Federal Register Vol 78 No 27 Friday February 8 2013 Rules and Regulations - Affordable-Care-Act-Section-6002-Final-Rule

Vol.
78 Friday,
No. 27 February 8, 2013
Part II
Department of Health and Human Services

Centers for Medicare & Medicaid Services
42 CFR Parts 402 and 403
Medicare, Medicaid, Children’s Health Insurance Programs; Transparency
Reports and Reporting of Physician Ownership or Investment Interests;
Final Rule
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9458 Federal Register / Vol. 78, No. 27 / Friday, February 8, 2013 / Rules and Regulations
DEPARTMENT OF HEALTH AND transfers of value to physicians and b. Report Submission, Correction, and
HUMAN SERVICES teaching hospitals. Section 1128G of the Publication
Act also requires applicable The rule finalizes the processes and
Centers for Medicare & Medicaid manufacturers and applicable group requirements for applicable
Services purchasing organizations (GPOs) to manufacturers and applicable GPOs to
report certain information regarding the submit their reports to CMS, including
42 CFR Parts 402 and 403 ownership or investment interests held the specific data elements required to be
[CMS–5060–F] by physicians or the immediate family included in the reports and the report
members of physicians in such entities. format. The rule also details the
RIN 0938–AR33 We believe that these provisions of processes for the review, dispute, and
the Act were modeled largely on the correction period when applicable
Medicare, Medicaid, Children’s Health recommendations of the Medicare
Insurance Programs; Transparency manufacturers, applicable GPOs,
Payment Advisory Commission covered recipients, and physician
Reports and Reporting of Physician (MedPAC), which voted in 2009 to
Ownership or Investment Interests owners or investors are provided the
recommend Congressional enactment of opportunity to review, dispute, and
AGENCY: Centers for Medicare & a new regulatory program. In addition, propose corrections to reported
Medicaid Services (CMS), HHS. the Institute of Medicine (IOM) payments or other transfers of value, or
ACTION: Final rule. recommended implementing a national ownership or investment interests,
disclosure program for payments to attributed to them. In addition, the rule
SUMMARY: This final rule will require health care providers and prescribers in clarifies the information to be included
applicable manufacturers of drugs, the 2009 report titled, ‘‘Conflict of on the publicly available Web site, as
devices, biologicals, or medical supplies Interest in Medical Research, Education well as the usability of the public Web
covered by Medicare, Medicaid or the and Practice.’’ Given these site. Finally, the rule includes details on
Children’s Health Insurance Program recommendations and other information the processes for reporting and
(CHIP) to report annually to the on conflicts of interest that could affect publishing payments or other transfers
Secretary certain payments or transfers treatment decisions, Congress enacted of value which are eligible for delayed
of value provided to physicians or legislation establishing a national publication.
teaching hospitals (‘‘covered disclosure program with section 6002 of
recipients’’). In addition, applicable the Affordable Care Act. This final rule c. Penalties
manufacturers and applicable group provides the implementing The rule includes details regarding
purchasing organizations (GPOs) are requirements for this program. the statutorily authorized civil monetary
required to report annually certain penalties for failure to report payments
2. Summary of the Major Provisions or other transfers of value, or physician
physician ownership or investment
interests. The Secretary is required to a. Transparency Reports ownership or investment interests,
publish applicable manufacturers’ and This rule finalizes requirements for including clarification of the instances
applicable GPOs’ submitted payment applicable manufacturers to annually when the penalties will be imposed.
and ownership information on a public report certain payments or other d. Annual Report
Web site. transfers of value to covered recipients. The rule finalizes the details of the
DATES: Effective date: These regulations The rule provides definitions of annual reports to Congress and the
are effective on April 9, 2013. numerous terms, such as applicable States.
Compliance date: Applicable manufacturer, and covered drug, device,
manufacturers and applicable group biological, and medical supply. In e. Relation to State Laws
purchasing organizations must begin to addition, the rule also clarifies how The rule clarifies the statutory
collect the required data on August 1, applicable manufacturers should report requirements for the pre-emption of
2013 and report the data to CMS by and characterize payments or other State laws.
March 31, 2014. transfers of value, including rules for
FOR FURTHER INFORMATION CONTACT: research payments, and indirect 3. Summary of Costs and Benefits
Erica Breese, (202) 260–6079. payments provided to a covered Based on the comments submitted, we
SUPPLEMENTARY INFORMATION: recipient through a third party. The rule anticipate that much of the total
also finalizes which payments or other estimated burden of this final rule will
I. Executive Summary and Background transfers of value are excluded from the fall on applicable manufacturers and
A. Executive Summary for This Final reporting requirements. applicable GPOs. We have estimated
Rule In addition, the rule finalizes the that the total cost of these provisions
requirements for applicable will be approximately $269 million in
1. Purpose manufacturers and applicable GPOs to the first year and $180 million annually
This final rule is necessary to annually report information about thereafter. We have no empirical ability
implement the requirements in section certain ownership or investment to estimate the monetary benefits of this
6002 of the Affordable Care Act, which interests held by physicians and the provision; however, there are
added section 1128G to the Social immediate family members of nonmonetary benefits, which are
Security Act (the Act). That provision physicians in such entities, as well as difficult to quantify. Increased
requires applicable manufacturers of payments and other transfers of value to transparency regarding the extent and
drugs, devices, biologicals, or medical such physicians. The rule details what nature of relationships between
supplies covered under title XVIII of the constitutes an ownership or investment physicians, teaching hospitals, and
Act (Medicare) or a State plan under interest for purposes of the reporting industry manufacturers will permit
title XIX (Medicaid) or XXI of the Act requirements, and defines for whom patients to make better informed
(the Children’s Health Insurance they must be reported. The rule also decisions when choosing health care
Program, or CHIP) to report annually to clarifies the content for the ownership professionals and making treatment
the Secretary certain payments or other or investment interest report. decisions, and deter inappropriate
Federal Register / Vol. 78, No. 27 / Friday, February 8, 2013 / Rules and Regulations 9459
financial relationships which can by statute to publish the reported data 373 timely public comments. Most of
sometimes lead to increased health care on a public Web site. The data must be the public comments addressed
costs. Additionally, increased downloadable, easily searchable, and provisions included in the proposed
transparency about the owners and aggregated. In addition, we must submit rule. We received some comments that
investors in GPOs will allow purchasers annual reports to the Congress and each were outside the scope of the proposed
to make better informed decisions and State summarizing the data reported. rule and, therefore, will not be
identify potential conflicts of interest Finally, section 1128G of the Act addressed in this final rule. Summaries
with ordering physicians. generally preempts State laws that of the public comments that are within
require disclosure of the same type of the scope of the proposals and our
B. Background information by manufacturers. responses to those comments are set
1. Legislative Overview (Statutory forth in the various sections of this final
2. Transparency Overview
Background) rule under the appropriate headings. In
We recognize that collaboration this final rule, we have organized the
Section 6002 of the Affordable Care among physicians, teaching hospitals,
Act added section 1128G to the Act, document by presenting our proposals,
and industry manufacturers contributes summarizing and responding to the
which requires applicable to the design and delivery of life-saving
manufacturers of drugs, devices, public comments for the proposal(s),
drugs and devices and we received and describing our final policy.
biologicals, or medical supplies covered many comments supporting this The following sections outline the
under Medicare or a State plan under statement. However, as discussed in the agency’s directives concerning
Medicaid or CHIP to report annually to proposed rule and in the public implementation of section 1128G of the
the Secretary certain payments or other comments submitted, payments from Act, including clarification of the terms
transfers of value to physicians and manufacturers to physicians and and definitions used in the statute, as
teaching hospitals. Section 1128G of the teaching hospitals can also introduce well as procedures for the submission,
Act also requires applicable conflicts of interest that may influence review, and publication of the reported
manufacturers and applicable GPOs to research, education, and clinical data. For terms undefined by the statute,
report certain information regarding the decision-making in ways that we have provided definitions where
ownership or investment interests held compromise clinical integrity and appropriate to provide additional
by physicians or the immediate family patient care, and may lead to increased clarity, as well as explanations of how
members of physicians in such entities. health care costs. we interpret such terms. During the
Specifically, manufacturers of covered We recognize that disclosure alone is public comment period, we received
drugs, devices, biologicals, and medical not sufficient to differentiate beneficial numerous comments on how to
supplies (applicable manufacturers) are financial relationships from those that approach and structure the final rule,
required to submit on an annual basis create conflict of interests or are such as providing additional examples
the information required in section otherwise improper. Moreover, financial and memorializing intentions in the
1128G(a)(1) of the Act about certain ties alone do not signify an regulatory text. We appreciate the
payments or other transfers of value inappropriate relationship. However, comments and have endeavored to
made to physicians and teaching transparency will shed light on the develop a final rule that allows for
hospitals (collectively called covered nature and extent of relationships, and reporting flexibility while also
recipients) during the course of the will hopefully discourage the providing sufficient detail, clarity, and
preceding calendar year. Similarly, development of inappropriate standardized processes, in order to
section 1128G(a)(2) of the Act requires relationships and help prevent the better ensure the accuracy of the
applicable manufacturers and increased and potentially unnecessary published data. Throughout the final
applicable GPOs to disclose any health care costs that can arise from rule, time periods referenced in days are
ownership or investment interests in such conflicts. Given the intricacies of considered to be calendar days, unless
such entities held by physicians or their disclosure and the importance of otherwise noted.
immediate family members, as well as discouraging inappropriate
information on any payments or other relationships without harming A. Timing
transfers of value provided to such beneficial ones, we have worked closely This final rule has not been published
physician owners or investors. with stakeholders to better understand in time for applicable manufacturers
Applicable manufacturers must report the current scope of the interactions and applicable GPOs to begin collecting
the required payment and other transfer among physicians, teaching hospitals, the information required in section
of value information annually to the and industry manufacturers. In addition 1128G of the Act on January 1, 2012, as
Secretary of the Department of Health to this feedback, we consulted with the provided in the statute. In the proposed
and Human Services (HHS) (the HHS Inspector General, as required by rule, we indicated that we would not
Secretary) in an electronic format. The the statute. Our conclusions and require applicable manufacturers and
statute also provides that applicable interpretations in the preamble are applicable GPOs to begin collecting the
manufacturers and applicable GPOs solely for purposes of this regulation required information until after the
must report annually to the Secretary and do not apply in other contexts. publication of this final rule. We
the required information about proposed a preparation period of 90
physician ownership and investment II. Provisions of the Proposed Rule and days. Additionally, we considered
interests, including information on any Analysis of and Responses to Public requiring the collection of data for part
payments or other transfers of value Comments of 2012, to be reported to CMS by the
provided to physician owners or In the December 19, 2011 proposed statutory date of March 31, 2013. We
investors, in an electronic format by the rule (76 FR 78742), we solicited public also stated that we were considering
same date. Applicable manufacturers comment on a number of proposals requiring the collection of data for part
and applicable GPOs are subject to civil regarding transparency reports and the of 2012, to be reported to CMS by the
monetary penalties (CMPs) for failing to reporting of physician ownership or statutory date of March 31, 2013, and
comply with the reporting requirements investment interests. In response to our requested comments on the feasibility of
of the statute. The Secretary is required solicitation, we received approximately a partial year collection.
Comment: Many commenters were manufacturers and applicable GPOs a payment or other transfer of value, or
concerned with the length of time would have to develop systems and ownership or investment interest on the
applicable manufacturers and then change them after the first year. public database does not mean that any
applicable GPOs would be given The statute sets forth the minimum of the parties involved were engaged in
following publication of the final rule threshold for reportable payments and any wrongdoing or illegal conduct.
before the data collection requirements does not appear to provide any
begin. authority for us to change it. We believe 1. Reports on Payments and Other
A number of these commenters that because the threshold is provided Transfers of Value Under Section
suggested that the reporting in the statute itself, applicable 1128G(a)(1) of the Act
requirements begin as quickly as manufacturers were given adequate a. Applicable Manufacturers
possible following the publication of the notice of the threshold amount and While the term applicable
final rule, in order to ensure that there should be able to prepare for it. We are manufacturer was defined in section
is sufficient time for data to be collected also concerned that changing the 1128G of the Act, we provided
for a partial year of 2012. These threshold for 1 year would be confusing additional clarification in the proposed
commenters recommended a 30-day to users. With regard to retroactive rule. In this section, we aim to even
preparation period. Conversely, many reporting, we similarly believe that we more clearly define the entities that will
other commenters requested that the do not have the authority to require this
be required to report.
data collection requirement not begin and will not adopt that approach.
until January 1, 2013, stating that the After consideration of the public (1) Definition of Applicable
data collection requirement for comments received and given the timing Manufacturer
collecting a partial year of data would of the final rule, we are establishing that
In the proposed rule we defined
be difficult and overly burdensome. data collection will begin on August 1,
‘‘applicable manufacturer’’ for the
Other commenters did not address the 2013 and must be reported to us by
purposes of this regulation as an entity
beginning date for data collection, but March 31, 2014. There will be no
that is—
instead advocated for a longer retroactive reporting.
• Engaged in the production,
preparation period than the proposed 90
B. Transparency Reports preparation, propagation, compounding,
days. The majority of these commenters
Section 1128G(a) of the Act outlines or conversion of a covered drug, device,
requested an 180-day preparation
the transparency reporting requirements biological, or medical supply for sale or
period, but a few suggested longer, with
the longest being 15 months. Some and consists of two paragraphs. The distribution in the United States, or in
commenters also requested that first, section 1128G(a)(1) of the Act, a territory, possession, or
regardless of the timing, data collection outlines the required reports from commonwealth of the United States; or
should begin at the beginning of a applicable manufacturers on payments • Under common ownership with an
quarter and also explained that making or other transfers of value to covered entity in the first paragraph of this
systems changes during the last quarter recipients. The second, section definition, and which provides
of a year would be difficult. 1128G(a)(2) of the Act, outlines the assistance or support to such entity with
Response: We appreciate these reporting requirements for applicable respect to the production, preparation,
comments and agree that data collection manufacturers and applicable GPOs propagation, compounding, conversion,
needs to begin as soon as reasonably concerning ownership and investment marketing, promotion, sale, or
possible; however, to allow us time to interests of physicians, and their distribution of a covered drug, device,
address the important input we received immediate family members, as well as biological, or medical supply for sale or
from stakeholders during the information on any payments or other distribution in the United States, or in
rulemaking process, we announced in transfers of value provided to such a territory, possession, or
May 2012 that we would not require the physician owners or investors. While commonwealth of the United States.
collection of any data before January 1, there is some overlap between these In defining applicable manufacturer,
2013. We are finalizing that the data submissions, we proposed that these we interpreted the statutory phrase
collection requirement will begin on two types of information be reported ‘‘operating’’ in the United States, or in
August 1, 2013, allowing about an 180- separately to ensure that the relevant a territory, possession, or
day preparation period. We believe that reporting obligations of applicable commonwealth of the United States in
this is a sufficient amount of time for manufacturers and applicable GPOs are section 1128G(e)(2) of the Act, as ‘‘for
applicable manufacturers and clearly distinguished. We solicited sale or distribution’’ in the United
applicable GPOs to prepare. comment on this general approach, but States, or in a territory, possession, or
Comment: A few commenters received no comments, so we are commonwealth of the United States.
requested that CMS modify the finalizing this provision as proposed. Comment: Many commenters
reporting requirements for the first year. Additionally, we also want to expressed concern with CMS’s
Some suggested easing the initial emphasize that compliance with the interpretation of the phrase ‘‘applicable
burden by phasing in reporting with a reporting requirements of section 1128G manufacturer.’’ Specifically, many
higher minimum dollar threshold, while of the Act does not exempt applicable commenters suggested that the phrase
others recommended collecting more manufacturers, applicable GPOs, ‘‘for sale or distribution’’ is overly broad
data for 2012 by requiring retroactive covered recipients, physician owners or and would apply to nearly any entity in
reporting. investors, immediate family members, the world involved in the
Response: We appreciate these other entities, and other persons from manufacturing chain or marketing of a
comments, but we do not believe that any potential liability associated with covered drug, device, biological, or
we have authority to amend the payments or other transfers of value, or medical supply (referred to generally for
reporting requirements for the first year. ownership or investment interests (for purposes of this rule as a ‘‘covered
In addition, we believe that changing example, potential liability under the product’’) that is ultimately sold or
the reporting requirements for a single Federal Anti-Kickback statute or the distributed in the United States, even if
year would be operationally difficult, False Claims Act). However, we also such entity has no operations in the
since both CMS and applicable want to make clear that the inclusion of United States. These commenters
recommended that CMS retain the similar comments that entities that licensed practitioners in the course of
statutory language and define the phrase produce or compound products or tests their professional practice; and (3) do
‘‘operating’’ in the United States as should be exempt from the definition. not produce, prepare, propagate,
having a physical location in the United For example, many pharmacies compound, or convert drugs or devices
States or conducting business activities compound medications in small batches for sale other than in the regular course
in the United States. Several for individual patients at the direction of their business of dispensing or selling
commenters agreed with and supported of a prescribing physician. drugs or devices at retail to individual
the proposed definition. Response: We recognize that entities patients.
Response: We appreciate the that only manufacture raw materials or Comment: Many commenters
comments and agree that the proposed components may differ from addressed whether distributors and
definition may have inadvertently manufacturers of the final product, and wholesalers, including repackagers,
captured entities that operate wholly we believe that the statutory framework relabelers, and kit assemblers, met the
outside the United States, many of already treats them differently. The definition of applicable manufacturer.
which may have little or no interaction definition of ‘‘applicable manufacturer’’ These entities were not specifically
with U.S. health care providers. We did is dependent on the definition of addressed in the proposed rule other
not intend to capture foreign entities ‘‘covered drug, device, biological or than the recognition that there are other
that may contribute to the medical supply.’’ Raw materials and definitions of ‘‘manufacture,’’
manufacturing process of a covered components often do not meet the ‘‘manufacturer’’ and ‘‘manufacturing’’
product, but have no business presence definition of covered drug, device, with which industry may be familiar
in the United States. Accordingly, we biological, or medical supply because (such as those in 21 CFR 207.3, 21 CFR
have decided to revise the definition by payment is not available for them in 210.3(b)(12), 21 CFR 820.3(o), and 42
retaining the statutory phrase operating their component form under Medicare, U.S.C. 1396r–8(k)(5)). The commenters
in the United States, which we defined Medicaid or CHIP. Entities that only represented both sides—some advocated
as having a physical location within the manufacture raw materials or that these types of entities meet the
United States, or otherwise conducting components, which are not themselves definition, while others advocated that
activities within the United States or in covered products, will not be required they do not. Some commenters noted
a territory, possession, or to report unless they are under common that distributors and wholesalers
commonwealth of the United States. We ownership with an applicable purchase and often take the title to
believe that any manufacturer, foreign manufacturer and assist such covered products and then sell them to
or not, which operates in the United manufacturer with the production, providers. The distributor may or may
States (including by selling a product) preparation, propagation, compounding, not rebrand or repackage the product
must comply with the reporting conversion, marketing, promotion, sale, before resale. Commenters on both sides
requirements, regardless of where the or distribution of a covered drug, referred to other definitions of
product is physically manufactured. device, biological, or medical supply. In ‘‘manufacturer’’ and ‘‘manufacture’’
Therefore, under this final rule, entities the event a supplier of raw materials is both in the Affordable Care Act and
based outside the United States that do under common ownership with an elsewhere, some of which specifically
have operations in the United States are applicable manufacturer, it will be reference distributors and some of
subject to the reporting requirements. subject to the reporting requirements for which did not, similar to the statutory
Additionally, we note that entities that entities under common ownership, definition in section 1128G(e)(9) of the
have operations in the United States are including options for consolidated Act. The advocates for including
not permitted to circumvent the reporting with the applicable distributors and wholesalers state that
reporting requirements by making manufacturer. because these entities are involved in
payments to covered recipients In addition, we agree with the ‘‘preparation’’ and ‘‘propagation’’ of
indirectly through a foreign entity that comments regarding hospitals, covered products, they should be
has no operations in the United States. pharmacies, and laboratories that included based on the statutory
Such payments are considered to be produce or manufacture materials and definition. Conversely, other
made by the entity that is operating in products solely for their own use or use commenters stated that distributors and
the United States as an indirect payment by their patients. We believe that it was wholesalers stock multiple competing
or other transfer of value and must be not the intent of the statute to include products, so they do not try to sway
reported as such, so long as the entity these entities as applicable purchasing decisions in the same way as
operating in the United States is aware manufacturers, since they are not listed a manufacturer.
of the identity of the covered recipients in the statute as manufacturers. Given Response: We agree that distributors
receiving the payments as required for these considerations, we have revised and wholesalers (which include
all indirect payments or other transfers the definition of applicable repackagers, relabelers, and kit
of value. manufacturer to exclude entities such as assemblers) that hold the title to a
Comment: Many commenters hospitals, hospital-based pharmacies covered drug, device, biological or
recommended additional limitations on and laboratories that manufacture a medical supply meet the definition of
the scope of the definition of applicable covered product solely for use by or an applicable manufacturer for the
manufacturer. A few commenters within the entity itself or by an entity’s purpose of this rule. We believe that
suggested CMS limit the definition to own patients. In addition, the definition distributors that hold the title to a
manufacturers directly involved in of applicable manufacturer does not covered product are similar to
manufacturing of the final products, and include pharmacies, including applicable manufacturers since both
not entities that supply components and compounding pharmacies, that meet all hold title to the product at some point
raw materials. In addition, many of the following conditions: (1) Maintain in the production and distribution
commenters stated that the definition establishments that comply with cycle. These entities will be subject to
should not include hospitals or other applicable local laws regulating the the same requirements as all other
entities that produce covered products practice of pharmacy; (2) regularly applicable manufacturers, as described
for sale to or use by their own patients engage in dispensing prescription drugs in more detail in this section.
