The Sunshine Act Will Cost Pharma and Medical Device Manufacturers Hundreds of Millions of Dollars

Fed up by pharmceutical, biotech and medical device manufacturers’ vulgar use of “honoraria,” “consulting fees” cozy “investment” relationships and other financial sweeteners to buy physician loyalty, Congress included the “Physician Payment Sunshine Act” as part of the Affordable Care Act.

The initial proposed set of regulations appeared in the Federal Register on December 19, 2011.  Comments were invited and CMS’ reponse i.e., the”Final Rule,” has just been released.  It can be found here.  This sample of the mainsteam news media reporting indicates generally positive reviews.

Case closed? 

Not quite.  That’s why you read the Disease Management Care Blog.

As the DMCB understands it, the idea is to notify patients and the public about potential physician conflicts of interest, especially if they are recommending one treatment versus another. The financial relationship data from August through December of this year has to be reported to CMS by March 31, 2014. CMS will, in turn, post the information on the web in September of 2014.

While the DMCB agrees with the intent, it also took the time to scroll through the Final Rule and found some interesting information on page 226. 

CMS estimates the manufacturers will each need to hire a compliance officer and bookkeeping personnel.  Based on prevailing hourly salary rates (page 228) for approximately 1,150 companies, the total cost in year 1 of the Sunshine Program will be $193,037,104.  After some systems automation kicks in and start-up costs are eliminated, the cost will decrease to $144,777,828 “annually thereafter” (p. 229).  There will also be “infrastructure costs” to the tune of just over $12 million in year one and just over $1 million for each subsequent year.

The DMCB thinks that’s worthy of some sticker shock, especially when we’re all agreeing that the health care system is already too expensive. Ultimately, it remains to be seen if patients will use the internet as advocate-consumers and blunt their physicians’ conflicts of interest.  Based on data like these (the impact on consumer behavior) and these (on hospitals) we don’t know if patients will vote with their feet or if physicians’ bad behavior will lessen. 

It could work, but once again, finding out is going to cost American health care consumers hundreds of millions of dollars.

Stay tuned!