Guest Column | December 7, 2023

Are Your Trials Compliant With The Updated Physician Payments Sunshine Act?

By Darshan Kulkarni, Pharm.D., MS, Esq., principal attorney, Kulkarni Law Firm, and host of Darshan Talks podcast

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The Physician Payments Sunshine Act (PPSA), part of the Affordable Care Act (“ACA” or the “Act”) since 2010, marked a pivotal move toward greater transparency, targeting conflicts of interest in healthcare. Originally proposed in 2007, the Act responded to demands for clearer healthcare practices, influenced by a 2009 Institute of Medicine report emphasizing the dangers of financial conflicts, particularly in obscuring negative outcomes, eroding trust, and affecting clinical research integrity. This was updated in November 2023 with CMS putting out an Open Payments list of Frequently Asked Questions.

The Act focused on at least the following key elements:

  1. Disclosure and clinical research: The PPSA requires drug and medical device manufacturers to report payments to healthcare providers and teaching hospitals, including for research purposes. This is vital for illuminating drug marketing strategies and revealing hidden marketing influences within purported research payments.
  2. Fraud and abuse prevention: The Act aims to unveil and mitigate fraud, kickbacks, and unethical relationships, with the HHS Office of Inspector General identifying suspect practices like dubious consulting payments or overpriced research studies, potentially breaching the Anti-Kickback Statute.
  3. Regulatory oversight and penalties: CMS's 2023 FAQs reinforce the importance of strict compliance with reporting standards. Entities failing to report accurately and timely face severe civil monetary penalties, with audits conducted based on compliance history and data anomalies.

Reporting Financial Interactions In Clinical Trials

Under the PPSA, there's a clear expectation for transparent reporting of financial interactions related to clinical trials. Manufacturers are required to disclose payments made to covered entities, such as physicians and teaching hospitals, for clinical research. This involves detailing any financial contributions associated with clinical trials, whether for conducting the trials or other related activities. Depending on the type of remuneration, this would include in kind payments made, including for medical writing assistance. The aim is to illuminate potential biases or conflicts of interest that might arise from these financial relationships, ensuring that clinical trial conduct and outcomes are not unduly influenced by such factors.

Conducting Audit Plans

CMS intends to conduct audits under the PPSA to ensure compliance history, compliance tips, data anomalies, or unusual reporting patterns. CMS evaluates adherence to reporting requirements for financial relationships between healthcare providers and manufacturers.

Imposing Penalties

Noncompliance can lead to severe penalties, including civil monetary penalties (CMPs). Entities failing to report accurately or timely could face CMPs, potentially up to $1 million, adjusted annually.

Preparation For Sponsors

Companies looking to avoid penalties for noncompliance with the PPSA must take at least the following into consideration and must be consistent with the DOJ and HHS-OIG recommended compliance programs. This includes taking the following steps and more.

  1. Maintain accurate records. CMS has not penalized companies that are non-compliant with the PPSA. Accordingly, many companies simply forget or ignore these requirements. With the new FAQs and “fair warning” from CMS, it behooves companies to ensure meticulous tracking and documentation of all financial transactions with healthcare providers.
  2. Conduct regular compliance checks. While companies must each determine what constitutes sufficient and regular compliance checks individually, it is incumbent upon companies to conduct these internal audits and assessments to identify and rectify potential reporting errors or omissions and to comply with annual reporting requirements.
  3. Understand reporting criteria. Stay updated with CMS guidelines on what constitutes a reportable payment or transfer of value.
  4. Educate staff. Provide training for all affected staff, including clinical research, medical affairs, medical writing, sales and others who might be involved in reporting, to ensure understanding of and adherence to compliance requirements.
  5. Implement robust systems. Use software or systems that facilitate accurate and efficient data collection and reporting. It is incumbent upon companies to individually determine whether software or systems meet their internal requirements. Testing can range from complying with Part 11 requirements to doing validation checks and more.

Proactive preparation and a commitment to transparency are essential for sponsors to navigate CMS audits successfully and avoid substantial penalties under the PPSA.

Considerations In Developing A Sunshine Act Audit-Ready Compliance Program

Developing a PPSA compliance program, while aimed at enhancing transparency, can inadvertently expose vulnerabilities to violations of the Anti-Kickback Statute, False Claims Act, and Civil Monetary Penalty Act. This exposure occurs because the process of compiling and reporting financial relationships necessitates a deep dive into the nature and purpose of these transactions. During this scrutiny, previously overlooked or misinterpreted transactions may surface, revealing potential noncompliance.

Companies must proactively mitigate these risks by conducting thorough internal audits, reevaluating their policies and procedures, and ensuring that all financial interactions with healthcare providers align with legal and ethical standards. Continuous education and training for staff, coupled with robust internal controls and monitoring systems, are crucial in preemptively identifying and addressing any areas of vulnerability. Companies should consider retaining outside counsel to help with developing a comprehensive plan and identifying problems.

The PPSA stands as a critical tool in ensuring ethical pharmaceutical practices and maintaining the integrity of clinical research, with a focus on preventing misuse of funds and ensuring transparency in physician-industry relationships.

About The Author:

Darshan Kulkarni, PharmD, MS, Esq., is the principal attorney at the Kulkarni Law Firm, known for its dedication to legal excellence in the pharmaceutical industry. An entrepreneur and an innovator, Kulkarni serves as an adjunct professor at Drexel University School of Law. He serves on multiple boards including the board of the Emily Whitehead Foundation, contributing to transformative work in pediatric cancer research. Beyond his legal and academic commitments, Kulkarni hosts the DarshanTalks podcast, a platform where he engages thought leaders in candid discussions about the life sciences.