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Alerts and Updates

Research-Related Payments and the Physician Payment Sunshine Act: How Reporting Works and What Applicable Manufacturers Should Consider

March 6, 2013

Research-Related Payments and the Physician Payment Sunshine Act: How Reporting Works and What Applicable Manufacturers Should Consider

March 6, 2013

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The Rules contain different reporting requirements for these research-related payments, so applicable manufacturers may want to analyze their relationships now in preparation for the August 1, 2013, data collection start date.

On February 1, 2013, the Centers for Medicare & Medicaid Services (CMS) published long-awaited rules (the "Rules") detailing manufacturers' and group purchasing organizations' reporting requirements under Section 6002 of the Patient Protection and Affordable Care Act, otherwise known as the Physician Payment Sunshine Act (the "Sunshine Act"). This Alert is the second in Duane Morris' series of Alerts on the new Sunshine Act reporting requirements, and addresses the unique reporting requirements for applicable manufacturers' making payments or transfers of value related to clinical research and pre-clinical research. The Rules contain different reporting requirements for these research-related payments, so applicable manufacturers may want to analyze their relationships now in preparation for the August 1, 2013, data collection start date.

What Every Applicable Manufacturer Should Know About Reporting Research-Related Payments

  • Data collection for research-related payments must begin on August 1, 2013
  • Records must be maintained for five years
  • The first report must be submitted to CMS by March 31, 2014, and annually thereafter
  • Applicable manufacturers must report all payments made in connection with activities meeting the definition of research and that are made pursuant to a written agreement or research protocol

Who Must Report Research-Related Payments?—Applicable Manufacturers

The Sunshine Act and Rules require applicable manufacturers to report research-related payments or other transfers of value that are ultimately made, in whole or in part, to covered recipients (e.g., physicians and teaching hospitals). For manufacturers, the organization has reporting requirements if it is:

  • Engaged in the production, preparation, propagation, compounding or conversion of a covered drug for sale or distribution in the United States, including foreign manufacturers that operate in the United States by selling a product (regardless of where the product is physically manufactured); or
  • Are under common ownership with such an entity with respect to such acts.

Duane Morris' first Alert has a detailed discussion of the definition of "applicable manufacturer."

What Research-Related Payments Must Be Reported?

CMS has adopted a broad rule for research-related payments or transfers of value. "Research" is defined under the Rules as "a systematic investigation designed to develop or contribute to generalizable knowledge relating broadly to public health, including behavioral and social-sciences research. This term encompasses basic and applied research and product development." Thus, any payments or transfers of value that are made in connection with activities falling under this definition of research have to be reported.

To be reportable under the Rules, the research-related payment must also be made pursuant to a written agreement or contract between the applicable manufacturer and entity conducting the research or a written protocol. Such agreements, contracts or protocols may include unbroken chains of agreements between the applicable manufacturer, contract research organization (CRO) or site management organization (SMO), and the covered recipient. For example, according to CMS's comments to the Rules, an agreement between an applicable manufacturer and a CRO, a CRO and an SMO, and then an SMO and a teaching hospital would be a continuous chain of agreements that triggers the Rules' reporting requirements.

CMS has clarified that related payments are also reportable even if the principal investigator to whom the payment is made is not a physician regularly treating patients. However, material transfers to a researcher for discovery collaboration are not reportable if the material transfer is not part of a commercial/marketing plan preceding new product development.

Finally, even if a research-related payment does not meet the statutory definition of "research," it may still be reportable using the other categories of payments or transfers of value defined in the Rules, such as consulting fees; entertainment; food; or travel.

How Are Research-Related Payments Reported?

Due to the unique payment stream for research-related payments, CMS has created different rules for reporting research-related payments than other payments or other transfers of value. The payment must be reported once as a single interaction, regardless of how the payments are distributed downstream, and must identify the entity or individual that received the payment, either directly or indirectly from the manufacturer, CRO or SMO. Applicable manufacturers will not, however, have to specify whether the research-related payment was direct or indirect.

The applicable manufacturers’ report are also required to:

  • Identify the physician principal investigator;
  • Report the total aggregate amount of research payment, including costs associated with patient care; time spent by professionals; and the provision of supplies or in-kind items. The total aggregate amount of research payments does not include payments for activities separate from the research, including payments for serving on a study steering committee or meals and travel, and they need not be itemized;
  • Identify the name of the study; and
  • Identify the name of the related covered drug, device, biological or medical supply.

Applicable manufacturers have the option of reporting the context of the research and the identifier.

The reporting requirements for pre-clinical study related payments are slightly different than other research payments. Applicable manufacturers making payments related to pre-clinical studies need only report the (1) research entity name, (2) total amount of payment and (3) principal investigator.

Manufacturers who are required to report research-related payments under the Sunshine Act also should keep in mind that the new Rules do not change or eliminate the somewhat-parallel duty to make appropriate financial disclosures to the U.S. Food and Drug Administration (FDA) under 21 CFR Part 54 in connection with covered marketing applications.


Research and pre-clinical related payments create unique reporting requirements under the Act. Any applicable manufacturer should therefore consider analyzing those relationships now, in preparation for the August 1, 2013, data collection start date. Particularly because of the hefty reporting requirements and, as detailed in Duane Morris' earlier Alert, the stiff penalties, appropriate policies and processes should be developed promptly to ensure accurate and compliant information gathering and reporting.

About Duane Morris

Duane Morris attorneys counsel clients in the pharmaceutical and medical device industries on virtually all aspects of their business and at all stages of the client's lifecycle, from bringing new products to market, review of promotional materials, price reporting, adverse event reporting, import and export issues and manufacturing questions, to conducting self-evaluative audits and designing corrective action plans. Duane Morris also regularly assists clients in dealing with governmental regulatory agencies—including the FDA, DEA, CMS, OIG, HHS, DOJ, the FDA Office of Criminal Investigations and state regulatory authorities—in matters involving regulatory enforcement actions, False Claims Act litigation, internal investigations, fraud and abuse, off-label promotion and federal and state anti-kickback statutes.

For Further Information

If you have any questions about this Alert or would like more information, please contact Elinor L. Hart, Frederick (Rick) R. Ball, Michael A. Swit, any of the attorneys in our Pharmaceutical, Medical Device, Pharmacy & Food industry group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.