Sponsors Cope with New Sunshine Act Rules

As part of the campaign to promote transparency in pharmaceutical industry relationships with health professionals, recently enacted health reform legislation requires drug and medical product companies to report to the federal government fees paid to physicians for conducting clinical trials. The Physician Payments Sunshine Act, which was included in the Affordable Care Act (ACA) enacted in March 2010, establishes a process for publicly disclosing industry payments to physicians and teaching hospitals for research activities, as well as marketing. Sunshine advocates believe that pharma companies may influence prescriber behavior by engaging physicians as clinical investigators, consultants, and advisors—in addition to commercial encounters.

Jill Wechsler

The Sunshine Act specifically requires "applicable manufacturers" to report "a payment or other transfer of value" to a "covered recipient." Data submission includes recipient's name, address, medical specialty, amount received, date of payment, type of payment (cash, stock, items, or services), and if the payment is related to a specific drug or medical product. Anything worth more than $10, or outlays that total $100 a year, have to be reported, and that includes consulting fees, honoraria, payment for research, gifts, entertainment, travel, education, charitable contributions, royalties, licenses, grants, stipends to speakers in medical education programs, or anything else that the feds add to the list. Because small amounts can add up quickly, pharma companies are establishing aggregate spend information systems able to capture every dollar provided to doctors and to track those amounts over time.

Unchartered territory

The Department of Health and Human Services (HHS) is charged with writing implementation regulations by October 2011 to clarify which companies have to report what information about who. Everyone is looking for clearer definitions of "consulting fee," "honorarium," "teaching hospital," and how reporting applies to affiliated companies, product co-development partners, and third party service firms.

There's considerable uncertainty related to research expenditures: Does reporting apply to the clinical spend for both interventional and observational studies? Or to fees paid to physicians presenting to Institutional Review Boards or serving on data safety monitoring committees?

Another gray area is equipment supplied by a sponsor to a clinical site on a temporary basis. This is "unchartered territory," commented Wanda Toro, President of Bull's Eye Innovations, at the August Aggregate Spend Forum sponsored by the Center for Business Intelligence (CBI), an Advanstar Company.

The process for submitting data to HHS, for recipients to review reports, and for the feds to make this information public also remains murky, making it hard for pharma companies to set up the computer systems needed to collect transaction data beginning January 2012, in order to file their first reports the following year (March 2013). That may seem like plenty of time to launch new programs, but the standard-setting process can take months, and no one at HHS seems to be in charge.

Manufacturers will have to report amounts paid to physicians every year, but fees related to clinical research can be withheld from the public until after product approval by the FDA, or four years after the payments are made, whichever comes first. Pharma companies lobbied for this delay as a way to retain some secrecy for investigational programs. However, it calls for sponsors to identify what items fall into the clinical spend "bucket" so they can benefit from delayed publication. Investigator fees related to post-marketing clinical studies, though, are not delayed, further complicating the data tracking process.

States set pace

Pharma companies have been tracking and reporting fees and entertainment expenses to health care professionals (HCPs) for several years to comply with a range of state laws and other standards. Eight states, including Massachusetts, Vermont, Maine, Minnesota, and Washington, DC, have enacted transparency policies, and about 10 states were moving in that direction when health reform was enacted. In fact, the Pharmaceutical Research and Manufacturers of America (PhRMA) backed federal Sunshine legislation as a way to replace diverse state laws with a uniform national policy. Unfortunately, the ACA provision pre-empts state laws only partially, permitting states to enforce policies that are more stringent than the federal requirements. Minnesota and Vermont request disclosure of payments related to clinical trials, but several other states exempt such payments. Even so, specific exclusions raise questions about what qualifies as a "bona fide clinical trial" in Washington, DC or Maine, and what's "genuine research" in Massachusetts.

The aim of these state initiatives is to reduce health care spending, pointed out Vermont Assistant Attorney General Wendy Morgan at the CBI forum. She and others believe that disclosure of payments will reduce marketing outlays and rationalize drug use. Drug companies spend millions marketing to doctors, and this "affects the way doctors prescribe," explained Illinois state representative Jack Franks. But he added that he won't continue to pursue an Illinois disclosure law because a federal policy is "better than a hodgepodge of legislation across the country." Morgan noted that Vermont will adopt federal definitions and standards as much as possible to avoid redundancies.

Although the federal Sunshine Act does not ban doctor payments or other practices, Vermont and several other states have moved from disclosure to outright curbs on gifts to HCPs, which more clearly aims to cut marketing expenditures. If you limit gifts, said Morgan, you eliminate "a huge chunk of money added to the cost of pharmaceuticals."

The state policies reflect the steadily rising demand for transparency in industry relationships with HCPs. A revised PhRMA marketing code in 2008 banned gifts to physicians and pricey restaurant meals. In addition, last year PhRMA updated its principles on conducting clinical trials to encourage "reasonable" payment to investigators; this aimed to curb the use of lucrative consulting and research contracts to camouflage promotional payments to docs. Several pharma companies, moreover, including Eli Lilly, Merck, GlaxoSmithKline, and Pfizer, have begun to post physician payments on their websites to comply with corporate integrity agreements negotiated to settle charges of illegal drug marketing. Most disclosure involves fees related to marketing activities, but Pfizer includes payments to research entities conducting clinical trials, an amount that totaled $15.3 million in 2009.

Reluctant researchers

Unlike most state laws, the federal policy clearly brings clinical research under the "aggregate spend" umbrella. That makes collection of data on payments to HCPs all the more complex, extending to almost every facet of pharma company operations, as well as to such activities at biotech and medical device manufacturers.

Public disclosure of physician payment data is expected to have a noticeable impact on sponsor relationships with health professionals. Many doctors have become reluctant to make speeches on behalf of pharma companies or to consult on research projects. It may become more difficult to engage investigators in the United States in face of public disclosure of research fees and the implication that such work compromises a physician's independence.

While all-inclusive aggregate spend programs may improve company information systems and help sponsors detect potentially damaging conflicts of interest, these initiatives are likely to create tension within companies. Pharma R&D and medical affairs staffs don't see themselves as part of marketing, and they are not accustomed to pulling out fees to investigators from large research budgets. Corporate caps on annual compensation to an HCP for marketing activities, as recommended by the PhRMA code, may generate conflicts between the marketing department that wants to use a prominent clinician as a spokesman, and the research department planning to engage the same individual as an investigator.

Just what HHS and states do with all the aggregate spend information remains to be seen. Beginning in September 2013, the government will start posting all payment reports on a public database in a format that is searchable and easily aggregated and downloaded. This wealth of information on corporate marketing and research may be surprising even to the reporting company, and certainly will attract industry critics and enforcement officials. HHS will provide Congress with an annual report aggregated by manufacturer, and each state will receive a summary of payments to its practitioners.

Failure to comply with all the requirements "in a timely manner" carries fines that start at $1,000 for each reporting failure and jump to $1 million a year for firms that knowingly and deliberately disregard the rules. To avoid problems, sponsors need to update research agreements with investigators to ensure they obtain all required information, and to revise co-promotion and co-development agreements to clarify responsibilities for collecting and reporting required information. It will be important to get data right, as a host of attorneys, whistle-blowers, and prosecutors will have a sharp eye out for inadequate drug company disclosure and for situations that warrant charges of submitting false claims to the government.

Jill Wechsler is the Washington editor of Applied Clinical Trials, (301) 656-4634 jwechsler@advanstar.com