and provide education
and training to investigators
– Designate an official to review disclosures
– Determine if any significant financial interest could affect
PHS-funded research
 Website disclosure of financial interests must be
made
 Disclosures to PHS
 Both PHS FCOI and Sunshine Act may apply!

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Other Conflicts of Interest and
Clinical Trial Resources
 Conflicts of Interest Policies and Guidance
– FDA
htt // fd /R l t I f ti /G id / 12204 http://www.fda.gov/RegulatoryInformation/Guidances/ucm12204
5.htm
– National Institutes of Health
 http://www.nih.gov/about/ethics_COI.htm
 http://grants.nih.gov/grants/policy/coi/resources.htm
– Office for Human Research Protections
htt // hh / h / hi /h bj t /fi lt /f id df http://www.hhs.gov/ohrp/archive/humansubjects/finreltn/fguid.pdf
 Medicare Clinical Trial Policies
– http://www.cms.gov/Medicare/Coverage/ClinicalTrialPoli
cies/index.html?redirect=/clinicaltrialpolicies/
Drug Samples
 The sale, purchase, or trade (or offer to sell,
purchase, or trade) of prescription drug samples isp , ) p p g p
prohibited
– Under the Prescription Drug Marketing Act of 1987
(PDMA), as modified by the Prescription Drug
Amendments of 1992 (PDA) and the FDA
Modernization Act of 1997 (FDAMA)
 Criminal and civil penalties for violations

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Federal Fraud & Abuse Laws
 Stark Law
– Prohibits physicians from referring designated health
i h l h i if h h i i hservices to a health care entity if the physician has an
ownership interest in or compensation arrangement
(direct or indirect) with the entity and no exception
applies
 Strict liability civil statute
 Anti-Kickback Statute (AKS)
– Prohibits knowingly and willfully offering, soliciting,
paying or receiving remuneration in exchange for
referring or arranging for services payable by a Federal
health care program
 Intent-based criminal statute
Federal Fraud & Abuse Laws
 Arrangements to Avoid
– Benefits tied to or tracked with referrals of vendor
dproducts
– Gifting cash or cash equivalents
 Some possible exceptions to the Stark Law and
Safe Harbors under the AKS –
▪ Non-Monetary Compensation (Stark) ▪ Personal Services
▪ Medical Staff Incidental (Stark and AKS)Medical Staff Incidental (Stark and AKS)
Benefits (Stark)
– Remember that any analysis and the applicability of an
exception or safe harbor will be fact-specific based on
the parties and nature of the arrangement

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State Laws
 States may have laws that regulate vendorStates may have laws that regulate vendor
arrangements and require disclosures
 Need to determine the extent to which an
applicable state law is preempted by the Sunshine
ActAct
Consequences
 Heightened scrutiny
– Public perception and media access
– Source for government investigations
 AKS and false claims theories of liability
 Off-label promotion
– Final rule on Sunshine Act does note that “financial ties
alone do not signify an inappropriate relationship”
 Changes in ArrangementsChanges in Arrangements
– Average hourly payment to physicians for consulting
dropped from $604/hr in 2006 to $299/hr in 2011.
 Cutting Edge Key Opinion Leader Fair-Market Value and
Aggregate Spend study press release 6/14/11

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Prepare
 Create policies and processes to track vendor
arrangements
 Provide training
 Audit and evaluate overall compliance of
arrangements
 Calendar upcoming dates and time periodsCalendar upcoming dates and time periods
– Reporting for Applicable Manufacturers
– Review for Covered Recipients
Additional Resources
 OIG Compliance Resources
– Draft OIG Compliance Program Guidance for Recipients
f PHS R h A dof PHS Research Awards
 http://oig.hhs.gov/fraud/docs/complianceguidance/PHS%20Rese
arch%20Awards%20Draft%20CPG.pdf
– OIG Compliance Program Guidance for Pharmaceutical
Manufacturers
http://oig.hhs.gov/authorities/docs/03/050503FRCPGPharmac.pdf
 Roadmap for New Physicians: Avoiding Medicare
Fraud and Abuse
– http://oig.hhs.gov/compliance/physician-
education/roadmap_web_version.pdf

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Additional Holland & Hart
Resources
 Healthcare Update and Health Law Blog
– Under “Publications” at www.hollandhart.com.
– www.hhhealthlawblog.com
– E-mail me at ksmcintosh@hollandhart.com
 Future Webinars
– February 27 – Identifying and Responding to HIPAA
B hBreaches
– March 13 – Fraud and Abuse Laws: FCA, Stark, AKS
and CMP
– March 27 – Wage/Hour Laws
Additional Holland & Hart
Resources
 Past webinars covering related topics availablePast webinars covering related topics available
through the Health Law Blog:
– Stark
– Anti-Kickback Statute
– Civil Monetary Penalties laws

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Questions?
K ll S M I t hKelly S. McIntosh
Holland & Hart LLP
5441 Kietzke Lane, Second Floor
Reno, Nevada 89511
(775) 327-3004
ksmcintosh@hollandhart comksmcintosh@hollandhart.com