only. A few commenters provided or devices upon prescriptions from Wholesalers or distributors that do not
hold the title of a covered product will Response: We agree that additional report all payments or transfers of value
not be subject to the reporting clarification is necessary, although we to covered recipients rather than only
requirements, unless they are under recognize that it is difficult to anticipate payments related to covered drugs,
common ownership with an applicable all potential manufacturing devices, biologicals, and medical
manufacturer and provide assistance or arrangements. In general, we believe supplies. While a few commenters
support with respect to a covered drug, that our proposed position to require supported this proposal, others did not.
device, biological, or medical supply. reporting by an entity that holds an FDA Entities and organizations with only a
Finally, an applicable manufacturer that approval, licensure, or clearance for a small number of covered products
has product(s) with titles held by covered product is appropriate. Such believed that reporting all payments
distributors does not need to report entities are clearly ‘‘engaged in the would be overly burdensome and
payments or other transfers of value production, preparation, propagation, recommended limiting the definition to
made by the distributor or wholesaler to compounding, or conversion’’ of a manufacturers that obtain a certain
covered recipients, since these will be covered product. We did not receive any percentage (generally 5 or 10 percent) of
reported by the distributor or comments on this and are finalizing it their sales or revenues from covered
wholesaler. However, in the event that as proposed. For the contracted entity products.
the applicable manufacturer makes conducting the actual manufacturing, Response: We stand by our decision
payments or other transfers of value we believe that these entities fit into the to require reporting of all payments or
related to the product independently definition of applicable manufacturer, transfers of value to covered recipients
from the distributor or wholesaler (or since they are actually manufacturing a rather than only payments related to
through the distributor or wholesaler as covered product and clearly are covered drugs, devices, biologicals, and
a third party), then the applicable ‘‘engaged in the production, medical supplies and discuss this
manufacturer would have to report preparation, propagation, compounding, decision more fully in section II.B.1.b of
these payments or other transfers of or conversion’’ of a product. Therefore, this final rule. We do not believe that all
value. we are finalizing that entities that payments or other transfers of value are
manufacture any covered product are related to particular covered products,
(2) Limitations to the Definition of so we do not want an applicable
applicable manufacturers, even if the
Applicable Manufacturer manufacturer to avoid reporting by
manufacturer does not hold the FDA
In the preamble to the proposed rule, approval, licensure, or clearance. While representing certain payments or other
we clarified that the applicable we recognize that such entities do not transfers of value to covered recipients
manufacturer definition included necessarily market the product, we as being unrelated to covered products.
believe it is clear that they do However, we are sensitive to
entities that hold Food and Drug
applicable manufacturers whose
Administration (FDA) approval, manufacture it. However, we also
primary business focus is not the
licensure, or clearance for a covered understand that these manufacturers’
production of covered drugs, devices,
drug, device, biological, or medical business model may not be focused on
biological or medical supplies, but may
supply, even if they contract out the covered products. Therefore, if an
still produce one or a few covered
actual physical manufacturing of the applicable manufacturer does not
products. We recognize that since so
product to another entity. We manufacture a covered drug, device,
few of their products are covered, many
interpreted these entities as being biological, or medical supply except
of their competitors will not be subject
‘‘engaged in the production, pursuant to a written agreement to
to the reporting requirements, providing
preparation, propagation, compounding, manufacture the covered product for
the competitors with a potential
or conversion of a covered drug, device, another entity, does not hold the FDA competitive advantage. Despite this
biological, or medical supply.’’ approval, licensure or clearance for the recognition, we also do not believe that
However, we did not address whether product, and is not involved in the sale, these entities should be exempt from all
the entity manufacturing the product marketing or distribution of the product, reporting, since other manufacturers of
under contract is an applicable then the manufacturer is only required the same covered products with a
manufacturer. We also proposed that to report payments or other transfers of different business model would be
any manufacturer that meets the value related to the covered product. subject to reporting. We recognize that
definition of applicable manufacturer by This is described in the regulatory text these applicable manufacturers could
manufacturing at least one covered at § 403.904(b)(4). If an applicable also classify payments or other transfers
drug, device, biological or medical manufacturer has this business of value as unrelated to a covered drug,
supply (as defined later in this section) arrangement for some products and also device, biological or medical supply in
would be considered an applicable manufactures at least one covered order to try to avoid the reporting
manufacturer, even though it may also product that does not meet these requirements; however, we believe the
manufacture products that do not fall criteria, then the applicable burden on these applicable
within that category. manufacturer must report all payments manufacturers of reporting all
Comment: A few commenters or other transfers of value subject to the interactions related to all products (not
requested clarification on the reporting reporting requirements. We believe that just covered drugs, devices, biologicals,
requirements for situations when the this is consistent with our treatment of or medical supplies) outweighs this
license-holder is not the manufacturer other manufacturers with business concern. Therefore, we have clarified
or the manufacturing process is models that are not focused on covered the agency’s position in § 403.904(b)(1)
contracted out. These commenters products, as discussed in more detail in to allow applicable manufacturers with
recommended that if an entity, which this section. Finally, no payment or less than 10 percent of total (gross)
manufactures a covered product under other transfer of value should be revenues from covered drugs, devices,
contract, but does not market or reported more than one time by a single biologicals or medical supplies during
distribute the product and is not an entity. the previous fiscal year to report only
applicable manufacturer otherwise, then Comment: Several commenters also payments or other transfers of value
the entity does not meet the definition discussed CMS’s proposed decision to specifically related to covered drugs,
and does not need to report. require applicable manufacturers to devices, biologicals or medical supplies.
The 10-percent threshold should be and brother/sister corporations. In We believe that had Congress intended
calculated based on the company’s total addition, we also included an alternate to establish a ‘‘common control’’
(gross) annual revenue. Applicable interpretation that would limit the standard, it would have used that term,
manufacturers with less than 10 percent common ownership definition to rather than ‘‘common ownership.’’
of total (gross) revenue from covered circumstances where the same Similarly, a 5-percent threshold for
products during the previous year that individual, individuals, entity, or common ownership is used elsewhere
have payments or other transfers of entities own 5 percent or more of total in the Act, in other CMS regulations,
value to report must register with CMS ownership in two or more entities. This and is one with which entities are
and must attest that less than 10 percent would be subject to the same familiar. For example, section 1124(a)(3)
of total (gross) revenues are from requirements as the definition described of the Act defines the term ‘‘person with
covered products, along with their previously, but would only apply to an ownership or control interest,’’ in
attestation of the submitted data. We common interests of 5 percent or more. part, as a person who has a direct or
selected a 10-percent threshold based on Regarding how applicable indirect ownership interest in an entity
the public comments that we received manufacturers under common of at least 5 percent. We also believe
suggesting a range from 5 to 10 percent; ownership will submit reports, we that clarifying when an entity under
we chose the higher percentage in order proposed that if two or more entities common ownership has to report (as
to reduce the reporting burden on a individually met the proposed explained in this section) will help
greater number of entities. definition of an applicable manufacturer reduce the number of entities under
Comment: A few commenters also under paragraph (1) of the definition, common ownership reporting.
requested additional clarification on the entities should report separately Comment: Many commenters also
when an entity with no covered under section 1128G of the Act. requested additional clarification on
products becomes an applicable However, if only one company under how the agency was interpreting
manufacturer because payment becomes common ownership met the proposed ‘‘assistance and support’’ for entities
available for one of the company’s definition of applicable manufacturer under common ownership, since only
products under Medicare, Medicaid or under paragraph (1) of the proposed entities under common ownership
CHIP (for example, because a definition, and the other company is which provide ‘‘assistance and support’’
manufacturer’s only product received required to report under paragraph (2) of for the listed manufacturing activities
FDA approval). Most of the commenters the definition, then the affected entities need to report. These commenters
simply requested clarification, since this can choose whether or not to report varied in their suggestions, but most
was not addressed in the proposed rule. together. Additionally, we proposed that advocated a narrow interpretation, such
However, a commenter suggested that a payment or other transfer of value as only those involved in sales and
CMS should allow new applicable provided to a covered recipient in marketing or those entities integral or
manufacturers a grace period (for accordance with a joint venture or other necessary to the manufacturing process.
example, 180 days) to allow the cooperative agreement between two or In addition, some commenters
manufacturer time to prepare to comply more applicable manufacturers must be questioned whether separate operating
with the data collection requirements. reported in the name of the applicable divisions, which are not related to
Response: We agree that we should manufacturer that actually furnished the covered products, such as the animal
provide clarification on when a product payment or other transfer of value to the health division or over-the-counter
becomes ‘‘covered’’ and, thus, when an covered recipient, unless the terms of a drugs division, need to report. The
applicable manufacturer who did not written agreement between the commenters advocated that reporting of
previously have any other covered applicable manufacturers specifically these divisions would be confusing,
products becomes subject to the data require otherwise, so long as the since they are unrelated to covered
collection and reporting requirements agreement requires that all payments or products.
under this rule. We will allow the other transfers of value in accordance Response: We appreciate these
applicable manufacturer a grace period with the arrangement are reported by comments and agree that we should
of 180 days following a product one of the applicable manufacturers. provide greater clarification to help
becoming ‘‘covered’’ to begin complying Comment: Many commenters did not identify the entities under common
with the data collection and reporting support the agency’s definition of ownership which are required to report.
requirements. We believe this is common ownership. These commenters We define ‘‘assistance and support’’ as
appropriate because it is the same generally recommended that a threshold being necessary or integral to the
preparation period allowed after the greater than the proposed alternative of production, preparation, propagation,
publication of the final rule, allowing all 5 percent be applied to determine compounding, conversion, marketing,
new applicable manufacturers the same common ownership. The commenters promotion, sale, or distribution of a
time to prepare for complying with the that support a higher threshold covered product. For example, an entity
data collection and reporting generally advocated for a ‘‘common under common ownership which
requirements. control’’ standard, which is traditionally produces the active ingredient for a
a greater ownership percentage of 50 to covered drug and provides it to the
(3) Common Ownership 80 percent, rather than an affiliate applicable manufacturer for inclusion in
The definition of applicable status, which is generally around 5 the final product would be considered
manufacturer includes entities under percent. Conversely, some commenters necessary to the manufacturing of that
common ownership with an applicable supported the proposed definition, as product, since the applicable
manufacturer. We proposed to define well as the 5 percent alternative. manufacturer could not produce the
‘‘common ownership’’ as when the same Response: We appreciate the drug without the active ingredient.
individual, individuals, entity, or comments and have decided to finalize Conversely, an entity under common
entities, directly or indirectly, own any the 5-percent ownership threshold for ownership that only aids the applicable
portion of two or more entities. This common ownership. We recognize that manufacturer with human resources
would apply to a range of corporate this is a lower threshold than many of administrative functions would not be
arrangements, including, but not limited the commenters recommended; deemed necessary or integral to the
to, parent companies and subsidiaries however, we believe this is appropriate. production, preparation, propagation,
compounding, conversion, marketing, Comment: Many commenters since it clarifies the specific entity
promotion, sale, or distribution of advocated that CMS should allow making the payment. We also believe
covered products, since human entities more flexibility to submit that this method provides significantly
resources functions are not directly consolidated reports, regardless of more clarity for covered recipients when
involved with any of these whether an entity meets the definition reviewing their payments or other
manufacturing processes. of applicable manufacturer under transfers of value, allowing them to
In general, we believe that all paragraph 1 or 2 of the proposed better review the information submitted
payments or other transfers of value definition and at the company or on their behalf. Regardless of whether
related to covered products should be operating division level. These applicable manufacturers file separate
reported, but that we should minimize commenters explained that or consolidated reports,
the reporting of payments or other manufacturers may have complicated § 403.908(d)(1)(iv) and (d)(2)(ii) clarify
transfers of value unrelated to covered corporate structures and reporting that in no case shall a single payment
products. The final rule does not require systems and suggested that the agency or other transfer of value be reported
entities under common ownership to provide additional flexibility in more than once by multiple applicable
report when they are not necessary or reporting. Additionally, the commenters manufacturers (under common
integral to manufacturing, and are not noted that consumers may not be ownership or not). Each transaction
applicable manufacturers in and of familiar with the names of between an applicable manufacturer
themselves. However, an indirect manufacturers’ smaller divisions and, and a covered recipient must be
payment or other transfer of value made therefore, publication of the data under reported only one time. Also, to support
to a covered recipient through an entity the names of the smaller divisions could our ability to improve identity and data
under common ownership that is not limit the usefulness of the published matching, regardless of whether
necessary or integral to the data to consumers. Other commenters applicable manufacturers file separate
manufacturing process must still be agreed with increased flexibility, but or consolidated reports, all covered
reported as required for indirect advocated that the reports should recipients included in the report must
payments or other transfers of value. In clearly state what entities are included be individually, uniquely and
addition, we believe that entities under in the report, including reporting which consistently identified. The same
common ownership that are necessary payments were made by which entity. individual, if present on multiple
or integral to the production, Response: We agree that entities payment lines within the same report,
preparation, propagation, compounding, should have more flexibility to report must have the same unique identifiers
conversion, marketing, promotion, sale together or separately. Therefore, we for all occurrences within the report.
or distribution of a covered product clarified in § 403.908(d) that applicable For example, the same name and
should not have to report all payments manufacturers under paragraph 1 of the National Provider Identifier (NPI) (as
or other transfers of value that the definition that are under common required to be reported in this final rule)
entities provide to covered recipients, ownership with separate entities that should be used consistently for all
and § 403.904(b)(2) of this final rule are also applicable manufacturers under payment lines and any subsequent
states that they only need to report paragraph 1 may, but are not required updates for the same individual.
payments or other transfers of value that to, file a consolidated report for all of Finally, we did not receive any
are related to covered products. the entities. Additionally, as we stated comments on our proposed reporting
Finally, with regard to applicable in the proposed rule, applicable method for joint ventures and co-
manufacturers that have separate manufacturers under paragraph 1 of the promotions, so we have finalized these
operating divisions that only produce definition of applicable manufacturer provisions as proposed, which required
non-covered products and do not meet and an entity (or entities) under reporting by the applicable
the definition of providing ‘‘assistance common ownership with such manufacturer that actually made the
and support,’’ we believe that such manufacturer under paragraph 2 of the payment or other transfer of value
divisions only need to report payments definition also may, but are not required (unless decided by the parties to report
or other transfers of value that are to, file a consolidated report. We believe differently) and that the payment or
related to a covered drug, device, that this will make reporting less other transfer of value was only reported
biological or medical supply as stated in burdensome to entities and will provide once.
§ 403.904(b)(3). We believe that the vast more clarity to consumers. However, we In sum, after consideration of the
majority of payments or other transfers are concerned that it will not be clear public comments received, we are
of value will not be related to covered to CMS or consumers which companies revising the interpretation of what it
products. To prevent applicable are under common ownership and are means that an entity is ‘‘operating in’’
manufacturers from diverting payments either reporting together or separately. the United States. We are finalizing the
through these divisions in order to Therefore, if multiple applicable position that applicable manufacturers
avoid the reporting requirements, we are manufacturers (under paragraph 1 and/ must report all payments or other
finalizing that all payments or other or 2 of the definition) submit a transfers of value, but clarifying that
transfers of value made by these consolidated report, we are requiring manufacturers with less than 10 percent
divisions that are related to covered that the report must provide information of their gross revenue coming from
products must be reported. This specified by CMS to identify each covered products only have to report
includes payments or other transfers of applicable manufacturer and entity (or payments related to covered products.
value made directly by the operating entities) under common ownership that In addition, we are also finalizing the
division, as well as payments or other the report covers. Additionally, definition of common ownership to
transfers of value made indirectly by the applicable manufacturers submitting require a threshold of 5 percent or more
applicable manufacturer through the consolidated reports must specify on an common ownership interest and
separate operating division, as the latter individual payment line which entity providing additional clarification on the
payments are required to be reported as made which discrete payment or other requirements for reporting by entities
indirect payments or other transfers of transfer of value. We believe this under common ownership. Finally, we
value. method is more useful for consumers are allowing additional flexibility for
applicable manufacturers (under transfers of value must be reported. In premarket notification, but that are
paragraph 1 and/or 2 of the definition) the proposed rule, we specifically stated regulated by the FDA solely as a food.
to report separately or together that manufacturers who manufacture Comment: Many commenters
depending on their internal structure. both non-covered products (such as requested additional clarification and
OTC drugs) and at least one product details concerning the meaning of
b. Covered Drug, Device, Biological, or payment being ‘‘available’’ under
Medical Supply that falls within the definition of a
covered drug, device, biological or Medicare, Medicaid or CHIP. Some
The data collection and reporting medical supply would be required to commenters inquired whether the
requirements are limited to applicable report all payments or transfers of value availability of payment referred only to
manufacturers of a ‘‘covered drug, to covered recipients required by those items that have been approved or
device, biological, or medical supply.’’ section 1128G of the Act (whether or not cleared by FDA. Other commenters
The phrase ‘‘covered drug, device, associated with a covered drug, device, suggested that the definition should
biological, or medical supply’’ is biological or medical supply). only include payments for products
defined in section 1128G(e)(5) of the Act Comment: Many commenters which are reimbursed separately, and
as any drug, biological product, device, inquired about the definition of covered not through a bundled payment. Finally,
or medical supply for which payment is drug, device, biological, or medical a few commenters inquired whether the
‘‘available’’ under Medicare, Medicaid, supply. Many commenters supported proposed definition referred to payment
or CHIP. Because there are numerous the proposed definition, particularly the availability on a single basis (for
payment mechanisms in Medicare, proposed limitations, which did not example, as a result of an appeal) or if
Medicaid and CHIP, we proposed that payment was regularly available.
receive any opposition. However, a few
drugs, devices, biologicals, or medical Response: We agree with the
commenters sought clarification on how
supplies for which payment is available comments that additional clarification
the two parts of the definition work
through a composite payment rate, as of the meaning of ‘‘availability’’ of
together. These commenters sought
well as those reimbursed separately, are payment would be useful. The statute
clarification, for example, on whether a
considered to be covered products provides that in order to be a covered
drug or biological that requires a
under section 1128G of the Act. We product, payment must be available
prescription to be dispensed or a device
were particularly concerned about under Medicare, Medicaid or CHIP.
that requires premarket approval or
inadvertently excluding items, such as While the statute does not discuss FDA
clearance, but for which payment is not
implantable devices, for which payment approval, clearance or notification, most
may be available only as part of a available under Medicare, Medicaid or
products for which payment is available
bundled payment. CHIP, would be a covered product.
under Medicare, Medicaid or CHIP will
We proposed to define ‘‘covered drug, Response: We are pleased with the have received FDA approval or
device, biological, or medical supply’’ support for the proposed definition, clearance. However, we note that there
as: any drug, device, biological, or including the limitations, and have may be exceptions. For example,
medical supply for which payment is finalized them. In addition, we agree payment may be available under
available under Title XVIII of the Act or with the commenters regarding a need Medicare for certain investigative
under a State plan under Title XIX or for clarification concerning the devices that receive an investigational
XXI (or a waiver of such plan), either relationship between the parts of the device exemption (IDE) from the FDA
separately, as part of a fee schedule definition. We had intended the and are classified as a Category B
payment, or as part of a composite interpretation of the definition to device, in accordance with 42 CFR part
payment rate (for example, the hospital require that a product must meet both 405 Subpart B. In addition, payment
inpatient prospective payment system parts of the definition in order to be may be available under Medicaid for
or the hospital outpatient prospective considered covered. In order to make certain drug products described in
payment system). this more clear, we have revised the section 1927(k)(2) of the Act, that have
The proposed definition included two definition to clearly state that a covered not been approved by the FDA, but were
exceptions to limit the entities drug, device, biological or medical commercially used or sold in the United
reporting. We proposed to limit drugs supply is one for which payment is States before the date of the enactment
and biologicals in the definition of available under Medicare, Medicaid or of the Drug Amendments of 1962 (or
‘‘covered drug, device, biological, and CHIP and which, requires a prescription which are identical, similar, or related
medical supply,’’ to drugs and to be dispensed (in the case of a drug within the meaning of 21 CFR
biologicals that, by law, require a or biological) or premarket approval by 310.6(b)(1) to such drugs) and have not
prescription to be dispensed, thus or notification to the FDA (in the case been the subject of a final determination
excluding drugs and biologicals that are of a device or a medical supply that is by the Secretary that they are a ‘‘new
considered ‘‘over-the-counter’’ (OTC). a device). For example, a device which drug.’’ While we understand that a
Similarly, we proposed an additional is of a type that requires premarket bright line test would be useful, limiting
limitation to the definition as it pertains notification, but for which payment is covered products to those that have
to devices and medical supplies, which not available under Medicare, Medicaid, received FDA approval or clearance (or
would limit them to those devices or CHIP, would not be a covered device for which notification has been
(including medical supplies that are under the program. Finally, we do not provided to the FDA) would not be
devices) that, by law, require premarket intend to capture all items that require comprehensive. We believe that
approval by or notification to FDA. This FDA premarket approval or premarket manufacturers are generally aware when
would exclude many Class I devices and notification and for which payment is payment is available for their drugs,
certain Class II devices, which are available under Medicare, Medicaid, or devices, biologicals, or medical supplies
exempt from premarket notification CHIP; rather, we only intend to include under a Federal health care program.
requirements under 21 U.S.C. 360(l) or items that meet these criteria and that In addition, we do not agree with the
(m), such as tongue depressors and are devices (or medical supplies that are suggestions to interpret payment
elastic bandages. devices). For example, the definition is availability as being limited to those
Beyond coverage, the proposed rule not intended to include products that provided separately, rather than through
also discussed what payments or other require premarket approval or a bundled payment. We recognize that
it is not always clear whether a product publicly available on the FDA’s Web transfers of value sections of this final
is paid through a bundle, making it site.1 rule). Similarly, we do not intend to
difficult to establish whether payment is Comment: A few commenters capture payments made to a veterinary
available. We also recognize that this suggested that reporting on all payments school that may be associated with a
expands the number of products or other transfers of value, including teaching hospital.
meeting the definition of covered drug, those related to products under
development, is too broad. These c. Covered Recipients
device, biological or medical supply.
