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Feb 7, 2013

Crackdown on Biopharma Payments to Doctors

  • Manufacturers of branded and generic drugs, biologicals, devices, or medical supplies subject to reimbursement under Medicare, Medicaid, or the Children's Health Insurance Program must report to the federal government data on their payments to physicians or teaching hospitals starting in August, under new regulations completed last week and officially published today in the Federal Register.

    The rules—required under section 6002 of President Obama’s Affordable Care Act (ACA)—require manufacturers to report their data on payments or “transfers of value” by March 31, 2014, and every year thereafter to the Centers for Medicare & Medicaid Services (CMS).

    Included among manufacturers subject to the new rules are contract research organizations and contract manufacturing organizations.

    However, manufacturers can delay publication of data for up to four years if they apply to research connected with the development of a new drug, device, biological, or medical supply; to a clinical investigation for those new products; or to a potential new medical technology or new application of an existing medical technology.

    The delay only applies where the new drug or biological is being made under product research or development agreements that are in writing, with a written research protocol, and even then, “only if they were made in the context of a relationship for bona fide research or clinical investigation activities.”

    “This provision seeks to balance the need for confidentiality of proprietary information with the need for public transparency of payments to covered recipients that could affect prescribing habits or research outcomes,” the final rules state.

    Manufacturers can delay publication until either “the approval, licensure, or clearance by the FDA” of new drugs or biologics, or four calendar years after the date of payment or other transfer of value, whichever is earlier.

  • Industry-Friendly Provisions

    But the new rules also include industry-friendly provisions as well. Manufacturers are required to report the entire amount they paid for research as a single payment and include only the name of the receiving institution and the physician principle investigator. Previously, drug manufacturers were required to not only report research payments, but follow downstream how the funds were allocated as well.

    “The new rules do therefore alleviate the concerns of the manufacturers that they would be required to track downstream payments,” Isabel Dunst, a partner with the law firm Hogan Lovells, told GEN. “But even more important it address to some extent the concern that physicians would not be willing to participate in research because the sums paid to the teaching hospitals for research would have under the proposed rule be attributed to them.”

    Dunst also noted that under the new rules, overseas-based companies are only subject to the reporting rules if they are “operating in the United States,” defined as having a physical location within the U.S. or otherwise conducting activities within the U.S. or in a U.S. territory, possession, or commonwealth.

    “This was an important change since the proposed rule could have captured entities operating entirely outside the United States,” Dunst said.

    Three categories of manufacturers are only required to report payments related to covered products, as opposed to all payments made to covered recipients regardless of product:

    • Manufacturers that earned less than 10% of total gross revenue from covered products during the previous fiscal year.
    • Contract manufacturers that manufacture covered product only for another entity; that do not hold the FDA approval, licensure, or clearance for the product they are manufacturing; and that are not involved in the sale, marketing, or distribution of that product.
    • Manufacturers that have separate operating divisions that don’t make products covered by the rules—the law specifically cites animal health divisions as an example—and do not provide assistance or support to an applicable manufacturer.

    Exempt from the reporting rules are payments or transfers of value between individuals with existing personal relationships, educational materials “that directly benefit patients or are intended for patient use,” discounts and rebates for covered drugs and devices, and in-kind items for providing charity care.

    Also exempt—but only for the first year—will be individual gifts of up to $10, including pens and note pads provided at large-scale conferences and events, or a set of payments or gifts valued collectively at under $100. Those sums will be raised annually to reflect inflation.

    Will having to report data on payments to doctors have a negative effect on the biopharma industry?


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