Requirements for Disclosure of Financial Ties Between Physicians and
the Medical Device Industry Gain Momentum in 2009

As the Senate and House of Representatives move to merge the two chambers’ health reform bills, what remains to be seen is the future of provisions that would require both the drug and device industry to disclose financial ties to physicians and other health care providers.  Both bills contain such “sunshine” provisions and, though minor differences exist between those provisions, if a health reform package is ultimately enacted it is very likely to contain some financial disclosure requirements.  The health reform requirements mark only the most recent development in a year marked by calls for increased transparency with respect to financial relationships between industry and health professionals.

As currently written, the disclosure provisions of both health reform bills would require drug and device manufacturers to disclose annually any payment or “other transfer of value” (including ownership and investment interests) made to physicians and teaching hospitals.(1)  The two bills also include similar penalties for noncompliance, including civil money penalties ranging from $1,000 to $10,000 for each unreported payment and $10,000 to $100,000 for each knowing failure to report a payment.(2) However, the House bill would also require distributors to disclose such payments and would require disclosure of payments to a broad spectrum of care providers, in addition to physicians and teaching hospitals.(3)  Additionally, the House bill’s provisions would take effect sooner than those in the Senate bill, requiring companies to make disclosures beginning in March 2011, as opposed to March 2013.(4)  Of note, the House bill would have required companies to begin tracking payments in calendar year 2010.

These disclosure provisions build on the “Physician Payment Sunshine Act” legislation that Sens. Chuck Grassley (R-Iowa) and Herb Kohl (D-Wisconsin) have introduced each year since 2007.  Grassley, a staunch proponent of disclosure requirements, has continued advocating enhanced transparency in a number of ways in 2009.(5)  Most recently, Grassley sent a letter to more than 30 health professional societies and medical advocacy organizations, asking the groups to disclose any funding from the health care industry, including drug and device companies.(6)  The impetus for transparency and disclosure provisions in the health reform legislation were further fueled by an Institute of Medicine report published earlier this year, and lauded by Grassley, in which the report authors recommend increased disclosure of payments from industry to health professionals, medical associations, and advocacy groups.(7) 

The federal disclosure provisions follow state laws enacted this year requiring disclosure of financial ties between the device industry and health professionals.  In Massachusetts, new regulations issued in April require drug and device firms to disclose annually all payments or benefits greater than $50 in value and given to physicians in connection with sales and marketing activities (broadly defined).(8)   The regulations took effect July 1, 2009, with the first report due July 1, 2010.(9)  In Vermont, a state law passed in June requires that manufacturers of drugs and devices disclose any allowable payments and gifts made to any health care provider, which includes physicians, nurses, pharmacists, and myriad other health professionals.(10)  The law took effect July 1, 2009, and the first disclosure is required on October 1, 2010.  Unlike the federal health reform proposals, the new state laws include restrictions on the type of activities that industry may engage in, or “gift bans,” in addition to the disclosure requirement for permissible expenditures. 

Additionally, a report sent this month to the New Jersey state attorney general recommended that the state implement even more stringent disclosure and gift ban rules, which may be formally proposed in the state legislature in January.(11)  Of note for device firms, a recent survey found that the expense associated with tracking and disclosing physician payments per these state requirements can cost as much as $500,000 annually per company.(12)  While the cost of compliance will vary by the company size and other factors, meeting the state reporting requirements requires significant staff as well—typically as many as two full-time employees.(13)