However, bundled payments constitute commenters recommended that only Under section 1128G(a)(1) of the Act,
a significant portion of Medicare payments or other transfers of value applicable manufacturers are required to
reimbursement and excluding products related to covered products should be disclose certain payments or other
that are reimbursed only as part of reported. Similarly, other commenters transfers of value made to covered
bundled payments would exclude requested that payments or other recipients, or to entities or individuals
manufacturers of products who have transfers of value for certain products, at the request of, or designated on behalf
historically had significant relationships such as veterinary drugs, be excluded of, a covered recipient. Section
with physicians and teaching hospitals. since the relationships related to such 1128G(e)(6) of the Act defines ‘‘covered
For example, we believe it would be products are not intended to be recipient’’ as: (1) a physician, other than
inappropriate to exclude implanted included by the statute. a physician who is an employee of an
devices that are reimbursed through the Response: As noted previously, we applicable manufacturer; or (2) a
hospital inpatient prospective payment are finalizing the proposal that, in most teaching hospital. As required by
system (IPPS) or the outpatient circumstances, applicable section 1128G(e)(11) of the Act, we
prospective payment system (OPPS), as manufacturers must report payments or proposed to define ‘‘physician’’ as
well as chronic kidney disease drugs other transfers of value to covered having the meaning set forth in section
and products reimbursed through the recipients regardless of whether they are 1861(r) of the Act, which includes
end stage renal disease (ESRD) bundled related to a covered product. We believe doctors of medicine and osteopathy,
payment system. As a result, the final that not all payments or other transfers dentists, podiatrists, optometrists, and
rule adopts the proposal to include of value will be related to specific drugs, chiropractors, who are legally
products which are reimbursed devices, biologicals, or medical authorized to practice by the State in
separately or as part of a bundled supplies, but they nevertheless which they practice.
represent a financial relationship The statute excludes from the
payment. We note that because there
between an applicable manufacturer definition of covered recipient a
was some confusion about the phrase
and a covered recipient that has the physician who is an employee of the
‘‘composite payment rate’’ in the applicable manufacturer, as defined in
proposed rule, we have replaced it with potential to affect medical judgment and
must be reported under the section 1877(h)(2) of the Act. Section
the phrase ‘‘bundled payment’’ and 1877(h)(2) defines ‘‘employee’’ as an
continue to interpret that as meaning requirements in section 1128G of the
Act. Additionally, we are concerned individual who would be considered to
IPPS, OPPS, and other prospective be an employee of an entity under the
payment systems. that limiting the reporting requirements
to payments or other transfers of value usual common law rules applicable in
Comment: Many commenters also determining the employer-employee
requested clarification on what products related to covered products would
create loopholes that would allow relationship (as applied for purposes of
constituted a device or medical supply. section 3121(d)(2) of the Internal
The proposed rule did not define these entities to avoid reporting of certain
payments or other transfers of value. Revenue Code of 1986). We note that
terms, so commenters provided these common law rules are discussed
recommendations for ways to clarify the However, we do understand that
payments related to products that will in 20 CFR 404.1007 and 26 CFR
terms, such as limiting them to product 31.3121(d) through 1(c).
classes or providing definitions. never become covered by Medicare,
Medicaid or CHIP (such as animal Finally, we proposed to define the
Additionally, commenters questioned term ‘‘teaching hospital’’ by linking it to
whether specific products would or health products) may unnecessarily
increase the scope of reporting. Medicare graduate medical education
would not be considered a ‘‘device’’ or (GME). The proposed rule defined
‘‘medical supply’’ for the purposes of Therefore, we have limited the reporting
requirements to address this situation, teaching hospital as any institution that
the reporting requirements. received payments under section
Response: We appreciate the as well as other situations described
previously in the discussion of the 1886(d)(5)(B) of the Act (indirect
comments and note that covered devices medical education (IME)); section
and medical supplies are limited to limitations to the definition of
‘‘applicable manufacturer,’’ where 1886(h) of the Act (direct GME); or
those devices and medical supplies for section 1886(s) of the Act (psychiatric
which payment is available under requiring an applicable manufacturer to
report payments related to non-covered hospital IME) during the most recent
Medicare, Medicaid or CHIP, and are of year for which such information is
the type that require premarket products would be unnecessarily
burdensome and not particularly useful available.
notification to or premarket approval by Comment: Many commenters
the FDA. We believe that this provides to the public. We are finalizing that
recommended changes to the proposed
applicable manufacturers with a clear separate divisions that manufacture
definition of physician. Some
sense of the devices and medical only non-covered products do not need
commenters requested that CMS expand
supplies that constitute covered devices to report payments or other transfers of
the definition of physician to include
and medicals supplies, as well as those values unless the payments or other
other entities with prescribing
that do not. For example, FDA defines transfers of value are in fact related to
privileges. Other commenters inquired
the devices (including certain medical covered products (see the applicable
about whether residents would be
supplies) that are exempted from the manufacturer and payments or other
considered physicians. Some
premarket notification requirements. 1 List of exempt products: http:// commenters requested that the
This information can be found in 21 www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpcd/ definition exclude physicians who are
CFR parts 862 through 892 and is 315.cfm . not actively engaged in (or who do not
‘‘perform’’) the practice of medicine, will be difficult for us to accurately included in the exception. The
which would include physicians not identify residents and ensure that commenters also noted that the
acting solely within their role as a payments or other transfers of value are language in the proposed rule indicated
physician, as well as medical attributed across applicable that the exception included physicians
researchers. They refer to the phrase in manufacturers appropriately because employed by an applicable
the statutory definition that a physician many of them do not have a NPI and/ manufacturer, so it was not limited to
is an individual licensed in the State ‘‘in or State professional license number employees of the applicable
which he performs such function or (used for physician identification, manufacturer making and reporting the
action.’’ Other commenters discussed later in this section). Due to payment or other transfer of value. In
recommended that the reporting the operational and data accuracy addition to these more general
requirements should be limited to concerns regarding aggregation of definitional comments, we also received
physicians enrolled in Medicare, payments or other transfers of value to numerous comments recommending
Medicaid or CHIP, on the basis of recent residents, many of whom have neither other situations (such as physicians who
reimbursement or expected an NPI nor a State professional license serve as medical directors or retirees)
reimbursement. Finally, a few number, applicable manufacturers will that should be included in the employee
commenters recommended that CMS not be required to report such payments exception.
establish an ‘‘opt-out’’ function for or other transfers of value. Response: We appreciate the
physicians to declare that they have With regard to the comment that the comments and have clarified the
opted out, and no payments would term ‘‘physician’’ should be limited to definition of covered recipient to ensure
appear on the public Web site attributed those enrolled in Medicare, we believe that only bona fide employment
to them. such an interpretation would be relationships are included in the
Response: We appreciate the contrary to the language of the statute. employee exclusion. We are concerned
comments, but we will not expand the In contrast to the statutory requirement that in the absence of this clarification,
definition to include other provider that products are limited to those for applicable manufacturers could
types nor will we limit the definition to which payment is available under circumvent the reporting requirements
exclude those clearly intended in the Medicare, Medicaid or CHIP, the statute by styling a physician as an ‘‘employee’’
statutory definition. The statute defines did not indicate that physician covered and not reporting payments made to
the term ‘‘physician’’ as having the same recipients be limited to those enrolled such a physician. Additionally, we did
meaning as in section 1861(r) of the Act. in Medicare, Medicaid or CHIP. not intend to allow the exception for
We recognize that, as a result, we will Finally, while we appreciate the employees to include physician
not be able to fully capture financial interest in allowing physicians the employees at any applicable
relationships between industry and opportunity to ‘‘opt-out’’ of the manufacturer, rather than only the
prescribers, specifically non-physician reporting requirements, we do not reporting applicable manufacturer itself.
prescribers such as nurse practitioners. believe it would be possible to The proposed rule incorrectly quoted
However, to the extent that applicable implement a system of this kind. We the statute, which in section
manufacturers make payments or other believe it would be overly burdensome 1128G(e)(6)(B) of the Act states that the
transfers of value to non-physician for both CMS and applicable term covered recipient ‘‘does not
prescribers to be passed through to a manufacturers to track who has opted include a physician who is an employee
physician, they would be indirect out and ensure that no payments or of the applicable manufacturer.’’ For the
payments to the physician and would other transfers of value are made to final rule, we have reverted to the
have to be reported under the name of those individuals. Additionally, we statutory language. Additionally,
the physician. would need to create a system to regarding employees of agents of the
Additionally, we believe that the reconcile any payments reported as applicable manufacturer, we do not
definition hinges on whether a having been made to physicians stating intend these individuals to be included
physician is ‘‘legally authorized’’ to that they have opted out. We believe in the exception, since they are not
practice, so all physicians (including all that a physician who wants to opt out employees of the applicable
providers types listed in the statutory should simply refuse all payments or manufacturer. However, as discussed in
definition) that have a current license to other transfers of value from the section on indirect payments
practice will be considered covered manufacturers, and will, accordingly, (section II.B.1.k of this final rule), we do
recipients. By holding a current license not be included on the public Web site not believe that payments or other
to practice, the physician is legally (unless they hold ownership or transfers of value to legal agents of an
authorized to practice regardless of the investment interests in an applicable applicable manufacturer that happen to
extent to which they do so. manufacturer or applicable GPO). have physicians on staff constitutes a
Payments or other transfers of value to Comment: Many commenters payment or other transfer of value for
residents (including residents in addressed the exclusion for employees the purposes of this rule.
medicine, osteopathy, dentistry, of applicable manufacturers from the We appreciate the comments
podiatry, optometry and chiropractic) definition of physician covered regarding other situations that
will not be required to be reported for recipient. A few commenters commenters would like to see included
purposes of this regulation. We recommended revising the definition to in the employee exclusion, such as an
recognize that some States require or ensure that only ‘‘bona fide’’ employee applicable manufacturer’s board
allow residents to obtain licenses to relationships are excluded from members and medical directors.
practice, whereas other States do not reporting, similar to the language in the However, we believe that whether such
require or allow residents to obtain employee exception in the Anti- individuals fall within the statutory
them. We do not want to treat residents Kickback Statute in section definition of employee in section
differently depending on their State of 1128(b)(3)(B) of the Act and the 1877(h)(2) of the Act, which defines
residency by requiring reporting on corresponding HHS OIG regulation at 42 employee by referencing common law
payments to residents in only those CFR 1001.952(i). Other commenters rules used to determine the employer-
States that require or allow residents to questioned whether employees of agents employee relationship for Internal
have a license. Moreover, we believe it of the applicable manufacturer would be Revenue Service purposes, will require
a case-specific analysis. Therefore, we (1) Identification of Physicians that it will not be made public. Finally,
are not able to adopt a bright-line policy Section 1128G of the Act requires that some commenters recommended that
that all board members or medical applicable manufacturers report a CMS should require physicians to
directors are (or are not) bona fide physician covered recipient’s name, obtain NPIs to ensure that all physicians
employees for purposes of the reporting business address, NPI and specialty. have one.
exclusion. This information will be used to Response: We appreciate the
Similarly, with regard to the distinguish physicians and allow us to comments, but want to reiterate that
comments suggesting that prospective match physicians across applicable reporting a physician covered
employees and retirees should treated as manufacturers. We proposed that recipient’s NPI is a statutory
employees for purposes of being applicable manufacturers use the requirement, so the agency does not
excluded from the reporting National Plan & Provider Enumeration have flexibility to waive the
requirements, we believe that whether System (NPPES), which we currently requirement. Similarly, we do not
such individuals fall within the maintain and update on the public Web believe that section 1128G of the Act
statutory definition of employee in site, to assist with identifying physician provides the agency with authority to
section 1877(h)(2) of the Act will covered recipients. The NPPES Web site require all physicians to obtain an NPI.
require a case-specific analysis. includes a database of physician NPIs We agree that it may be difficult for an
Therefore, we are unable to state that and has an NPI Registry function that applicable manufacturer to definitively
payments to such physicians, such as allows applicable manufacturers to look know whether a physician does not
recruiting costs paid to prospective up individual physician’s NPIs.2 The have an NPI; however we believe it is
employees, do not need to be reported. full database can be downloaded from reasonable for the applicable
Comment: We received significant the CMS Web site.3 We proposed that if manufacturer to bear responsibility for
support for our proposed definition of the physician NPI was not available in determining a physician covered
teaching hospital. However, some NPPES, the applicable manufacturer recipient’s NPI (or lack thereof).
commenters recommended that CMS would be responsible for obtaining the Applicable manufacturers should be
clarify that payments or other transfers physician’s individual NPI directly from able to demonstrate that they made a
of value to non-healthcare departments the physician, if the physician has an good faith effort to obtain an NPI for the
at universities affiliated with teaching NPI. Other than NPI, in the proposed physician. We believe that a good faith
hospitals should not be included in the rule, we considered whether we should effort includes, but is not limited to,
reporting requirements. require, under the discretion granted in specifically requesting an NPI from the
Response: We have decided to finalize section 1128G(a)(1)(A)(viii) of the Act, physician, checking the NPPES
the proposed definition. As explained in that applicable manufacturers report database, and calling the NPPES help
the proposed rule, we recognize that another unique identifier, such as State desk. This statute does not impose
this definition may not capture professional license number, for requirements on covered recipients, so
hospitals with accredited medical physicians who are identified, but do we do not believe we can require
residency programs that do not receive not have an NPI. physicians to disclose their NPI to
IME or direct GME payments; however, Comment: A number of commenters applicable manufacturers when
we are unable to include these hospitals provided input on the processes and requested; however, we strongly
since we cannot readily identify them requirements for applicable encourage physicians to provide this
based on Medicare payment data. manufacturers to report the NPI for a information because it is essential for
Finally, we do agree; payments to non- physician. Some commenters noted that matching payments or other transfers of
healthcare departments of universities reporting a physician covered value to physicians accurately. We
affiliated with teaching hospitals should recipient’s NPI is complicated, since not believe it is in the best interest of all
not be included in reporting all physicians have an NPI and parties (applicable manufacturers,
requirements. However, any payments manufacturers typically do not collect physician covered recipients,
or other transfers of value made through such information. Additionally, a few consumers and others) that payments be
these departments to a covered recipient commenters did not support the attributed to the correct physician, and
as indirect payments or other transfers requirement that applicable we hope that physicians will be willing
of value must be reported as required for manufacturers must obtain an NPI from to provide their NPI to applicable
indirect payments. a physician, if it was not readily manufacturers to make this possible,
available in the NPPES database. They especially since their NPI will not be
d. Identification of Covered Recipients explained it would be difficult to obtain made public on the public Web site. If,
In order to accurately identify and and questioned how an applicable after a good faith effort, the applicable
distinguish covered recipients, section manufacturer would really know if a manufacturer cannot determine an NPI
1128G(a)(1) of the Act requires that physician did not have an NPI. Some for a physician covered recipient, or a
applicable manufacturers report the other commenters requested physician does not have an NPI, we
covered recipient’s name and business clarification that if an applicable agree with the commenters and have
address, and for physician covered manufacturer cannot identify an NPI for finalized that the NPI field may be left
recipients, the physician’s NPI, and a physician then the NPI field can be blank to indicate that the applicable
specialty. The collection of this left blank. Beyond determining a manufacturer could not identify an NPI
information is necessary for applicable physician’s NPI, a few commenters for the physician covered recipient.
manufacturers, in order to distinguish recommended that CMS clarify that However, if we determine that a
individual covered recipients when physicians are not required to provide physician covered recipient does have
reporting to CMS, and for CMS, in order their NPI when requested and that an NPI, we may inform the applicable
to be able to aggregate the data. This applicable manufacturers should state manufacturer and require the applicable
section outlines the comments received 2 NPI Registry can be found at: https://
manufacturer to re-submit the data
regarding identification of both nppes.cms.hhs.gov/NPPES/NPIRegistryHome.do. including the NPI and re-attest to the
physician and teaching hospital covered 3 Database can be downloaded at http:// updated data. Additionally, not
recipients. nppes.viva-it.com/NPI_Files.html. reporting an NPI for physician covered
recipients that do have an NPI will be additional burden on applicable However, just because an NPI is not
considered inaccurate reporting, which manufacturers. Many commenters listed in NPPES does not mean that the
may be subject to penalties. Finally, we indicated that applicable manufacturers applicable manufacturer does not need
want to reiterate that only one maintain this information already. to make a good faith effort to obtain the
individual NPI (not a group NPI) may be Moreover, we believe that any NPI or that the payment should not be
reported for each physician, and that additional burden associated with reported. While it is not possible to keep
applicable manufacturers should use the collecting and reporting physicians’ past ‘‘versions’’ of NPPES due to the
NPI listed in NPPES, if a dispute arises. State professional license numbers will continual updates, we would like to
Also as required by statute, physician- be outweighed by the increased point out that each provider entry is
covered recipient’s NPIs will not be accuracy of the data attributing date stamped to include the date the
included on the public Web site. payments or other transfers of value to entry was created, as well as the date of
Comment: Some commenters physician covered recipients. each update, which will help establish
discussed the proposal to allow Comment: Many commenters the information available at a particular
reporting of an alternative identifier for discussed the proposal that applicable time. Beyond the specific concerns
physicians without an NPI. Many of manufacturers use NPPES to identify regarding using NPPES, we understand
these commenters supported reporting a physician covered recipients. Many that NPPES is not perfect, but the
State professional license number as an commenters did not support requiring agency is working to improve it. In
alternative to an NPI. Conversely, a few applicable manufacturers to use the addition, we do not believe it is
advocated that CMS not require an information listed in NPPES, rather than appropriate for us to create a new
additional alternative unique identifier, what was in their internal files, system specifically for this program, as
whether it is a State professional license particularly for specialty and business it would be duplicative and
number or another identifier. Some address. The commenters explained that unnecessary.
commenters that supported State the data in NPPES is not as accurate in Finally, while we are sensitive to the
professional license number some cases, as their internal databases request for a physician covered
recommended that CMS should allow and information. Similarly, some recipient list, we do not believe it is a
State professional license number commenters did not believe it made viable option. Any list of physicians
instead of NPI at the discretion of the sense to report information from NPPES would be created based on NPPES, since
applicable manufacturer, since they back to CMS. Many commenters also it is the most comprehensive database
believe it is could be burdensome for discussed how applicable available. However, as stated in this
the applicable manufacturer to find the manufacturers should use NPPES. These section, NPPES is not complete since
NPI. commenters inquired whether there not all physicians meeting the definition
Response: We agree that obtaining a would be point in time (such as 90 days of covered recipient have an NPI. We
unique identifier is particularly before the reporting year) when the NPIs also do not want the reporting
important for physicians who do not in the database would be finalized and requirements to be based on a list,
have an NPI or for whom an NPI cannot no longer changed, and whether which will be difficult to maintain and
be reasonably identified. Without this manufacturers could rely on it. A few invariably include mistakes and
information, it will be difficult for us to commenters recommended that inaccuracies. Instead, the statute that
ensure that payments are attributed to applicable manufacturers should be requires reporting of payments to
the appropriate physician and to notified of changes in NPPES. For physicians who meet the statutory
aggregate payments accurately. We example, a commenter advocated that definition. We believe applicable
believe that the more unique identifiers CMS should keep past ‘‘versions’’ of manufacturers are in the best position to
supplied for a physician covered NPPES in case of an audit. In addition, identify the individuals with whom
recipient, the more accurate the data some commenters stated that NPPES is they have financial relationships who
will be, since they are essential for us not user friendly and CMS should be meet this definition.
to appropriately match data about the responsible for improving it. Finally, a
same physician within and across (2) Identification of Teaching Hospitals
few commenters requested that CMS
reports, and publish data appropriately create a list of physician covered Regarding the identification of
on the public Web site. Therefore, recipients rather than using NPPES. teaching hospitals, we proposed to
pursuant to the discretion granted in Response: We appreciate the publish a list of hospital covered
section 1128G(a)(1)(A)(viii) of the Act, comments on NPPES and note that we recipients (that is, those hospitals that
we will finalize that applicable did not intend to require applicable received Medicare direct GME or IME
manufacturers must report the State(s) manufacturers to specifically or solely payments during the last calendar year
and appropriate State professional use NPPES in order to obtain the NPI of for which such information is available)
license number(s) for at least one (but a covered recipient. Applicable on the CMS Web site once per year. We
multiple will be accepted) State where manufacturers may obtain physician proposed to do so since it may not be
the physician maintains a license for all NPI information (or any other immediately apparent to applicable
physician covered recipients, regardless information) in any manner they see fit, manufacturers whether a particular
of whether the applicable manufacturer as long as they report NPIs accurately as hospital meets our definition of a
has identified an NPI for the physician required. This may include matching teaching hospital, and there is no
covered recipient or not. While this is NPIs obtained elsewhere with the NPIs currently published database that
slightly broader than what was provided in NPPES. The NPPES includes this information. We proposed
proposed in the proposed rule, we database is continually updated, so it is that the list of teaching hospital covered
believe (based on the comments) that difficult to set a point in time to freeze recipients should include the name and
reporting applicable State professional the database for a reporting year or address of each teaching hospital.
license numbers for all physician notify applicable manufacturers of all Comment: Many commenters
covered recipients, rather than only the changes. Applicable manufacturers may supported CMS’s proposal to publish a
subset that do not have NPIs, will rely on NPI information in NPPES as of list of teaching hospitals, but
significantly improve data accuracy and 90 days before the beginning of the recommended that the agency provide
will not represent a significant reporting year. additional details regarding the list. The
commenters suggested that CMS publish ‘‘payment or other transfer of value’’ how to determine the amount and value
the list prior to the beginning of the broadly as ‘‘a transfer of anything of of a payment or other transfer of value
reporting year and ensure that value.’’ since neither the statute nor the
applicable manufacturers will be able to We would like to clarify that we proposed rule provided much guidance.
download the list. The majority of these interpret payments or other transfers of While some commenters recommended
commenters recommended that the list value to an entity or individual at the specific options, such as interpreting
be published 90 days before the end of request of or designated on behalf of a value as discernible economic value on
the year, but the comments varied. covered recipient to refer to a situation the open market, the majority advocated
Additionally, some commenters in which an entity or individual that the applicable manufacturers be
requested that CMS clarify that receives and keeps the payment that allowed flexibility to determine whether
applicable manufacturers could rely on was made on behalf of (or at the request a payment or other transfer of value has
the teaching hospital list for the entire of) the covered recipient and the a cognizable economic value, and if so,
year and that entities not included on covered recipient does not receive the to allow flexibility to determine such
the list would not be covered recipients payment or other transfer of value. value. Several commenters also
for the whole data collection year. They Rather, the covered recipient directs the recommended that if a payment or other
also advocated that the list should payment or other transfer of value and transfer of value does not have a
remove hospitals classified in error. does not receive the payment measurable economic value to a covered
Finally, a few commenters also personally. Such payments or other recipient, then it does not need to be
requested that the list contain additional transfers of value to third party reported. In addition, a few commenters
information to help clarify corporate recipients are somewhat different than requested clarification on how to handle
identities (such as inclusion of a tax indirect payments to a covered recipient tax and other additional payments, such
identification number (TIN) or an made through a third party (discussed as shipping. Finally, a few commenters
OSCAR number), as well as an in section II.B.1.k. of this final rule). recommended that CMS clarify that
institutional contact or officer for all Indirect payments or other transfers of goods purchased for market value
hospitals. value are made to an entity or should not be reportable.
Response: We agree that the teaching individual (that is, a third party) to be
Response: We appreciate the
hospital list will be useful for applicable passed through to a covered recipient.
comments and agree that more
manufacturers and appreciate the In the case of indirect payments or other
information will be useful for applicable
comments making suggestions for how transfers of value, we believe that the
to improve the list. We will publish the applicable manufacturer will generally manufacturers. In general, for purposes
list once annually and make it available direct the payment path. of this rule only, we interpret value
publicly and for download at least 90 We proposed that payments or similarly to many comments as the
days before the beginning of the transfers of value made to an individual discernible economic value on the open
reporting year, or for the first reporting or entity at the request of or designated market in the United States. However,
year, at least 90 days prior to the start on behalf of a covered recipient we agree and support that applicable
of data collection. Applicable included payments or other transfers of manufacturers should be allowed
manufacturers can rely on the list for value provided to a physician (or flexibility to determine value, so we do
the entirety of the data collection year. physicians) through a physician group not plan to create numerous rules for
The list will include all hospitals that or practice. We proposed that payments calculating value. We have outlined a
CMS had recorded as receiving a or other transfers of value provided few guidelines to help manufacturers.
payment under one of the defined through a group or practice should be First, payments or other transfers of
Medicare direct GME or IME programs. reported individually under the name(s) value that do not have a ‘‘discernible’’
The list will include hospital TINs to of the physician covered recipient(s). economic value for the covered
provide more specific information on When reporting payments or other recipient specifically, but nevertheless
hospitals with complex corporate transfers of value made at the request of, have a discernible economic value
identities. Finally, we will not include or designated on behalf of a covered generally must be reported. For
an institutional contact, since we do not recipient, we proposed that applicable example, an applicable manufacturer
have this information readily available manufacturers should report the may provide a physician with a
and do not believe it is integral to the payment or other transfers of value in textbook that the physician already
success of the program. the name of the covered recipient, but owns. Since it is a duplicate, it may not
include the entity or individual that have a value to the physician; however,
e. Payments or Other Transfers of Value received the payment at the request of the textbook does have an economic
Section 1128G(a)(1)(A) of the Act or designated on behalf of the covered value, so it must be reported. Second,
requires that applicable manufacturers recipient. We believed that reporting the even if a covered recipient does not
report a ‘‘payment or other transfer of entity or individual paid would formally request the payment or other
value’’ made to a covered recipient or maximize transparency about the details transfer of value, it still must be
‘‘to an entity or individual at the request of the payment or other transfer of reported. Similarly, when calculating
of or designated on behalf of a covered value, by allowing end users to discern value we believe that all aspects of a
recipient.’’ Under Section whether a covered recipient actually payment or transfer of value, such as tax
1128G(a)(1)(B), if an applicable received the payment, and if not, where or shipping, should be included in the
manufacturer makes a payment or other the payment went. Additionally, we reported value. Finally, all applicable
transfer of value to an entity or proposed that we did not believe it was manufacturers must make a reasonable,
individual at the request of or feasible to provide a review period for good faith effort to determine the value
designated on behalf of a covered these entities before the data is made of a payment or other transfer of value.
recipient, the applicable manufacturer public. Instead, we explained that The methodology used and assumptions
must disclose the payment or other review by the covered recipient was made by the applicable manufacturer
transfer of value under the name of the sufficient. may be included in the applicable
covered recipient. Section Comment: Many commenters manufacturer’s voluntary assumptions
1128G(e)(10)(A) of the statute defines requested additional information on document (discussed in section II.B.1.h.
of this final rule). Finally, we added the recipient. We did not address this Response: This statute does not afford
statutory definition of ‘‘payment or specific situation in the proposed rule. us the authority to limit the payments
other transfer of value’’ to the regulatory These commenters generally refer to a or other transfers of value made to
text to ensure consistency with the situation when a payment is provided to covered recipients. The statute requires
statute. a physician covered recipient, but made applicable manufacturers to report the
Comment: A few commenters stated through a teaching hospital covered relationships, but does not limit or ban
that applicable manufacturers should recipient. them in any way. This is a transparency
not report payments or other transfers of Response: We appreciate the initiative, and inclusion on the public
value provided to a group practice as if comments and agree that this is an area Web site does not indicate that the
the payment or other transfer of value of potential confusion, so we believe relationships are necessarily improper
had been provided to all members of the that clarification is necessary. While the or illegal.
group. comments are generally limited to Comment: There were a number of
Response: We agree that payments or payments or other transfers of value to comments, some which supported
other transfers of value being provided a physician through a teaching hospital, reporting the name of the entity or
to a specific physician through a group we provide clarification more generally. individual that received the payment
practice should not necessarily be However, we recognize that the majority and others opposing this approach.
attributed to all physicians in that of payments to one covered recipient However the most common suggestion
group. However, we also do not want through another will likely involve a was to only report the name of entities
payments or other transfers of value to physician and teaching hospital. that receive the payment, rather than
go unreported because they were Payments provided to one covered individuals, due to privacy concerns.
provided to a group or practice rather recipient, but directed by the applicable Additionally, a few commenters stated
than to a specific physician. This was manufacturer to another specific that the applicable manufacturer may
the intent of our proposal for reporting covered recipient should be reported in not know the amount if it was at the
payments to group practices. We have name of the covered recipient that request or designated on behalf of a
finalized that payments provided to a ultimately received the payment covered recipient.
group or practice (or multiple covered because the intermediate covered Response: We appreciate the
recipients generally) should be recipient was merely passing through comments and continue to believe that
attributed to the individual physician the payment. For example, if an reporting the name of the entity which
covered recipients who requested the applicable manufacturer provides a received the payment at the request of
payment, on whose behalf the payment payment to a teaching hospital intended or designated on behalf of a covered
was made, or who are intended to for a physician employee of the teaching recipient is beneficial. However, we
benefit from the payment or other hospital, then the payment should be agree that reporting the name of an
transfer of value. This means that the reported in the name of the physician individual that received the payment
payment or other transfer of value does covered recipient, since that is who could be problematic. We will finalize
not necessarily need to be reported in ultimately received the payment. In that applicable manufacturers must
the name of all members of a practice. addition, a payment provided directly to report, in the name of the covered
For example, if an applicable a physician covered recipient should be recipient, all payments or other transfers
manufacturer donates a set of reported in the name of the physician, of value made at the request of or
dermatology textbooks to a group regardless of whether the physician is designated on behalf of a covered
practice, we believe that applicable an employee of a teaching hospital, recipient, as well as the name of the
manufacturers should attribute the since the payment was provided to the entity that received the payment or
transfer of value to only the physician and not the teaching hospital. other transfer of value. In the event that
dermatologists at the practice by In order to prevent double counting, a payment was provided to an
dividing the cost equally across all payments provided in these individual, at the request of or
dermatologists. We intend for applicable circumstances should not also be designated on behalf of a covered
manufacturers to divide payments or reported in the name of the intermediate recipient, the individual’s name does
other transfers of value in a manner that covered recipient. If the payment or not need to be reported. Instead, the
most fairly represents the situation. For other transfer of value was not passed applicable manufacturer should report
example, many payments or other through in its entirety, then the simply ‘‘individual’’ in the field for
transfers of value may need to be applicable manufacturer should report entity paid.
divided evenly, whereas others may separately the portion of the payment or Finally, we do not agree with the
need to be divided in a different manner other transfer of value retained by the comment that the applicable
to represent who requested the teaching hospital covered recipient and manufacturer may not know the amount
payment, on whose behalf the payment the portion passed through to the of the payment. We believe that because
was made, or who was intended to physician covered recipient. If the the applicable manufacturer is making
benefit from the payment or other payment or other transfer of value was the payment, it should know the
transfer of value. We agree with the not passed through at all, the applicable amount being provided. We believe
commenters that this approach manufacturer should report it in its regardless of what entity received the
attributes payments more fairly, since entirety in the name of the teaching payment or other transfer of value, the
some physicians in a group practice hospital. We note that the rules details are available to the applicable
may not make use of a payment or other regarding research-related payments manufacturer.
transfer of value and may have concerns made to teaching hospital covered Comment: Many commenters
about such payments or other transfers recipients differ somewhat and are recommended that CMS should provide
of value being attributed to them. discussed further in the section on entities receiving payments or other
Comment: A few commenters research herein. transfers of value at the request of or
requested clarification of the reporting Comment: A few commenters designated on behalf of a covered
requirements for payments or other recommended that CMS set a limit for recipient (as a third-party recipient)
transfers of value provided through a the total amount a physician can receive should have the opportunity to review
covered recipient to another covered annually. and correct the information. However,
other commenters supported the CMS create rules for each situation. Instead, include the name of the entity paid or
proposal. we are providing the following general that another individual received the
Response: While we appreciate the guidelines and information on how we payment. The covered recipient will
interest in allowing these entities the intend to interpret the phrases ‘‘at the have the opportunity to review and
opportunity for review, dispute and request of’’ and ‘‘designated on behalf correct the payment on behalf of the
proposing corrections, we do not believe of.’’ entity or individual that received the
there is a viable method for If a covered recipient directs that an payment.
administering it. The agency will not applicable manufacturer provide a
have any information on the entities payment or other transfer of value to a f. Payment and Other Transfer of Value
beyond their name, so we will not be specific entity or individual, rather than Report Content
able to match an entity across applicable receiving it personally, then the
manufacturers. More importantly, since payment is being made ‘‘at the request’’ The specific categories of information
the entities will not be readily of such covered recipient and must be required to be reported for each
identifiable groups or individuals (such reported as described in this section payment or other transfer of value
as physicians), the agency will have no (under the name of the covered provided to a covered recipient are set
means to validate the identity of an recipient, but also including the name of forth in section 1128G(a)(1)(A) of the
individual signing on to the Web site the entity paid or ‘‘individual,’’ in the Act. In the proposed rule, we provided
and stating that he or she is from a case of an individual). For example, in explanations and details on how we
specific entity. Additionally, we believe the event that a covered recipient proposed that applicable manufacturers
a covered recipient will be able to directs an applicable manufacturer to report some of this information to CMS.
review these payments or other transfers donate a payment or other transfer of This section outlines the comments we
of value sufficiently since they should value—to which he would have received on the data elements.
be aware of the payment or other otherwise been entitled—to a particular
(1) Name
transfer of value made at their request charity, the applicable manufacturer
or designated on their behalf. As must report the payment in the name of We proposed that applicable
explained in this section, we have the covered recipient and provide the manufacturers should report the first
decided to only require reporting and name of the charity that received the name, last name, and middle initial for
publication of the name of entities (and payment at the covered recipient’s physician covered recipients.
not individuals) that received payments request. However, if a covered recipient
or other transfers of value at the request decides to neither accept the payment or Comment: A few commenters stated
of or designated on behalf of covered other transfer of value nor request that that not all physicians have middle
recipients. We believe this should it be directed to another individual or names and not all existing systems
alleviate some of the concerns regarding entity, then the payment or other include middle name or initial, so they
review and correction because personal transfer of value that was offered by the recommended middle initial not be
payments to an individual will not be applicable manufacturer does not need reported.
made public on the Web site. Given to be reported. In this situation, there is Response: We appreciate the
these considerations, we will finalize nothing to report because no reportable comments, but believe that given the
that review and correction for entities payment or other transfer of value was number of physicians with the same
which receive a payment at the request made to a covered recipient or to an first and last name, reporting a middle
of or designated on behalf of a covered individual or entity at the request of or initial will be important when
recipient will be done by the covered designated on behalf of a covered identifying and distinguishing
recipient, rather than the entity. recipient. physician covered recipients and
Comment: Numerous commenters In addition, we interpret ‘‘designated aggregating payments across applicable
noted various situations when a on behalf of a covered recipient’’ as
manufacturers. While we recognize that
payment or other transfer of value may when a covered recipient does not
not all physicians have middle names,
be at the request of or designated on receive a payment or other transfer of
we believe that this information should
behalf of a covered recipient. In some value, but the applicable manufacturer
cases, a covered recipient may direct the provides the payment or other transfer be reported whenever possible. As
payment elsewhere; conversely, in of value to another entity or individual required in § 403.904(c)(1), applicable
others, the covered recipient may in the name of the covered recipient. manufacturers must report the middle
simply waive the payment and the For example, a covered recipient may initial of a physician covered recipient
applicable manufacturer provides it to a waive his payment, and the applicable as listed in NPPES, but will not be
third-party recipient of their choosing. manufacturer nevertheless donates the penalized for leaving the field blank if
In addition, there are also models when payment to a charity ‘‘on behalf of’’ the it is not available in NPPES or if the
a covered recipient does not have any covered recipient. We recognize that physician does not have a middle name.
claim to the payment and it is this could result in a covered recipient Additionally, as stated previously, we
automatically provided elsewhere (such who waived a payment nevertheless hope that applicable manufacturers
as a charity) on his/her behalf. The having a payment reported in his or her provide as much identifying detail as
commenters recommended various name; therefore, we encourage covered possible on physician covered
methods to report these situations, recipients to make very clear to recipients to ensure we can attribute
including categorizing some as nonapplicable manufacturers whether they payments appropriately. In order to
reportable. would like their waived fee to be paid ensure that physician covered recipients
Response: We appreciate these to another individual or entity— are appropriately matched across
comments and recognize that there are After consideration of the public applicable manufacturers and to their
various circumstances where a payment comments received, we are finalizing own data during the review and
will be made at the request of or on that reporting of payments or other correction period, we will require
behalf of a covered recipient, which will transfers of value at the request of or applicable manufacturers to report a
all be slightly different. In general, we designated on behalf of a covered physician covered recipient’s name as
do not believe it will be possible to recipient should be reported, but should listed in NPPES.
(2) Business Address significant amount of data to be important for facilitating aggregation of
We proposed that applicable submitted. We agree that we want to the data. We note that the NPPES list
manufacturers should report the full minimize the data submitted; however, does include the nine recognized ADA
street address. For teaching hospital we believe that full street address is specialties. When reporting specialty,
covered recipients, we proposed using important since in large urban areas applicable manufacturers should list
only the address included in the CMS- there may be multiple physicians with both the specialty name and code to
published list of teaching hospitals. For the same name in the same city, so we ensure consistency.
will continue to require reporting of full Additionally, we do not believe
physician covered recipients, we
street business address. applicable manufacturers need to
proposed that applicable manufacturers
provide more information when
report the physician’s primary practice (3) Specialty and NPI reporting physician covered recipient
location address, since this is more
In the proposed rule, we stated that, specialty. We believe that a single
easily recognizable to end users of the specialty should be sufficient and that
as required by the statute, applicable
data. allowing applicable manufacturers to
Comment: A few commenters manufacturers are required to report the
specialty and NPI for physician covered provide a justification of physician
recommended that CMS allow
recipients. We suggested that applicable specialty would be too much
applicable manufacturers to use the information to be beneficial.
address kept on file for a physician manufacturers use the ‘‘provider
covered recipient, rather than the taxonomy’’ field when reporting (4) Date of Payment
address in NPPES, since the address on physician specialty. We proposed that
applicable manufacturers only report a In the proposed rule, we required
file may be more accurate than the applicable manufacturers to provide the
NPPES address. Regarding NPPES, a few single specialty and use only the
specialties available for the ‘‘provider date on which a payment or transfer of
commenters also suggested that CMS value was provided to the covered
should require physicians to keep their taxonomy’’ field in NPPES. More details
on these terms are available online.4 For recipient. We recognized that some
address updated. Some commenters payments or other transfers of value
recommended reporting the address NPI, we proposed that applicable
manufacturers report the physician’s might be provided over multiple dates,
used for correspondence, rather than such as a consulting agreement with
business location. Finally, a few individual NPI, rather than any group
NPI, with which the physician may be monthly payments. We proposed that
commenters discussed that providing applicable manufacturers use their
the full street address for the business associated.
Comment: Many commenters discretion as to whether to report the
address field for each payment or other total payment on the date of the first
transfer of value will increase the data addressed the requirements for
payment as a single line item, or to
elements significantly. reporting physician specialty and NPI.
report each individual payment as a
Response: We appreciate the Some commenters recommended that
separate line item.
comments. We agree that (unlike with a applicable manufacturers be able to use Comment: Many commenters
physician covered recipient’s name) their own internal files for reporting supported the proposed requirements
applicable manufacturers do not need to specialty, rather than NPPES. They were for reporting the date(s) of payment.
use NPPES when reporting addresses. In concerned that specialty in NPPES may These comments appreciated the
the proposed rule, we simply wanted to not be accurate and could lead to flexibility since applicable
be clear that it was available and concerns about off-label marketing. manufacturers may use different
explain what field to use, if an Regarding the NPPES list, a few tracking systems. However, some
applicable manufacturer chose to use commenters recommended that CMS commenters requested additional
NPPES. Regarding the requirement to include the nine recognized American flexibility on how to report the payment
keep addresses updated, we encourage Dental Association (ADA) specialties. date. For example, some commenters
physicians to keep their NPPES profiles Some commenters also requested suggested that applicable manufacturers
updated, but we do not believe that we clarification on whether applicable should have flexibility, depending on
have the authority to force all manufacturers should report both the their individual systems, to report the
physicians to do so. specialty name and the associated date a flight actually occurred or the
We also have finalized our proposal to NPPES code. In addition, a few date the trip was booked, as long as this
require the primary practice location commenters recommended that CMS information is reported consistently
address to be reported as the business allow methods for an applicable within a category. Additionally, the
address. We realize that a physician can manufacturer to provide more context commenters recommended that CMS
be associated with multiple addresses, regarding physician specialty, such as clarify how to report payments which
but we believe that primary practice reporting multiple specialties with one may happen across a reporting year.
location is the most recognizable to listed as primary or allowing a Response: We appreciate the
consumers. However, we understand statement justifying specialty choice. comments and have finalized the
that it may be difficult for an applicable Response: We appreciate the proposal that applicable manufacturers
manufacturer to know which address comments and agree that applicable have the flexibility to report payments
represents the primary practice location, manufacturers may use their internal made over multiple dates either
so we plan to not penalize applicable information when reporting specialty. separately or as a single line item for the
manufacturers for providing the However, the NPPES ‘‘provider first payment date. In addition, we will
incorrect address, as long as applicable taxonomy’’ list (as referenced allow flexibility for what specific date to
manufacturer reports a legitimate previously) should be used as the list of report for a nature of payment category.
business address for the covered accepted specialties since consistency We believe that the methodology
recipient. in the names of reported specialties is employed should be consistent within a
Finally, we appreciate the comment 4 Health care provider taxonomy codes are
single nature of payment category. For
that the reporting of a full street address available through a link on the NPPES Web site:
example, for all flights, applicable
(as opposed to a portion of the address, https://nppes.cms.hhs.gov/NPPES/ manufacturers should report dates in a
such as City and State) will require a StaticForward.do?forward=static.instructions. consistent manner (such as the flight
date or ticket purchase date). In medical supply, the name of the specific named. Similarly, some commenters
addition, the aggregated payments product must be reported. We realize suggested that CMS should allow
should not cross years, so for payments that not every financial relationship flexibility to report business purpose, in
which span multiple years, the amount between an applicable manufacturer addition to product family or a single
paid in a given year must be reported for and a covered recipient is explicitly product.
that reporting year. Similarly, the date linked to a particular covered drug, Response: We appreciate the
of payment methodology should not be device, biological or medical supply, comments and agree that it is important
used to move payments from one but many are, and we proposed that to provide additional information on
reporting year to another. Applicable those must be reported. when and how a related product should
manufacturers are encouraged to When reporting a related product, we be reported. Section 1128G(a)(1)(A)(vii)
include information on the methods proposed that applicable manufacturers of the Act requires that ‘‘if a payment or
they used for reporting date of payment could report only one covered drug, other transfer of value is related to
or other transfer of value in their device, biological or medical supply as marketing, education, or research
assumptions document. When reporting related to a payment or other transfer of specific to a covered drug, device,
the date of payment for bundled small value, even though there arguably may biological, or medical supply,’’
payments (as described in be multiple covered products related to applicable manufacturers must report
§ 403.904(i)(2)(iv)), applicable the payment. However, we considered, the name of the covered product. We
manufacturers should report the date of as an alternative, allowing applicable believe that many financial
payment as the date of the first small manufacturers to report multiple relationships between applicable
payment or other transfer of value made covered drugs, devices, biologicals or manufacturers and covered recipients
to the covered recipient. medical supplies as related to a single are related to marketing, education or
payment or other transfer of value. We research associated with a particular
(5) Context believed that reporting of multiple product, often a covered product.
Comment: Some commenters covered drugs, devices, biologicals, and Therefore, we will finalize that
recommended that CMS allow medical supplies may be easier for applicable manufacturers must report a
applicable manufacturers to voluntarily applicable manufacturers since many related product name for all payments
report contextual information about financial relationships are not specific or transfers of value, unless the payment
each payment or other transfer of value to one product only, but could make or other transfer of value is not related
and make the information publicly aggregating payments by product to a covered product. However, we do
available. CMS did not propose difficult. not believe applicable manufacturers
including this in the proposed rule. With regard to reporting a product should be required to report the name
Response: We agree that information name, we proposed that the applicable of associated non-covered products,
on the context of a payment or other manufacturer should report the name since this may be misleading to
transfer of value could be useful. We under which the product is marketed, consumers and would provide
believe it could help the public better since this name is probably most information that is beyond the goal of
understand the relationships between recognizable to the consumer. In the the statute. However, we do believe it is
the industry and covered recipients. In event that a covered drug, device, useful to know the extent of payments
addition to consumers, we believe biological or medical supply does not or other transfers of value that are not
contextual information will be useful for yet have a market name, we proposed associated with any product or not
covered recipients when reviewing the the applicable manufacturer should associated with a covered product. This
payments or other transfers of value. report the scientific name. distinction will not be possible if
Hopefully, the context will provide Comment: Many commenters applicable manufacturers leave the
information to help the covered questioned how and when to report an associated products fields blank in cases
recipient assess the accuracy of the associated product. A number of these when it is not applicable. Given this
payment. However, we do not want this commenters discussed whether a interest, the final rule directs applicable
information to overwhelm users or product name should be reported for manufacturers to fill in associated
significantly increase the data reported, payments associated with non-covered product fields as appropriate. Instead, if
so will limit the amount of data that can products (such as pre-commercial or the payment or other transfer of value is
be reported in that field. Section OTC drugs) and recommended only not related to at least one covered
403.904(c)(12) allows applicable requiring reporting of a product when product, then applicable manufacturers
manufacturers to provide brief the payment is related to ‘‘marketing, should report ‘‘none.’’ Conversely, if the
contextual information for each education, or research.’’ Many payment or other transfer of value is
payment or other transfer of value, but commenters also recommended that related to a specific product, which is
does not require them to do so. CMS allow the reporting of ‘‘n/a’’ or not a covered product, then applicable
‘‘none’’ in instances when a product is manufacturers are to report ‘‘non-
(6) Related Covered Drug, Device, not associated or when associated with covered product.’’ Finally, if the
Biological or Medical Supply a non-covered product. Similarly, a few payment or other transfer of value is
Section 1128G(a)(1)(A)(vii) of the Act commenters recommended that related to at least one covered product,
requires applicable manufacturers to applicable manufacturers should not as well as at least one non-covered
report the name of the covered drug, have to report an associated product for product, then applicable manufacturers
device, biological or medical supply research on a new indication of a must report the covered products by
associated with that payment, if the covered product. name (as required), and may include
payment is related to ‘‘marketing, A few commenters provided more non-covered products in one of the
education, or research’’ of a particular specific requirements, such as only fields for reporting associated product.
covered drug, device, biological, or reporting a covered product for a Comment: Many comments addressed
medical supply. We proposed that in payment or other transfer of value, the number of associated products that
cases when a payment or other transfer when there is a written agreement or an may be reported for each payment or
of value is reasonably associated with a understanding with the covered other transfer of value. Several
specific drug, device, biological or recipient that the product will be commenters supported allowing
reporting of only a single product, applicable manufacturer should report Section 1128G(a)(1)(A)(vi) of the Act
whereas several others supported the five products which were most includes the following nature of
allowing applicable manufacturers to closely related to the payment or other payment categories:
report multiple products as being transfer of value. Additionally, when • Consulting fees.
associated with the a payment or other aggregating payments or other transfers • Compensation for services other
transfer of value. The commenters who of value by product, we will not than consulting.
advocated reporting multiple products represent a single interaction related to • Honoraria.
explained that often a financial multiple products as multiple • Gift.
relationship is associated with multiple interactions. However, we do not agree • Entertainment.
products, and it would be misleading to that the applicable manufacturer should • Food.
attribute it to a single product. report the percentage of the interaction • Travel (including the specified
Conversely, some commenters were dedicated to each product. We believe destinations).
sympathetic to the need to aggregate the this will be burdensome to the • Education.
applicable manufacturers and would not • Research.
payments or other transfers of value by
be beneficial to consumers, since it will • Charitable contribution.
product. As a compromise, some of • Royalty or license.
these commenters suggested reporting a greatly increase the volume of the data.
We also agree that we should allow • Current or prospective ownership o
single product would be sufficient, as investment interest.
long as we allowed applicable greater flexibility in reporting the
product name, particularly for devices • Direct compensation for serving as
manufacturers to report ‘‘multiple,’’ as faculty or as a speaker for a medical
well. Other commenters recommended where the product name is less
recognizable to consumers. For drugs education program.
that CMS allow reporting of up to five • Grant.
products. However, these comments and biologicals, we are finalizing that
• Any other nature of the payment or
cautioned that aggregation by product applicable manufacturers must report
other transfer of value.
should not give the impression that the market name of the product and In this section, we discuss the general
there were multiple interactions. A must include the NDC (if any). If a policies for reporting the form of
commenter recommended requiring market name is not yet available, payment and the nature of payment,
applicable manufacturers to report a applicable manufacturers should use the rather than the specific categories,
percentage of the interaction to be name registered on clinicaltrials.gov. which will be discussed in sections
attributed to each product listed. The We believe that reporting the NDC will II.B.1.g and h. of this final rule.
comments also addressed what product greatly help CMS aggregating the data In the proposed rule, we proposed
name should be used. Many by product. However, if there is no NDC that the categories within both the form
commenters advocated that applicable available for a product, it does not have of payment and the nature of payment
manufacturers should be allowed to to be reported. For devices and medical should be defined as distinct from one
report the product category or supplies, § 403.904(c)(8)(ii) allows another. Additionally, if a payment or
therapeutic area rather than the product- reporting of either the name under other transfer of value for an activity is
specific name. Many commenters which the device or medical supply is associated with multiple categories,
recommending this method referenced marketed, or the therapeutic area or such as travel to a meeting under a
implantable devices, since consumers product category. We believe that consulting contract, we proposed that
may not know the specific name of the reporting devices and medical supplies the travel expenses should remain
device that had been implanted during in this manner is appropriate, since distinct from the consulting fee
a medical procedure. Many devices are device names are less known to expenses and both categories would
given a complex name and number consumers and a single product may need to be reported to accurately
combination, which consumers may not actually be comprised of multiple describe the relationship. In these cases,
know. For example, a patient may be devices. Conversely, we believe that the we proposed that for each payment or
aware that she received a hip implant names of drugs and biologicals are more other transfer of value reported,
manufactured by company A, but may readily available to consumers, since applicable manufacturers may only
not know the specific model number of they are often listed on a prescription. report a single nature of payment and a
the implant. Similarly, some (7) Form of Payment and Nature of single form of payment. For example, if
commenters recommended slight Payment a physician received meals and travel in
changes to the name required to be association with a consulting fee, we
reported, such as using the The statute requires reporting on both
the form of payment and the nature of proposed that each segregable payment
clinicaltrials.gov name for drugs be reported separately in the
without a name or allowing reporting of payment for each payment or transfer of
value made by an applicable appropriate category. The applicable
the generic name. Finally, a few manufacturer would have to report three
commenters suggested that we require manufacturer to a covered recipient.
The statute provides a list of categories separate line items, one for consulting
reporting of National Drug Code (NDC), fees, one for meals and one for travel.
as well as brand and generic name. for both the form of payment and nature
of payment and gives the Secretary The amount of the payment would be
Response: We appreciate the discretion to add additional categories. based on the amount of the consulting
comments and agree that reporting Section 1128G(a)(1)(A)(v) of the Act fee, and the payments for the meals and
multiple products will likely improve includes the following form of payment travel. For lump sum payments or other
the accuracy of the database in a way categories: transfers of value, we proposed that the
that is more beneficial than the • Cash or a cash equivalent. applicable manufacturer break out the
difficulty in aggregating by product. • In-kind items or services. distinct parts of the payment that fall
Therefore, we will finalize that • Stock, a stock option, or any other into multiple categories for both form of
applicable manufacturers may report up ownership interest, dividend, profit, or payment and nature of payment. We
to five related covered products for each other return on investment. also solicited comment on an alternative
interaction. If the interaction was • Any other form of payment or other approach of allowing a payment or other
related to more than five products, an transfer of value. transfer of value for an activity that is
associated with multiple segregable manufacturer’s method for reporting the Response: We appreciate the
categories to be reported as a single payment or other transfer of value, since comments and have carefully
lump sum, rather than separately by the assumptions document will not be considered the best way to provide
each segregable category. made public. We also believe that a additional context to the categories.
Finally, in the proposed rule we also flexible method would create additional Given the very specific statutory
discussed the interpretations of various disputes because a covered recipient requirements, we are unable to fully
forms of payment and natures of would not know what was included in reconfigure the categories; while the
payment categories. We did not define a single line item, since some line items Secretary is granted discretion to add
the categories individually and instead would be separated, whereas others forms of payment and natures of
proposed that they would have their would be aggregated. Additionally, a payment, she is not given discretion to
dictionary definitions. State with a similar reporting remove or collapse them. However, we
Comment: Many commenters requirement for manufacturers that appreciate the clarification on form of
addressed our proposed method for allows the reporting of secondary payment being considered the modality
reporting form of payment and nature of natures of payment stated in its public used to transfer value and nature of
payment. A number of these comment that reporting entities seldom payment being the reason the payment
commenters supported our proposed use the secondary field, indicating that was made. We believe these
method of reporting a single form of a single field should be sufficient. classifications should help applicable
payment and a single nature of payment With regard to choosing the manufacturers when assigning
for each reported payment, whereas appropriate nature of payment, we agree categories, and will help us provide
others supported the alternative of that if a payment could fit within more accurate guidance on the
reporting multiple forms of payment multiple possible categories, applicable categories.
and natures of payment for a single manufacturers should have flexibility to In order to provide additional
payment. The commenters supporting select the category that best described information we have provided general
multiple forms of payment and natures the payment, in accordance with their discussions and additional contextual
of payment recommended that the own documented methodology. information, particularly for the nature
applicable manufacturer should be However, this should not be used to of payment categories, since we believe
allowed flexibility to report, but should bundle payments of separate categories most comments were concerned with
explain their decisions and into a single payment. For example, a the nature of payment categories. We
methodology for reporting form and meal should be reported as a meal, even provide additional details in the
nature of payment in the assumptions if associated with travel or a consulting following two sections of this final rule
document. Additionally, a few contract. Additionally, serving as a dedicated to form of payment and
commenters suggested that the faculty for a medical education program nature of payment.
applicable manufacturer should be should be reported separately from a
allowed to report lump payments, but g. Form of Payment
consulting contract, even if the medical
should be required to produce education program speech was similar Section 1128G(a)(1)(A)(v) of the Act
segregated payments in an audit. in content to the consulting services lists forms of payment that applicable
Finally, a few commenters provided by the covered recipient. manufacturers must use to describe
recommended that CMS allow Comment: A number of commenters payments or other transfers of value.
applicable manufacturers to report generally questioned the form of Applicable manufacturers must assign
additional details beyond form of payment and nature of payment each individual payment or other
payment and nature of payment to allow categories. Many commenters requested transfer of value, or separate parts of a
end users to understand that not all that CMS develop precise definitions, payment, to one and only one of these
reported relationships are payments. and a few commenters provided categories. In the proposed rule, we did
Response: We appreciate the recommended definitions. However, in not add any forms of payment beyond
comments and believe they provided the event that the agency does retain the those outlined in the statute because we
important background on the processes dictionary definitions, some believed what is provided in the statute
of reporting. However, we have commenters suggested that CMS should was sufficient to describe payments and
finalized these provisions as proposed. ensure that the dictionary definitions other transfers of value. Additionally, as
We believe that flexibility in the are sufficient to provide clarity. explained, we proposed that each form
reporting requirements is important to Additionally, a few commenters of payment be defined by the term’s
aid applicable manufacturers with recommended that CMS publish and dictionary definition, since we believed
different systems. However, we believe allow for Q&As to further clarify the that these terms are understandable as
that there should also be consistency in categories. A few commenters provided written.
the way payments or other transfers of additional categories for CMS to add, Comment: We received a few
value are reported across applicable whereas others recommended methods comments supporting the categories, as
manufacturers, particularly when for categorizing payments or other well as a few recommending small
describing and classifying payments or transfers of value to explain the details changes to the categories. A few
other transfers of value. We believe that of the payment. For example, a commenters advocated adding a
a single form of payment and a single commenter recommended that we create category for ‘‘grant’’ to make clear that
nature of payment for each line item separate reporting categories for it was not personal income. Another few
characterizes a payment or other payments or other transfers of value commenters recommended separating
transfer of value much differently than made directly and indirectly. Finally, a stock, stock option, or any other
reporting multiple forms of payment few commenters recommended that we investment interest from dividend,
and natures of payment for a lump sum should consider form of payment as profit or other return on investment,
payment. We are concerned that ‘‘payment type’’ or the modality used to since they are materially different.
allowing this flexibility will be transfer value, whereas we should These commenters explained that
confusing to covered recipients and end consider nature of payment as ‘‘payment stocks, stock options, and investment
users, since they will not be able to nature’’ or the reason the payment was interests are different from dividends,
readily tell a specific applicable made. profits, and return on investments
because the former are actively granted nature of payment category by its describe the relationship. Additionally,
to a covered recipient while the latter dictionary definition. since all payments or transfers of value
are earned on existing investments. Comment: Many commenters must be reported, we do not believe we
Finally, regarding the definitions, a few discussed the nature of payment should rank the categories and indicate
commenters suggested that CMS use categories, including our proposed some as more desirable or beneficial
standard legal definitions. method for defining the categories. A than others. Instead, we believe that the
Response: We appreciate the few commenters recommended that nature of payment categories are
comments and agree that the forms of CMS provide more guidance on how descriptors and that applicable
payment categories are sufficient. these categories should be applied. For manufacturers should select the most
However, we do agree that the ‘‘stock, example, one commenter recommended appropriate description. However, we
stock option, or any other ownership that CMS rank the categories and if do understand the interest in
investment interest, dividend, profit or multiple categories could apply to a consistency to enhance of the usefulness
other return on investment’’ category single payment or other transfer of of the data, so we will provide some
should be divided into two categories. value, the applicable manufacturer additional explanations for the
We agree that the categories are different should report it in the ‘‘higher’’ ranked categories.
and separating them would create category. Another commenter requested Finally, we appreciate the
additional specificity in the categories, that CMS break the categories into two recommended additional categories. We
without changing them significantly. groups: those made in exchange for have tried to limit the number of
Conversely, we do not agree that grant value (such as services or intellectual additional categories as much as
should be a form of payment. Instead, property rights) and those made without possible, so we have only added
we believe ‘‘grant’’ should remain as a any expectation of benefit. Beyond categories for those recommendations
nature of payment (as included in the categorizing payments or other transfers that we believe cannot be described by
statute), since it best describes a reason of value, many commenters requested existing nature of payment categories.
a covered recipient might receive a additional guidance on the definitions For example, we believe that agreement
payment. After consideration of the for the nature of payment categories. We to appear as an author of a ghostwritten
public comments received, we are also received a few recommendations article is an important relationship that
finalizing the proposal to break the for additional nature of payment should be reported, but believe there are
category of ‘‘stock, stock option, or any categories. For example, a few sufficient existing nature of payment
other ownership investment interest, commenters recommended including a categories, such as compensation for
dividend, profit or other return on category for agreements to appear as an
services other than consulting, which
investment’’ category into two ‘‘author’’ of an industry ghost-written
can be used to describe the relationship.
categories, but otherwise will not be publication. Another commenter
Conversely, regarding space rentals, we
adding any additional categories to form recommended that we include a
do agree that this represents a specific
of payment. We agree that stock, stock category for space or facility fee for
relationship between a covered
options, and other ownership events at a teaching hospital.
Response: We appreciate the recipient (likely a teaching hospital) and
investment interests are different than
comments. However, we believe that an applicable manufacturer that cannot
dividends, profits and other returns of
providing precise definitions for be accurately described by the existing
investment, so separating these
applicable manufacturers to use in nature of payment categories. We
categories may provide additional
clarity to consumers. We do not believe categorizing nature of payments will be understand that space rental or facility
that this changes the way forms of too restrictive. Applicable fees are commonly part of hosting an
payments will be reported, since the manufacturers are required to report all event at a hospital and believe that
categories existed previously, we are payments or other transfers of value, including them in another category
simply providing more clarity and unless they specifically fall within an would inflate the amount in that
specificity to the categories. We believe exception. The nature of payment category. Similarly, the statutory nature
the dictionary definitions are sufficient, categories are simply used to describe of payment categories are mostly
particularly since these terms are these payments or other transfers of directed towards physician covered
generally understandable to consumers. value. We believe precise definitions recipients, so it is important to consider
could make these descriptors less useful the common relationships between
h. Nature of Payment and could make reporting more teaching hospital covered recipients and
Section 1128G(a)(1)(A)(vi) of the Act challenging for applicable applicable manufacturers. Given these
lists the categories for the nature of manufacturers. For example, if a considerations, we will add space rental
payment or other transfer of value that payment or other transfer of value that and facilities fees as a nature of payment
applicable manufacturers must use to the applicable manufacturer generally category under our authority in section
describe each payment. In the proposed would classify as a consulting fee does 1128G(a)(1)(A)(vi)(XV) of the Act, but
rule, we encouraged applicable not meet our precise definition, the will not add appearing as an author for
manufacturers to consider the purpose applicable manufacturer would be a ghostwritten article.
and the manner of the payment or other forced to report it in another category, We are providing some additional
transfer of value; if a payment could which would likely be less accurate explanation of the nature of payment
conceivably fall into more than one than the consulting fee category. The categories to provide additional context.
category, we proposed that applicable relationships between applicable These explanations are not exhaustive
manufacturers should make reasonable manufacturers and covered recipients (unless specified as such), but rather are
determinations about the nature of are extremely diverse; we are concerned intended to provide additional guidance
payment reported for the payment or that providing specific, narrow to applicable manufacturers when they
transfer of value. Additionally, as definitions would not encompass every are categorizing payments. Additionally,
explained, we believed that the nature situation, forcing applicable we will discuss research in a separate
of payment categories have meanings to manufacturers to describe payments or section in light of the additional
the general public that are familiar to other transfers of value by less specific complexities in reporting research-
the industry and proposed defining each categories that do not accurately related payments or other transfers of
value, which warrants additional than payments or other transfers of Beyond the allocation method, we
consideration. value made for expected services or received significant support for our
benefits, such as consulting services or proposal that applicable manufacturers
(1) Charitable Contributions
rental of space in a hospital for an do not need to report any offerings of
In the proposed rule, we stated that event) would be considered and buffet meals, snacks or coffee at booths
charitable contributions to, at the reported as charitable contributions for at conferences or other similar events
request of, or on behalf of covered purposes of this rule. where it would be difficult for
recipients by applicable manufacturers applicable manufacturers to definitively
must be reported. For purposes of the (2) Food and Beverage
establish the identities of the
reporting requirement, a charitable When reporting food and beverage, individuals who accept the offerings.
contribution is any payment or transfer we proposed that in group settings, such However, a few commenters also
of value made to an organization with as the office of a group practice, where recommended that meals that are
tax-exempt status under the Internal it is more difficult to keep track of dropped off at a physician’s office
Revenue Code of 1986, but only if it is which covered recipients actually should also be excluded, as well as
not more specifically described by one partook in the food and beverage meals when the attendees are outside
of the other nature or payment provided by an applicable the control of an applicable
categories. We did not receive any manufacturer, the applicable manufacturer.
comments on the definition of manufacturer should report the cost per Response: We appreciate the
charitable contribution and intend to covered recipient receiving the meal comments and understand that
finalize it as proposed. even if the covered recipient does not
Comment: Many commenters reporting payments or other transfers of
actually partake of the meal. value that fall under the ‘‘food’’ nature
questioned how to report payments or
other transfers of value for when a Comment: Numerous commenters of payment category is quite
covered recipient (usually a physician) questioned our proposed allocation complicated, both in terms of
does not receive a payment personally method for food and beverage. The calculating the value of the payments
and instead the payment is provided to majority of commenters recommended and determining who should be
a charity. In these situations, the that we revise our proposed allocation reported as having received payments.
covered recipient may or may not methodology, but we did receive some We believe that while reporting the
choose the charity and may be waiving support for it. Many commenters transactions accurately is important,
his or her customary fee. recommended various options for tracking exactly what a person ate or
Response: We appreciate the dividing the cost of group meals; drank may not be practical for purposes
comments and understand these however, there were some common of the reporting requirements. We have
payments or other transfers of value can themes in the recommendations. The considered how to improve accuracy in
be complicated. We discussed general majority of these commenters reporting, while ensuring that the
guidelines for reporting payments recommended that applicable reporting requirements for this nature of
through another covered recipient in the manufacturers should report the amount payment are not overly burdensome. For
payments or other transfer of value based on the cost per participant meals in a group setting (other than
section of the final rule, but will provide (including, for example, support staff buffet meals provided at conferences or
additional detail in this section for members who are not covered other similar large-scale settings), we
situations when a payment or other recipients), rather than the cost per will require applicable manufacturers to
transfer of value is directed to charity. covered recipient. Many commenters report the per person cost (not the per
We believe that the ‘‘charitable also strongly recommended that we covered recipient cost) of the food or
contribution’’ nature of payment should not attribute meals to all covered beverage for each covered recipient who
category should be used only in recipients in a practice because it may actually partakes in the meals (that is,
situations when an applicable be difficult for applicable manufacturers actually ate or drank a portion of the
manufacturer makes a payment or other to identify all the physicians within a offerings). In other words, applicable
transfer of value to a charity on behalf practice, and this methodology could manufacturers should divide the total
of a covered recipient and not in implicate concerns of off-label value of the food provided by the
exchange for any service or benefit. For marketing in large multispecialty number of people who actually partook
example, in circumstances where a practices. These commenters suggested in the food and beverage including both
physician provides consulting services that the cost of a meal should only be covered recipients and non-covered
to an applicable manufacturer, but attributed to physicians who actually recipients (such as support staff). If the
requests that his payment for the partook of the food. They suggested that per person cost exceeds the minimum
services be made to a charity, this it would not be unduly burdensome to threshold amount, then the applicable
would not be a charitable contribution keep track of which physicians actually manufacturer must report the food or
for purposes of this rule because the participated in the meal. Some beverage as a payment or other transfer
payment was not provided by the commenters also recommended that of value for each covered recipient who
applicable manufacturer as a charitable CMS allow applicable manufacturers actually participated in the group meal
contribution, but rather as a directed flexibility in allocating the value of by eating or drinking a food or beverage
consulting fee. This payment would be meals depending on their internal item. For example, a sales representative
reported as a consulting fee with the systems or that the value should be brings a catered lunch costing $165 to
physician as the covered recipient, but based on the amount actually received. a 10-physician group practice. Six of the
the entity paid would be the charity. Finally, a few commenters ten physicians and five support staff
Additionally, we note that in the recommended that CMS provide participate in the meal. Because the
cases of teaching hospital covered covered recipients with the opportunity meal cost $15 per participant ($165/11
recipients that have tax-exempt status to ‘‘opt-out’’ of interactions with participants = $15), the meal needs to be
under the Internal Revenue Code of applicable manufacturers, including reported for the 6 physicians who
1986, payments or other transfers of meals, and attest that they never partake participated in it. However, the meal
value made to these organizations (other in such meals. does not need to be reported for the 4
other physicians in the group who did the opportunity to opt-out from continuing education-related speaking
not participate in the meal (that is, did receiving meals; however, we believe engagements and recommended that
not eat or drink any of the offerings). that this would be operationally they be treated differently than
Additionally, if the total cost of the meal difficult for CMS. We would need to unaccredited and/or certified
was $100, making the cost per track the covered recipients and would continuing education speaking
participant less than $10, then the meal have to develop a method of arbitration engagements. Many of these
would not have to be reported since it if an applicable manufacturer reports a commenters provided significant
was below the minimum threshold. We meal for a physician who has opted-out. background information on accredited
decided to make this modification to the We believe that covered recipients who and certified continuing education.
proposed rule because we agree with do not want to receive meals simply Accredited Continuing Medical
commenters that for the purposes of this should make clear to applicable Education (CME) refers to CME
rule this method will more accurately manufacturers that they do not accept activities that have been deemed to meet
reflect the actual transaction, and will them. The finalized methodology will the requirements and standards of a
not unfairly attribute a payment to a no longer attribute meals to physicians CME accrediting body, as authorized by
physician who did not partake in it. who do not attend the meal, so a the Accreditation Council for
Additionally, we believe this approach physician who does not want to receive Continuing Medical Education
will reduce disputes between applicable meals should not attend or accept them. (ACCME). Certified CME refers to CME
manufacturers and physicians, since Finally, we appreciate the support activities that carry credit offered by the
food-related payments or other transfers regarding offerings of buffet meals, grantors of CME credit (the American
of value will not be attributed to snacks, or coffee at conferences or other Osteopathic Association (AOA), the
physicians that did not actually receive large-scale events where it would be American Academy of Family
them. Finally, this method does not difficult for applicable manufacturers to Physicians (AAFP), and the American
require the reporting of meals eaten by definitively establish the identities of Medical Association (AMA)).
support staff, for the purposes of this the physicians who partake in the food Continuing dental education is similarly
reporting requirement. However, we or beverage. Accordingly, we have accredited through the American Dental
recognize that in other contexts, finalized that food and beverage Association’s Continuing Education
transfers of value to a physician’s office provided at conferences in settings Recognition Program (ADA CERP).
support staff (which may include meals) where it would be difficult to establish These commenters explained that
may constitute transfers of value to the the identities of people partaking in the accredited and certified continuing
physician. food do not need to be reported. This education speaker payments will
While we appreciate the importance applies to situations when an applicable generally not be made directly by an
of flexibility, we believe that we need to manufacturer provides a large buffet applicable manufacturer to a covered
set out the attribution methodology in meal, snacks or coffee which are made recipient, as this category suggests, due
order to ensure as much consistency as available to all conference attendees and to the accreditation requirements. Some
possible. If we did not provide a where it would be difficult to establish commenters suggested that these be
methodology, it could result in very the identities of the physicians who reported in another ‘‘indirect’’ speaking
different amounts being reporting across partook in the meal or snack. We do not engagement category. Conversely, other
applicable manufacturers and could intend this to apply to meals provided commenters recommended that this
lead to increased disputes since covered to select individual attendees at a category be limited to accredited and
recipients would not know how a conference where the sponsoring certified continuing education
particular applicable manufacturer applicable manufacturer can establish payments, and that compensation for
attributed the value of a meal. We identity of the attendees. other speaking engagements should be
believe that there must be some described by other natures or payments.
(3) Direct Compensation for Serving as Response: We appreciate the
consistency across applicable
a Faculty or as a Speaker for a Medical comments and agree that it is important
manufacturers in this complicated area,
so we have finalized the position that Education Program that CMS clarify this category. We
applicable manufacturers must report In the proposed rule, we interpreted understand the importance of
the cost per participant for covered this category broadly to encompass all continuing medical education and
recipients in attendance. instances in which applicable discuss the requirements for reporting it
Regarding meals that are dropped off manufacturers pay physicians to serve generally in section II.B.1.k. of the final
at a covered recipient’s office (for as speakers, and not just those situations rule, dedicated to indirect payments or
example, by a sales representative) and involving ‘‘medical education other transfers of value. We agree that
other meals where the attendees are not programs.’’ We acknowledged that this given the title of this nature of payment
controlled or selected by the applicable interpretation does not allow for category, which was set out in the
manufacturer, we believe that these differentiation between continuing statute itself, it should not include
situations nevertheless constitute education accredited speaking compensation for accredited or certified
payments or other transfers of value to engagements, and all other speaking continuing education payments.
a covered recipient, so they must be engagements. However, we do not believe that all
reported. Applicable manufacturers are Comment: Many comments addressed payments to physicians for serving as
responsible for keeping track of food our proposed interpretation of this speakers at an accredited or certified
and beverages provided to covered category, particularly regarding its continuing education program should
recipients and must use the same relationship to accredited and/or be granted a blanket exclusion (as
attribution method for all meals as certified continuing medical and dental discussed in the indirect payment
described previously regardless of education. section), so we have added an
whether the manufacturer’s A few commenters supported our additional nature of payment category
representative remained in the office for interpretation to include all speaking for serving as a faculty or speaker at an
the entire meal. engagements in one category; however, accredited or certified continuing
We also appreciate the comments numerous others were concerned about education event, at § 403.904(e)(2)(xv).
regarding allowing covered recipients payments for accredited and/or certified This category, named ‘‘compensation for
serving as faculty or as a speaker for an as a speaker for a medical education consulting services are typically
accredited or certified continuing program’’ to include indirect provided under a written agreement and
education event,’’ includes all compensation as well, provides in response to a legitimate need by the
accredited or certified continuing applicable manufacturers flexibility to applicable manufacturer. Similarly, we
education payments that are not describe payments or other transfers of believe there is often a connection
excluded by the conditions set forth in value more accurately. between the competence of the covered
§ 403.904(g)(1)(i) through (iii), and (4) Other recipient paid and the purpose of the
further discussed in section II.B.1.k. of arrangement, as well as a reasonable
this final rule. Additionally, we also In the proposed rule, we added a number of individuals hired to achieve
renamed the category for direct nature of payment category, titled the intended purpose.
compensation to include speaking ‘‘other,’’ to serve as a catch all for
payments or other transfers of value that (B) Compensation for Services Other
engagements at unaccredited and non-
do not fit into one of the listed natures than Consulting
certified continuing education events at
§ 403.904(e)(xiv). We recognize that not of payment.
Comment: Many commenters This category is intended to capture
all payments or other transfers of value compensation for activities or services
related to unaccredited and non- recommended that CMS remove the
proposed additional nature of payment that are not traditionally considered
certified continuing education will be consulting services, but are provided by
provided directly. Therefore, we retitled category ‘‘other.’’
Response: We appreciate the a covered recipient to an applicable
the category as ‘‘compensation for manufacturer. As discussed in the
serving as a faculty or as a speaker for comments and agree that an ‘‘other’’
category could dilute the usefulness of section on direct compensation for
an unaccredited and non-certified serving as a faculty or as a speaker for
continuing education program.’’ This the nature of payment categories.
Therefore, the final rule omits ‘‘other’’ a medical education program, this
renamed category includes all other category should include payments or
instances when an applicable category from the nature of payment
categories at § 403.904(e). However, all other transfers of value for speaking
manufacturer provides compensation to engagements that are not related to
a covered recipient for serving as a payments or transfers of value from
applicable manufacturers to covered continuing education, such as
speaker or faculty at an unaccredited promotional or marketing activities.
and non-certified education event, recipients (other than those excluded
regardless of whether the payment was under section 1128G(e)(10) of the Act) (C) Honoraria
provided directly or indirectly. Finally, must be reported. Any payments or
transfers of value that are not We believe this category is similar to
the nature of payment category for
specifically excluded, must be reported ‘‘compensation for services other than
‘‘compensation for services other than
and described based on the nature of consulting.’’ However, honoraria are
consulting’’ at § 403.904(e)(2)(ii) now
payment categories included in the final distinguishable in that they are
explicitly includes payments or other
rule. Applicable manufacturers are generally provided for services for
transfers of value for speaking
required to report each payment under which custom prohibits a price from
engagements that are not for continuing
the nature of payment category that being set.
education.
most closely describes the payment; the (D) Gift
We believe this reporting strategy absence of a nature of payment category
appropriately separates accredited and that closely describes the payment does This category is a general category,
certified continuing education from not constitute a basis for not reporting which will often include anything
unaccredited and non-certified an otherwise reportable payment or provided to a covered recipient that
continuing education, so that consumers other transfer of value. Failure to report does not fit into another category. For
can better understand the nature of the such a payment may result in the example, the provision of small trinkets
payment received by a covered imposition of a civil monetary penalty (above the minimum threshold) would
recipient. Accredited and certified on the applicable manufacturer. need to be reported as a ‘‘gift’’ since
continuing education that complies
(5) Other Nature of Payment Categories they are not included in any other
with applicable standards of the
category. However, provision of tickets
accrediting and certifying entities Although we did not address these to a professional sporting event should
generally includes safeguards designed categories in the proposed rule, we not be reported as a ‘‘gift’’ since this
to reduce industry influence, so we received comments requesting transaction is better described by the
believe that, when reportable (that is, additional information on these nature of payment category
when the payments or transfers of value categories and what CMS intends them ‘‘entertainment’’ even if the provision of
do not meet the conditions delineated at to include. In the following sections, we the tickets was a gift.
§ 403.904(g)(1)(i) through (iii)), have provided additional guidance on
payments or transfers of value made to how we interpret the categories. Once (E) Entertainment
support accredited and certified again, this is not intended to define the
continuing medical education should categories, but rather to provide This category is intended to include,
remain in a distinct category from additional information for applicable but is not limited to, attendance at
unaccredited or non-certified manufacturers when considering the recreational, cultural, sporting or other
continuing education. We also believe categories. events that would generally have a cost.
that educational speaking engagements (F) Travel and Lodging
should be separated from all other (A) Consulting Fees

speaking engagements, promotional or This category is intended to include This category includes travel,
otherwise, to have separated them fees paid by an applicable manufacturer including any means of transportation,
appropriately. Finally, we believe the to a covered recipient for services as well as lodging. As required in
renaming of the statutory nature of traditionally viewed as consulting section 1128G(a)(1)(A)(vi)(VII) of the
payment category for ‘‘direct services. While we believe there is Act, the destination, including City,
compensation for serving as a faculty or likely variation, we believe that State and country must be reported.
(G) Education must select the nature of payment of Information Act (FOIA) request.
We believe this category generally category that best describes the payment Conversely, other commenters
includes payments or transfers of value or other transfer of value. The nature of recommended that even if the
for classes, activities, programs or payment categories in the final rule are assumptions documents were not made
events that involve the imparting or as follows: public, they should be available to
acquiring of particular knowledge or • Consulting fee. covered recipients upon request to help
skills, such as those used for a • Compensation for services other mitigate disputes.
profession. As stated in the section on than consulting, including serving as Beyond the publication of the
indirect payments or other transfers of faculty or as a speaker at an event other assumptions document, some
value, we do not intend to capture the than a continuing education program. commenters discussed the expected
attendees at accredited or certified • Honoraria. content for the assumptions document,
continuing education events whose fees • Gift. as well as how CMS intends to use the
have been subsidized through the CME • Entertainment. documents. Regarding the content of the
organization by an applicable • Food and beverage. assumptions document, a few
• Travel and lodging (including the commenters recommended that
manufacturer (as opposed to payments
specified destinations). applicable manufacturers may include
for speakers at such events); however,
• Education. other reporting assumptions and
we believe that any travel or meals
• Research. methodologies, beyond natures of
provided by an applicable manufacturer • Charitable contribution.
to specified covered recipients payment, such as determining whether
• Royalty or license. an interaction constitutes a payment or
associated with these events must be • Current or prospective ownership
reported under the appropriate nature of other transfer of value. Other
or investment interest. commenters recommended that CMS
payment categories. • Compensation for serving as faculty create its own assumptions document
(H) Royalty or License or as a speaker for an unaccredited and for applicable manufacturers to use
This category includes, but is not non-certified continuing education when characterizing payments or other
limited to, the right to use patents, program. transfers of value. Finally, a few
• Compensation for serving as faculty commenters recommended that CMS
copyrights, other intellectual property
and trade secrets, including methods or as a speaker for an accredited or clarify that it intends to review the
and processes. We believe this may be certified continuing education program. submitted assumptions documents and
• Grant. does not plan to use them for purposes
pursuant to a written agreement and
• Space rental or facility fees. of prosecution for failure to report.
could entail various payment schedules
(such as scheduled or milestones (7) Assumptions Document Response: We appreciate the
methods). Applicable manufacturers comments, and given the support for the
In order to monitor how applicable assumptions document, we are
may report total aggregated payment manufacturers were classifying
amounts for payments made under a finalizing the voluntary submission of
payments or other transfer of value, we an assumptions document in this final
single agreement, in order to consolidate proposed that applicable manufacturers
reporting. rule. As discussed in the section of the
could submit along with their data a preamble to this final rule on payments
(I) Current or Prospective Ownership or document describing the assumptions or other transfers of value (section
Investment Interests used when categorizing the natures of II.B.1.F. of this final rule), applicable
We believe this category includes payments. We proposed that submission manufacturers may include in the
ownership or investment interests of the assumptions document would be assumptions document assumptions
currently held by the covered recipient, voluntary and would not be made and methodologies other than only
as well as ownership interests or public. We explained that the those employed when classifying nature
investment that the covered recipient documents could aid the agency in of payment categories. Furthermore,
has not yet exercised. Details on current offering further guidance to applicable applicable GPOs reporting under section
ownership or investment interests is manufacturers regarding how natures of 1128G(a)(2) of the Act may also submit
discussed in the section of the final rule payment should be classified. an assumptions document. The
dedicated to reporting ownership or Comment: A few commenters assumptions document may include the
investment interests of physicians. questioned the CMS proposal to allow applicable GPO’s assumptions when
applicable manufacturers to submit an categorizing nature of payment
(J) Grant assumptions document in order to categories for any information submitted
This category generally refers to ensure consistency in the reporting and on payments or other transfers of value
payments to covered recipients in selection of categories. Many of these provided to physician owners or
support of a specific cause or activity. commenters supported the submission investors (as required in section
of the assumptions document; however, 1128G(a)(2)(C) of the Act) or any other
(6) Nature of Payment Categories the commenters varied as to whether the assumptions or methodologies the
Based on the comments, and the assumptions documents should be applicable GPO wishes to include.
discussion and justifications included mandatory. Some commenters After review of the comments, we
in this section, we will allow applicable recommended that it be mandatory, continue to believe that submission of
manufacturers to report the following while others supported that it be the assumptions document should be
categories in the nature of payment field voluntary. Additionally, the voluntary and that the contents of the
to describe payments or other transfers commenters also both supported and assumptions documents submitted
of value. However, as stated previously, opposed the proposal not to make the should not be made public. We believe
all payments or other transfers of value assumptions document public. A few that they will likely contain significant
must be reported, unless excluded, even commenters expressed that the detailed information, which will not
if they do not explicitly fit into one of assumptions documents should not be necessarily be consumer friendly, so it
the outlined nature of payment published on the public Web site and could be overwhelming on the public
categories. Applicable manufacturers should also not be subject to a Freedom Web site. We encourage applicable
manufacturers to be as clear and specific accurately present research payments to provide additional information and
as possible with regard to the consumers. We appreciate the clarification about what constitutes
information submitted within the comments and have revised the system research and what research-related
assumptions document. If a statement to try to improve the process and ensure payments must be reported. Based on
within the assumptions document that the research is reported in a manner suggestions in the comments received,
pertains to a particular section of the that most accurately describes the we have decided to define research
report, applicable manufacturers should research relationship. A summary of the based on the Public Health Service Act
explicitly refer to that section in the comments and our finalized process are definition of research in 42 CFR 50.603;
assumptions document. Additionally, outlined in this section. this definition defines research as: ‘‘a
we do not believe that we should systematic investigation designed to
(1) Scope of Research
provide the assumptions documents to develop or contribute to generalizable
covered recipients. This would be In the proposed rule, we proposed to knowledge relating broadly to public
difficult for the agency to track and limit the research category to bona fide health, including behavioral and social-
would greatly reduce the confidentiality research activities, including clinical sciences research. This term
of the documents. Applicable investigations that are subject to a encompasses basic and applied research
manufacturers may provide their written agreement or contract between and product development.’’ We believe
assumptions document to covered the applicable manufacturer and the this definition includes pre-clinical
recipients upon the request of covered organization conducting the research research and FDA Phases I–IV research,
recipients independently from CMS. To and a research protocol. We based this as well as investigator-initiated
the extent an assumptions document is criteria on the method used to identify investigations. We have finalized that
requested under the FOIA, we would payments eligible for delayed payments reported as research should
follow our predisclosure notification publication. be made in connection with an activity
procedures at 45 CFR 5.65(d) and seek Comment: We received a number of that meets the definition. In addition,
the submitter’s input on the suggestions from commenters about we agree that requiring both a written
applicability of FOIA Exemption 4, which types of research payments agreement or contract and a research
which protects trade secrets and should be reportable. Many commenters protocol is limiting for some types
commercial or financial information recommended including a definition of research, so we are finalizing that if a
that is obtained from a person and is research and suggested many different payment falls within the nature of
privileged or confidential. definitions. Additionally, some payment category for research, it only
The agency intends to carefully commenters recommended that CMS needs to be subject to a written
review the assumptions documents to provide information on what constitutes agreement or contract or a research
determine whether we need to publish a research protocol or written protocol. This may include an unbroken
more detailed guidance to assist agreement. These commenters stated chain of agreements (instead of a single
applicable manufacturers in classifying that not all research has a ‘‘research agreement between the applicable
the nature of payment categories, or protocol’’ and recommended that the manufacturer and the covered recipient)
other assumptions or methodologies agency interpret the term broadly or not which link the applicable manufacturer
included in the assumptions document. require that one exist in order for a with the covered recipient because we
Additionally, we intend to provide payment to be described as research. For understand that many applicable
assistance to applicable manufacturers example, clinical research for devices is manufacturers use other entities such as
to help classify payments or other often different from clinical drug contract research organizations (CROs)
transfers of value and hope that such research and does not require a research (as defined in 21 CFR 312.3(b)), or site
guidance will be useful. Finally, we do protocol. Finally, many commenters management organizations (SMOs) to
not intend to use the assumptions recommended that CMS exclude certain manage their clinical research activities.
document for prosecution, but research-related payments from the For example, agreements between an
acknowledge that the reporting based on reporting requirements altogether, such applicable manufacturer and a CRO,
the assumptions would be open to as payments related to pre-clinical between a CRO and an SMO, and then
prosecution. Other HHS divisions, the research, indirect research, or research between an SMO and a teaching
Department of Justice (DOJ), or the by Principal Investigators (PI) not hospital would be considered a
Office of the Inspector General (OIG) practicing medicine, due to the continuous chain of agreements from
could request access to the documents importance of research-related the applicable manufacturer to a
as part of an audit or investigation into relationships in developing new covered recipient and would be
an applicable manufacturer or treatments and products. considered a research agreement.
applicable GPO. Additionally, a few comments Regarding reporting of research-
addressed how to handle payments that related payments which do not meet the
i. Research could conceivably be related to definition of research, applicable
We received numerous comments on research, but do not meet the definition manufacturers should report using the
our proposed methods for reporting and of research. In the proposed rule, we other categories available. We believe
presenting research-related payments. solicited comments on the preferred that the categories are sufficiently broad
We recognize that reporting payments or method for these payments and the to provide applicable manufacturers
other transfers of value for research comments were mixed. Some options; for example, we believe the
activities is extremely complicated, recommended that CMS create another grant category could be used to
since many research activities include nature of payment category for these sufficiently describe some of the
large payment amounts which are payments (such as one titled ‘‘other transactions.
spread across numerous activities and research’’); others recommended that We also seek to respond to comments
parties, and acknowledge that our CMS require applicable manufacturers about which research-related payments
proposed method did not fully address to report the payment in another should be reportable. In general, we
this complexity. We understand the category. believe that any payments related to the
need for a simple and clear reporting Response: We appreciate the definition of research discussed
process, which allows the agency to comments and agree that we should previously should be reportable. We
recognize that research is important and payment or other transfer of value more representative of the actual
have allowed research to be reported in (whether direct or indirect research) payment stream for research. Applicable
a manner that acknowledges its special should be reported individually under manufacturers must report research-
role. Given this consideration, we do the names and NPIs of physician related payments that ultimately are
not believe we should further limit the covered recipients serving as principal paid, in whole or in part, to a covered
scope of research payments to be investigators. For indirect payments, recipient (physician or teaching
reported. Many of the comments sought this included the physician covered hospital). We have finalized that
to limit the reporting of research related recipient(s) serving as principal applicable manufacturers must report
payment in significant ways, such as investigator(s) who would ultimately research payments separately in a
only reporting direct research. However, receive payments from the clinic, different template, since we will be
we believe Congress clearly intended hospital, or other research institution, requiring the reporting of modified
research-related payments or other assuming the applicable manufacturer is information. Applicable manufacturers
transfers of value to be included in the aware of the identity of the principal will not be responsible for indicating
reporting requirements, based on the investigator(s). Finally, we proposed whether a payment was direct or
inclusion of ‘‘research’’ as a nature of that for both direct and indirect indirect. We have adopted a procedure
payment, the statutory definition of research, applicable manufacturers must similar to the process outlined in many
‘‘clinical investigation,’’ and the report the entire payment amount for of the comments, where a single
procedures for delayed reporting for each research payment (whether to the research payment is reported once and
certain research-related payments or covered recipient or research includes the entity paid, as well as the
other transfers of value. We believe that institution), rather than the specific name of the principal investigator(s).
excluding payments or other transfers of amount that was provided to the Applicable manufacturers must report
value related to clinical research or covered recipient. each research payment once as a single
indirect research from the reporting Comment: A significant number of interaction. They must report the name
requirements would be inconsistent comments addressed the method of the individual or entity (regardless of
with the intent of Congress. We do agree proposed for reporting research whether it is a covered recipient) that
that pre-clinical research is slightly payments. While there was some received the payment for the research
different, so we have outlined reporting support for our proposed methods, the services, as well as the principal
requirements tailored to its unique majority of the commenters did not investigator(s). When reporting the
structure which are discussed more in support it and recommended a new entity or individual that received the
this section. method. Many commenters stated that payment, we intend for the applicable
Additionally, as explained in the allocating 100 percent of the research manufacturer to report the entity or
section on covered recipients, we do not payment to the physician PI would be individual that received the payment,
believe the statute limits the reporting misleading, even if the payment amount either directly from the applicable
requirements to licensed physicians was not aggregated into the physician’s manufacturer or indirectly through a
who regularly treat patients, so we plan total payments. Similarly, many CRO or SMO. We believe that the
to require reporting of research commenters did not support reporting a recipient of the payment could include
payments to PIs who meet the definition single payment multiple times, which individual principal investigators,
of ‘‘physician,’’ even if they do not some commenters feared could lead to teaching hospitals, nonteaching
regularly treat patients. Finally, material double counting of research payments. hospitals or clinics. We intend for the
transfers (such as provision of a protein) These commenters provided numerous principal investigator(s) to include the
to a researcher for discovery recommendations for how to report and individual(s) conducting the research or
collaboration does not need to be present research related payments. The providing the services on behalf of the
reported when not part of a commercial most common recommendation was to research institution.
or marketing plan and precedes the report research in a separate reporting As discussed regarding the reporting
development of a new product. We template, which would include a single elements for all payments or other
believe for the purposes of this line item for each payment. The transfers of value, in order to better
regulation that due to the early stage of payment would include both the entity identify and match covered recipients,
the research process, the transferred paid (such as the research institution) the same identifying information will be
material does not have independent and list the name of the principal required to be reported for each PI
value. investigator. There were some variations meeting the definition of covered
in the recommendations, including recipient.
(2) Reporting Research Payments The applicable manufacturer shall be
reporting only the amount the PI
We also understand that research received and that the applicable required to report the following for each
payments are unique and should be manufacturer must control the selection research-related payment that ultimately
reported differently than other of the PI; however, the majority of is paid, in whole or in part, to a covered
payments or other transfers of value. We comments followed this basic process. recipient (physician or teaching
proposed special rules to report research A few commenters also requested that hospital):
payments, including a rule to separate applicable manufacturers should be • Name of research institution/other
the classification of research payments allowed to report context of research or entity or individual receiving payment
to clarify whether the payment or other additional information on the research (regardless of whether a covered
transfer of value went indirectly or payment. Finally, a few commenters recipient)
directly to the covered recipient. When recommended that research payments ++ If paid directly to a physician
reporting payments or other transfers of be presented separately on the public covered recipient, list the individual’s
value designated as research, we Web site to clearly delineate them as a name, NPI, State professional license
proposed that applicable manufacturers research-related payment or other number(s) and associated State names
must report the payment or other transfer of value. for at least one State where the
transfer of value as either ‘‘indirect Response: We appreciate the physician maintains a professional
research’’ or ‘‘direct research.’’ comments and agree that reporting of license, specialty, and primary business
Additionally, we proposed that the research-related payments should be address of the physician(s).
++ If paid directly to a teaching including FDA’s defined phases of aware of the daily activities.
hospital covered recipient, list name investigation. For pre-clinical research, Additionally, we do not require the
and primary business address of the applicable manufacturers only have to reporting of payments to non-covered
teaching hospital. report the name of the research recipients that are not passed on to
++ If paid to a non-covered recipient institution, principal investigator(s) covered recipients. For example, if an
(such as a non-teaching hospital or (including name, NPI, State professional applicable manufacturer paid separately
clinic), list name and primary business license number(s), specialty and for a non-covered recipient to travel to
address of the entity. business address), and the total amount a meeting, then it would not need to be
• Total amount of research payment. of the payment, so they do not need to reported. However, if an applicable
• Name of study. report an associated product, or study manufacturers paid separately for a
• Name(s) of related covered drug, name. covered recipient (regardless of whether
device, biological or medical supply We are also finalizing guidelines for the individual was a PI or not) to travel
(same requirements as for all payments what should be included in the total to a meeting, then the travel would have
or other transfers of value) and NDC (if research payment amount. The amount to be reported in the name of the
any). should include the aggregated amount covered recipient traveling.
• Principal investigator(s) (including of any payments for services included in When reporting research payments,
name, NPI, State professional license the written agreement/research protocol. we also acknowledge that research
number(s) and associated States for at We envision that this would include the payments are generally different than
least one State where the physician costs associated with patient care, other payments and may not represent
maintains a professional license, including diagnostics, exams, laboratory a payment to the covered recipient. For
specialty, and primary business expenses, time spent by health care physician covered recipients whom are
address); professionals treating the patient and paid by a third party and not directly by
• Context of research (optional). managing the study, and the provision the manufacturer, we will list research
• ClinicalTrials.gov identifier of study drugs, devices, biologicals, and studies separately from all other
(optional). medical supplies or other in-kind items. payments provided to the covered
The payment amount should not recipient. For teaching hospitals, we
We believe reporting this information
include any payments for activities will publish all research payments
for each research payment will better
which are separate or segregable from which went to the hospital as a research
capture the nature of the research the written agreement or research institution. These will be listed
relationship, creating a simpler protocol or are paid through a method separately from other payments to the
reporting mechanism for the applicable different than that of the research. For hospital, but will include both the study
manufacturers to report payments and example, payments made directly to a amount and study name.
allowing end users a more accurate physician for serving on a study steering We believe that presenting research
understanding of the relationship. We committee or data monitoring payments in this method reflects the
believe the study name will provide committee that are not a part of the fact that research payments are unique
information on the research topics, but larger research payment should be and do not necessarily represent a
we have also included an optional field reported separately. Payments for personal payment to physicians;
allowing applicable manufacturers to medical research writing and/or however, it still allows for research
provide additional contextual publication would be included in the payments to be reported as intended by
information on or the objectives of the research payment, if the activity was Congress, but in a less burdensome way
research. We intend this to be used included in the written agreement or for applicable manufacturers. In light of
similarly to the additional context research protocol and paid as a part of the public comments received, we
allowed for reporting all payments or the research payment. In addition to believe that the modifications represent
other transfers of value. Additionally, research payments, we also believe that a better, more accurate method of
we also will allow applicable meals and travel should be reported reporting research payments.
manufacturers to provide the separately (under the food and travel
ClinicalTrials.gov Identifier to allow j. Exclusions
nature of payment categories) unless
consumers the ability to obtain more included in written agreement or Section 1128G(e)(10) of the Act
information on the study from research protocol and paid for through excludes specific types of payments or
ClinicalTrials.gov. However, we the large research contract. other transfers of value from the
recognize that not all research studies We realize that reporting reporting requirements.
will be posted on ClinicalTrials.gov, so requirements for research will be Comment: We received numerous
this category will be optional. Finally, somewhat different than the procedure comments on the exclusions section of
this represents the information required outlined for other natures of payment, the proposed rule. Many of the
to be reported for each research-related but we believe that this is appropriate comments focused on the statutory
payment or other transfer of value, but for research-related payments or other exclusions and the explanations CMS
the agency may identify other optional transfers of value. As several comments provided in the proposed rule. Beyond
fields, such as information on pointed out, due to the flow of research these comments, we also received
publications related to the research, in payments from sponsor to research numerous recommendations for
order to provide additional information institution, an applicable manufacturer additional exclusion categories to be
and background on the public Web site. might not know the specific details or included in the final rule. The
For pre-clinical research, we finalize amounts of how the larger research recommended exclusions covered
slightly modified reporting payment was spent. We do not intend numerous specific relationships
requirements since such early stage for applicable manufacturers to be between applicable manufacturers and
research is often not connected to a required to itemize each research covered recipients, some related to
specific product. We intend pre-clinical payment, since they are usually large healthcare, such as paying a physician
research to include laboratory and payments obligated to general at an on-site clinic, whereas others did
animal research that is carried out prior administration of the study and the not, such as campaign contributions to
to beginning any studies in humans, applicable manufacturer may not be physicians running for political office.
Response: We appreciate these proposed rule, we proposed that flexibility in reporting small payments.
recommendations, but do not believe applicable manufacturers should not They may either report them
that we have the statutory authority to report to CMS any payments or other individually or bundled with other
add exclusions beyond what was transfers of value less than $10 small payments or other transfers of
outlined in the statute. The statute individually and all small payments or value in the same nature of payment
expressly provides the Secretary transfers of value in the same nature of category, as long as applicable
discretion to require the reporting of payment category should be reported as manufacturers are reporting consistently
additional information of payments or one total amount for that category. We and clearly indicating the method they
other transfers or value, and ownership believed this would simplify reporting are using. Additionally, we agree that
or investment interests, but it does not for applicable manufacturers and the de minimis thresholds should not
provide a similar authority to add prevent the reporting of payments less change within a reporting year and will
exclusion categories. We have finalized than $10 individually. Given the timing be constant for the entire year. For
our policy that the exclusions will be of this final rule, we have decided to example, for the entirety of data
defined by their dictionary definitions, begin increasing the de minimis collection in 2014, the thresholds will
but plan to provide additional thresholds for reporting in CY 2014, and be those adjusted based on CPI
clarification in response to the retain the statutory de minimis published in June 2013. We will report
comments in this section. We believe thresholds ($10 and $100) for reporting the new de minimis value with the
that some of the recommended in CY 2013. We believe this simplifies reporting template for the next reporting
exclusions could be included in some of reporting for the first year of data year.
the statutory exclusions, so we have collection by employing simple We appreciate the comments on the
provided additional information to numbers as thresholds. Also because threshold for small payments and
clarify our interpretation of these these were the statutory thresholds, we understand that they may be low for
categories. believe applicable manufacturers should some stakeholders. Nevertheless, the
be prepared to collect data and report thresholds were mandated by the
(1) Existing Personal Relationships statute, and we do not have discretion
using these thresholds for CY 2013.
In the proposed rule we stated that we Comment: We received various to change them. However, we recognize
did not intend to require reporting of comments on small payments or other that we do not want the database to be
purely personal transfers of value (for transfers of value. Some commenters overwhelmed by small payments. We
example, if one spouse, who works for indicated that our proposed method for have considered options for reducing
an applicable manufacturer, gives a reporting small payments together might the number of small payments, but we
present to the other spouse who is a (for some applicable manufacturers) be believe that we do not have authority to
covered recipient), and we solicited more difficult than reporting small change the reporting requirements for
comments on this proposal. payments individually; these small payments or other transfers of
Comment: Many commenters commenters recommended that CMS value.
supported our intention to exclude allow applicable manufacturers Regarding reporting of payment or
payments or other transfers of value discretion in their reporting mechanism. other transfers of value at conferences or
between individuals who happen to Some commenters also recommended similar events, we appreciate the
have existing personal relationships and that CMS not change the thresholds comments and have provided additional
recommended that it be included as a within a single reporting year. Beyond guidelines expanding on the proposed
listed exclusion. A few commenters also comments on reporting of small rule. In general, we will finalize that
recommended specific requirements, payments, many commenters also these guidelines will apply to
such as to include relationships addressed the small payment or transfer conference and similar events, as well
between family members, to limit to of value exclusion more generally. Many as events open to the public. We believe
bona fide relationships or to mirror the commenters questioned the thresholds that at events open to the public, it will
Federal employee exemption. and indicated that they were too low be extremely difficult for applicable
Response: We appreciate the and recommended various higher manufacturer to identify physician
comments and do not intend existing thresholds. Similarly, some commenters covered recipients. Therefore, we will
personal relationships to be reported, so recommended that CMS consider finalize that small incidental items that
we have finalized this provision in methods within the statutory are under $10 (such as pens and note
§ 403.904(i)(14). requirements to reduce the number of pads) that are provided at large-scale
small payments being reported. Finally, conferences and similar large-scale
(2) Payments or Other Transfers of
many commenters supported CMS’s events will be exempted from the
Value of Less Than $10
proposal to not report food and reporting requirements, including the
Small payments or other transfers of beverages at conferences and indicated need to track them for aggregation
value, which the statute defines as that CMS should extend this to other purposes. While these small payments
payments or other transfers of value less items provided at conferences (both are excluded by statute, the $100
than $10, do not need to be reported, above and below the $10 threshold). aggregate payment requirement
except when the total annual value of Response: We appreciate the generally requires the tracking of small
payments or other transfers of value comments and agree that applicable payments in order to determine whether
provided to a covered recipient exceeds manufacturers should have discretion covered recipients received more than
$100. As required by section 1128G of when reporting small payments. We had $100 annually. For these covered
the Act, for subsequent calendar years, proposed requiring applicable recipients, we believe it would be
the dollar amounts specified will be manufacturers to bundle payments in difficult for applicable manufacturers to
increased by the same percentage as the order to reduce burden, but we do not track who receives these small items at
percentage increase in the consumer want to require that method if some conferences or similar events, due to the
price index (CPI) for all urban applicable manufacturers actually nature and disparate attendance at large-
consumers (all items; U.S. city average) believe it to be more burdensome. scale conferences or similar events.
for the 12-month period ending with Therefore, we will finalize that Additionally, this method is consistent
June of the previous year. In the applicable manufacturers have with our decision to not require
reporting of food and beverage at large- important and recognize that it may take benefit patients, do not fall within the
scale conferences. We note that a form other than written material, exclusion and are therefore subject to
payments or other transfers of value of especially in the device context. For the reporting requirements. Conversely,
$10 or more (for calendar year (CY) example, a device manufacturer may we have finalized that this exclusion
2013) need to be tracked and reported give a physician an anatomical model to does encompass materials, such as wall
even when provided at large-scale help explain to patients how a models and anatomical models which
conferences or similar events. We procedure would work. We agree that are ultimately intended to be used with
believe that if an applicable such an item, which is given to a patient. In addition, we believe that
manufacturer is handing out an item physicians for the purpose of educating pursuant to the statutory text, the
above the threshold, they should be able patients, falls within the exclusion. exclusion is limited to educational
to track who received the payment since Similarly, if a manufacturer provides materials only, and not marketing or
it is a more significant transfer. educational materials to a physician on promotional materials.
Finally, we will not be providing a a flash drive to be distributed to
standard template for reporting by (4) Discounts and Rebates
patients, the flash drive would also be
entities that organize and oversee events included in the exclusion. However, if Discounts and rebates for covered
and conferences. These event and the drive was provided as a gift drugs, devices, biologicals, and medical
conference vendors are not applicable alongside the materials, then it would supplies provided by applicable
manufacturers, so we do not believe we have to be reported, since it was manufacturers to covered recipients are
should have any contact with them or secondary to the materials. Similarly, excluded from reporting under section
impose requirements on them. We we believe that overhead expenses, such 1128G(e)(10)(B)(vii) of the Act.
recognize that applicable manufacturers as printing and time, should be We did not receive any comments on
and their vendors will need to devise included in the exclusion as long as this exclusion, so we have finalized it as
business practices to meet the they are directly related to the proposed.
requirements; however, we believe that development of the materials, which (5) In-Kind Items for the Provision of
many of the interactions at large-scale directly benefit patients or are intended Charity Care
conferences and similar events will not for patient use.
be reportable, so we do not believe this Comment: Numerous commenters In the proposed rule, we defined ‘‘in-
will be excessively burdensome. questioned CMS’s interpretation of kind items for the provision of charity
‘‘directly benefit patients or are care’’ as items provided to a covered
(3) Educational Materials That Directly recipient for one or more patients who
intended for patient use.’’ These
Benefit Patients or are Intended For cannot pay, where the covered recipient
commenters had mixed reactions to
Patient Use neither receives, nor expects to receive,
CMS’s proposed interpretation. Some
In the proposed rule, we explained recommended that all materials payment because of the patient’s
that this exclusion was limited to provided to educate physicians (such as inability to pay. Any items provided by
materials (including, but not limited to, textbooks or journals) should be the applicable manufacturer to a
written or electronic materials) and did included in the exclusion, since covered recipient that meet the
not include services or other items. educating the physician benefits definition of in-kind items for the
Additionally, we considered whether patients. Others suggested that these provision of charity care, are excluded
certain materials provided by applicable should not be included, since they do from reporting. This does not include
manufacturers to covered recipients for not benefit patients directly. Some the provision of in-kind items to a
their own education, but which are not commenters also recommended that covered recipient, even if the covered
actually given to patients (for example, materials that are used ‘‘for or with’’ recipient is a charitable organization, for
medical textbooks), should be patients, but not taken home (such as the care of all of the covered recipient’s
interpreted as educational materials that anatomical models or wall charts) patients (both those who can and cannot
‘‘directly benefit patients.’’ should be included in the exclusion pay). If a payment or other transfer of
Comment: Many commenters because they are intended for patient value is not an in-kind item and/or not
addressed this exclusion, particularly use. Finally, a few commenters for the provision of charity care, as
questioning the meaning of ‘‘materials.’’ recommended that all materials defined, then the payment must be
A few commenters stated that intended for patients should be reported as required under section
‘‘materials’’ should be interpreted more included in the exclusion. 1128G of the Act.
broadly to include ‘‘programs, services, Response: We appreciate the Comment: Many commenters
and items’’ since many applicable comments and agree that additional provided recommendations on the
manufacturers provide services and clarification is required. We agree that charity care exclusion. These comments
items to patients in order to support items that are educational to covered fell in two categories: first, on the
disease management or increase recipients (such as medical textbooks interpretation of a patient’s ability to
medication adherence. These items are and journal reprints), but are not pay, and second, on the interpretation of
generally provided to patients through intended for patient use are important in-kind items. Regarding a patient’s
covered recipients. Finally, a few for physicians; however, we do not ability to pay, the commenters generally
commenters also asked for clarification believe that these materials fall within supported the proposed interpretation,
on what form these materials needed to the statutory exclusion. Although these but recommended that CMS provide
be in and whether overhead costs for items may have downstream benefits for additional clarification that a patient’s
educational materials, such as time and a patient, we believe they are not ability to pay includes whether the
printing, were included in the directly beneficial to patients, nor are patient can afford the copayment or
exclusion. they intended for patient use, as coinsurance, but not the entire visit.
Response: We appreciate the required by section 1128G(e)(10)(B)(iii) Additionally, a few commenters
comments and agree that ‘‘materials’’ of the Act. Therefore, we will finalize recommended that ability to pay should
should be interpreted somewhat more that educational materials provided to be based on whether payment will be a
broadly for purposes of this exclusion. covered recipients for their own significant burden to a patient.
We understand that patient education is education, but that do not ‘‘directly’’ Regarding in-kind items, the
commenters discussed whether boundaries of the exclusion and to permit evaluation of the covered
payments to a covered recipient and/or interpret it widely to include samples device by the covered recipient.’’
a third party should be excluded if used beyond traditional drug samples, such Comment: A few commenters
to support charities or other charitable as single use or disposable devices, recommended that we include loans of
activities, such as patient assistance demonstration devices, and evaluation a broad range of devices (including
programs. Finally, a few commenters equipment. A few commenters also medical supplies) such as both covered
advocated that this exclusion should be recommended that the exclusion should and non-covered devices, as well as a
based on the mission of the organization include products used for research short-term supply of disposable devices.
receiving the items, rather than what studies, as well as coupons and Additionally, some commenters
actually happened to them, since it will vouchers. Finally, a commenter stated requested clarification on the timing of
be impossible for applicable that an applicable manufacturer may not the 90-day loan period and what to
manufacturers to track the uses of these know what actually happens to samples report if the loan goes beyond 90 days.
items. and should not be required to track
Response: We appreciate the We also received a comment to shorten
them. the loan period to 60 days.
comments and agree that an analysis of Response: We appreciate the
a patient’s ability to pay should include comments and agree that further Response: We appreciate the
whether the patient can afford his or her clarification is necessary. We believe comments and agree that this exclusion
copayment or coinsurance and whether that the statutory text is clear that this can include a broad range of devices.
the patient has insurance to cover the exclusion applies to products intended We have finalized that this exclusion
care. We intend this exclusion to for patient use; therefore, any drug, may include loans for covered devices,
include in-kind items given to covered device, biological or medical supply as well as those under development. We
recipients to provide care to patients provided as a sample to a covered also have finalized that this will include
who are unable to pay, or for whom recipient that is intended for use by a supply of disposable or single use
payment would be a significant patients will be included in the devices (including medical supplies)
hardship. intended to last for no more than 90
exclusion. Given this interpretation, as
Finally, we do not intend applicable days. We believe that these products
long as single use or disposable devices,
manufacturers to be responsible for should be treated similarly to non-
tracking each individual item provided demonstration devices or evaluation
equipment provided to a covered disposable devices and, therefore,
to a covered recipient to ensure it is should be included in the exclusion.
provided to a patient unable to pay. We recipient are intended for patient use,
they will be included in the exclusion. However, we do not believe that
believe it is sufficient for the applicable applicable manufacturers should be
manufacturer and covered recipient to Otherwise, we believe these items may
be excluded from the reporting allowed to provide an unlimited supply
agree in writing that the covered of these products and still fall within
recipient will use the in-kind items only requirements under the exclusions for
short term loans, as explained in that the exclusion, so we are establishing a
for charity care. 90-day supply as the limit. If an
Secondly, we believe that the section. In addition, we believe that
products used for research studies applicable manufacturer provides a
statutory text for this exclusion (section specific disposable or single use device
1128G(e)(10)(B)(viii) of the Act) clearly should be included as a part of the
larger research payment. Regarding for more than 90 days (even if provided
states that the exclusion should only over multiple dates), the products
apply to ‘‘in-kind items’’ and not all coupons and vouchers, we believe they
fall within the exclusion, so we have provided beyond the 90-day supply will
payments, so we have finalized that be subject to the reporting requirements.
only in-kind items will be included in finalized that all coupons and vouchers
the exclusion, which does not include for the applicable manufacturer’s For a single product the total number
financial support for charitable covered products that are intended for patient of days for the loan should not exceed
recipients. However, we recognize that use to defray the costs of covered drugs, 90 days for the entire year, regardless of
some payments made to charitable third devices, biologicals or medical supplies whether the 90 days were consecutive.
parties may at some point indirectly will be included in this exclusion We believe that this aligns with the
benefit a covered recipient. We believe category. For the purposes of this rule, intention of the statute to limit the loan
that these payments or other transfers of we believe such coupons and vouchers period to 90 days and not allow a new
value should be reported based on the are materially similar to samples. loan to start at the end of the previous
reporting requirements for indirect Finally, we do not believe the loan period, thus avoiding the reporting
payments or other transfers of value. applicable manufacturer should be requirements. In the event that the loan
However, we believe that charitable responsible for tracking what actually of a non-disposable device exceeds 90
contributions made directly to or happens to samples. Instead, we believe days (for the entire calendar year), the
intended for a covered recipient should that as long as the applicable applicable manufacturer should start
be reported as a charitable contribution. manufacturer and covered recipient reporting as if the loan began on day 91.
agree in writing that the products will We do not believe that reporting the
(6) Product Samples be provided to patients, which is prior 90 days as a payment or other
Even though this exclusion was not commonplace in the industry, the transfer of value would greatly increase
specifically discussed in the proposed provision of samples can be excluded. the payment value which would be
rule, we received comments on the misleading to consumers. Additionally,
(7) Short Term Loans
exclusion for product samples from if a device is purchased within 90 days,
section 1128G(e)(10)(B)(ii) of the Act This exclusion was also not addressed the applicable manufacturer does not
which states that ‘‘product samples that in detail in the proposed rule; however need to report the loan since the loan
are not intended to be sold and are we did receive some comments was less than 90 days. The loan period
intended for patient use’’ are excluded recommending clarifications. Section is statutorily defined, so we do not have
from the reporting requirements. 1128G(e)(10)(b)(iv) of the Act excludes the authority to lower it, but appreciate
Comment: Many commenters ‘‘the loan of a covered device for a short- the input that 90 days should be more
recommend that CMS clarify the term trial period, not to exceed 90 days, than sufficient for the loan period.
(8) Contractual Warranty (9) Covered Recipient Acting as a services provided to the manufacturer’s
Patient employees or their family, such as at an
While this exclusion was not on-site clinic or at a health fair.
addressed in the proposed rule, we While this exclusion was not
received a few comments on it. Section addressed specifically the proposed (11) Nonmedical Professional
rule, we received a few comments on it.
1128G(e)(10)(B)(v) excludes ‘‘items and This exclusion was not specifically
Section 1128G(e)(10)(B)(vi) of the Act
services provided under a contractual addressed in the proposed rule and we
excludes ‘‘a transfer or anything of value
warranty, including the replacement of did not receive specific comments on it,
to a covered recipient when the covered
a covered device, where he terms of the and we have finalized it as proposed.
recipient is a patient and not acting in
warranty are set forth in the purchase or the professional capacity of a covered Section 1128G(e)(10)(B)(xi) of the Act
lease agreement for the covered device.’’ recipient.’’ excludes ‘‘in the case of a covered
Comment: Some commenters Comment: A few commenters recipient who is a licensed nonmedical
recommended that CMS allow the recommended that CMS include in this professional, a transfer of anything of
exclusion to extend to items and exclusion situations when a covered value to the covered recipient if the
services provided under a contractual recipient is a subject in a research study. transfer is solely for the non-medical
warranty, regardless of whether or not Response: We appreciate the professional services of such licensed
comments and agree that a covered nonmedical professional.’’
the warranty period had expired. These
comments stated that often applicable recipients participating as a subject (and (12) Civil or Criminal Action or
manufacturers grant the terms of a not in a professional capacity) in a Administrative Proceeding
warranty even after the period has research study is the same as being a
patient and, should be included in the Although this exclusion was not
expired. Additionally, a few specifically addressed in the proposed
commenters recommended that the exclusion.
rule, we did receive a few comments on
exclusion should include other product (10) Provision of Healthcare it. Section 1128G(e)(10)(B)(xii) of the
contracts, such as product sale Act excludes ‘‘in the case of a covered
Although the exclusion was not
agreements, maintenance service recipient who is a physician, a transfer
discussed in detail in the proposed rule,
agreements, and technical support of anything of value to the covered
we did receive a few comments. Section
agreements. Finally, a few commenters recipient if the transfer is payment
1128G(e)(10)(B)(x) excludes ‘‘in the case
also recommended that replacement of an applicable manufacturer who solely for the services of a covered
products as a part of a product recall offers a self-insured plan, payments for recipient with respect to a civil or
should be included in this category. the provision of health care to criminal action or an administrative
Response: We appreciate the employees under the plan.’’ proceeding.’’
comments and agree that it is not Comment: A few commenters Comment: A few commenters
materially different for an applicable recommended that CMS clarify that this recommended that CMS clarify the
manufacturer to grant the terms of a exclusion includes the provision of exclusion to include specific legal
contractual warranty before the period health care to both covered recipients proceedings or arrangements, such as
expires or afterwards. We have finalized and their families covered under the legal defense, prosecution, settlement or
that as long as the contract warranty self-insured plan. Similarly, received judgment of a civil or criminal action
specified the terms prior to expiration few commenters discussed other and arbitration or other legal action.
and the terms do not change, then the situations, outside a self-insured plan Response: We appreciate the
exclusions may extend to items and when an applicable manufacturer may comments and agree that the agency can
services provided outside the expiration reimburse a physician for provision of help clarify this exclusion. We will
period. We believe the exclusion should health care services to employees. finalize that other specific legal
extend beyond the express time period Response: We appreciate the relationships will be included in the
of the warranty, since the warranty comments and agree that payments to exclusion. We believe that there are
terms, and thus the relationship, are the covered recipients for services rendered numerous legal proceedings that require
same before or after the expiration to family members receiving care under physician involvement and we plan to
period and it will be misleading to a self-insured plan should also be exclude all of them, in order to allow for
consumers to only include a portion of excluded from the reporting clear, consistent reporting requirements
the relationships. requirements. Similarly, we believe that for applicable manufacturers, covered
the provision of healthcare to employees recipients, and consumers.
In addition, we agree that there are should extend beyond that offered
numerous other contractual agreements k. Indirect Payments or Other Transfers
under a self-insured plan. We
that are similar to a warranty agreement, of Value Through a Third Party
understand that applicable
but are not specifically excluded. We manufacturers, both self-insured and Section 1128G(e)(10)(A) of the Act
believe that service or maintenance otherwise, may provide healthcare also excludes the reporting of payments
agreements are so similar to warranty services to employees beyond or other transfers of value that an
agreements that it may be difficult to traditional insurance. We believe that applicable manufacturer makes
consumers and applicable for the purposes of this exclusion there indirectly to a covered recipient through
manufacturers to meaningfully separate. is little material difference between the a third party where the applicable
We also believe the replacement provision of healthcare under a self- manufacturer is unaware of the identity
products in the case of a product recall insured plan and provision of of the covered recipient. However, any
are materially similar and should be healthcare outside a self-insured plan. payment or other transfer of value
included. Given the similarities, we We have finalized that this category provided to a covered recipient through
have finalized that items and services encompasses other situations, beyond a a third party, whether or not the third
provided under a contractual service or self-insured plan, when an applicable party is under common ownership with
maintenance agreement will also be manufacturer makes a payment to a an applicable manufacturer or operating
subject to the exclusion. covered recipient as part of healthcare in the U.S., must be reported if the
applicable manufacturer is aware of the payments given the language requiring recipient. Accordingly, we do not
covered recipient’s identity. reporting of payments made at the believe that Congress intended lack of
In the proposed rule, we proposed request of or designated on behalf of a control to be the basis for the indirect
that indirect payments are excludable covered recipient to a third party payment exclusion. Additionally, we
when an applicable manufacturer is recipient. A subset of these commenters believe that receiving a payment or
unaware of the identity of the covered recommended that in order for a other transfers of value from an
recipient and explained that an payment to be reportable, the applicable applicable manufacturer could lead to
applicable manufacturer is unaware of manufacturer must notify both the conflicts of interest, even in the event
the identity if the applicable covered recipient and the third party that the applicable manufacturer does
manufacturer does not know (as defined that the payment will be reported and not directly control the selection of the
in § 403.902) the identity of the covered receive concurrence that it is accurate. covered recipient.
recipient. The definition of ‘‘know’’ in Finally, a few commenters Similarly, we also do not believe that
§ 403.902 provides that a person, with recommended that the applicable the statutory language suggests that
respect to information, has actual manufacturer must require, instruct or indirect payments or other transfers of
knowledge of the information, acts in direct the third party to provide a value are only reportable if they are
deliberate ignorance of the information, payment or other transfer or value (or a made at the request of or designated on
or acts in reckless disregard of the truth portion of one) to a covered recipient(s). behalf of a covered recipient. The
or falsity of the information. This Response: We appreciate the parenthetical reference in section
standard is consistent with the comments and agree that CMS should 1128G(a)(1)(A) of the Act refers to
knowledge standard set forth in many consider ways to further clarify when an payments or other transfers of value
laws, including the False Claims Act, indirect payment or other transfer of made to an entity or individual other
and we believed it is one with which value should be reported. In addition, than a covered recipient on behalf of or
many applicable manufacturers are we intend that this exclusion refers to at the request of a covered recipient. We
already familiar. both payments and other transfers of believe this situation is different from
Comment: Numerous commenters value, despite references in the one in which a payment is provided to
discussed when an applicable proposed rule to only transfers of value. a third party and passed through to a
manufacturer should be required to We do not agree that all indirect covered recipient, as referenced in the
report indirect payments to covered payments or other transfers of value exclusion in section 1128G(e)(10)(A) of
recipients made through a third party. should be excluded from the reporting the Act. In situations where a covered
Many commenters recommended requirements. Section 1128G(e)(10)(A) recipient requests that a payment or
additional interpretations to further of the Act states that the exclusion of other transfer of value be provided to a
clarify when an indirect payment is indirect payments or other transfers third party, and the third party in turn
reportable. A few commenters made through a third party is limited to provides the payment or other transfer
recommended that all indirect payments situations ‘‘where the applicable of value to the covered recipient, the
should be excluded from the reporting manufacturer is unaware if the identity payment must be reported under the
requirements; however, some other of the covered recipient.’’ This indicates name of the covered recipient.
commenters supported the reporting of that indirect payments or other transfers We agree with the comments that we
indirect payments. Similarly, some of value where the applicable should provide some guidance on when
commenters requested that payments or manufacturer is aware of the identity of indirect payments must be reported. We
other transfers of value made through the covered recipient must be reported, understand that there are circumstances
certain third parties, such as medical and only those where the applicable where an applicable manufacturer
professional societies, be carved out of manufacturer is unaware of the identity makes a payment to a third party, which
the third party reporting requirements are excluded. Moreover, we believe that will be passed indirectly to a covered
such that payments to covered excluding from the reporting recipient, unbeknownst to the
recipients made through these entities requirements all payments made applicable manufacturer. For example,
would not be reportable. through a third party would create a an applicable manufacturer could make
Many commenters did not advocate significant loophole by allowing a payment to a consulting firm for
excluding all indirect payments, but manufacturers to funnel payments professional services and the consulting
instead recommended ways to limit through a third party and not report firm incidentally employs a physician
which indirect payments would be them; such a loophole would on the project. The applicable
reported. One common recommendation significantly undermine the intent of the manufacturer’s payment was ultimately
was to limit the reporting of indirect reporting requirements. Additionally, transmitted, at least in part, to a
payments to those under control of the we do not believe that we have statutory physician covered recipient, but not
applicable manufacturer. Commenters authority to carve out otherwise because the applicable manufacturer
described this concept in various ways, reportable indirect payments made directed that the payment be made to a
but generally suggested that reporting through particular third parties, such as specific physician, or to any physician
should be limited to when an applicable medical professional societies. at all. We believe that in these
manufacturer has control of the With regard to the recommendation situations, it would be misleading to
selection of the recipient of the that indirect payments should only be require reporting of the relationship,
payment, and not merely when they are reported when under the control of the since the applicable manufacturer did
aware of the covered recipient’s applicable manufacturer, we believe not intend or expect that a covered
identity. that controlling the selection of a recipient would receive any portion of
Another common comment was that recipient is different than being aware of the payment or other transfer of value.
indirect payments or other transfers of the identity of the recipient. Congress In order to address this concern and
value should only be reported if they are based the exclusion on an applicable clarify when an indirect payment must
at the request of or designated on behalf manufacturer being unaware of a be reported, we have provided for the
of a covered recipient. These covered recipient’s identity, not on the purposes of these regulations a
commenters stated that this was the applicable manufacturer lacking control definition of ‘‘indirect payments or
statutory intent for reporting indirect over the selection of the covered other transfers of value’’ in § 403.902.
The definition states that an indirect other transfer of value went to a covered ‘‘know’’ the identity of the covered
payment or other transfer of value is one recipient, but did not specifically know recipient, as defined in § 403.902.
that an applicable manufacturer the identity of the covered recipient. However, we want to clarify that, for
requires, instructs, or directs to be Similarly, some commenters also purposes of this rule only, we will not
provided to a covered recipient, discussed the language in the proposed consider an applicable manufacturer to
regardless of whether the applicable rule that attributes awareness of the be acting in deliberate ignorance or
manufacturer specifies the specific identity of the covered recipient by an reckless disregard of a covered
covered recipient. For example, if an agent of the applicable manufacturer to recipient’s identity in situations when
applicable manufacturer provided an the applicable manufacturer. the reason a payment or other transfer
unrestricted donation to a physician Commenters both supported and of value is being made through a third
professional organization to use at the opposed the proposal. Some of these party is that the identity of the covered
organization’s discretion, and the commenters recommended that CMS recipient remains anonymous. For
organization chose to use the donation provide additional information on how example, an applicable manufacturer
to make grants to physicians, those the agency interpreted ‘‘agent.’’ may hire a market research firm to
grants would not constitute ‘‘indirect Finally, many commenters also conduct a double-blinded market
payments’’ because the applicable recommended that CMS apply some sort research study, which includes paying
manufacturer did not require, instruct, of time restriction on the awareness physicians $50 for responding to a set
or direct the organization to use the requirement. The proposed rule did not of questions. The applicable
donation for grants to physicians. The specify whether there was a specific manufacturer clearly intends a portion
physician professional association could time period for awareness of the identity of the payment to be provided to
have used the donation for another of the covered recipient, so the physicians, but given that the reason for
purpose at its discretion. In this commenter requested clarification. the third party’s involvement is
situation, the applicable manufacturer Many of the commenters recommended specifically to maintain the anonymity
would not be required to report the that an applicable manufacturer must be of the respondents and sponsor, we do
donation, even if a portion of the aware of the identity of a covered not intend this to be considered a
payment or other transfer of value was recipient at the time of payment. reportable indirect payment or other
ultimately provided to a covered Whereas, other comments provided transfer of value.
recipient as a grant (or some other type slight variations, such as awareness at We recognize that by finalizing the
of payment or other transfer of value). the time the payment is committed or proposed definition, applicable
However, if an applicable manufacturer agreed upon, but in general the majority manufacturers may still feel they have
gave money to a medical professional of commenters focused on the time of an affirmative duty to determine the
payment. identity of covered recipients. However,
society earmarked for the purpose of
Response: We appreciate the our intention with this definition is to
funding awards or grants for physicians,
comments on alternative interpretations prevent applicable manufacturers from
the awards or grants would constitute of the statutory tem ‘‘unaware’’;
indirect payments to covered recipients directing payments to a discrete set of
however, we have decided to finalize covered recipients whose identities the
and would be subject to the reporting our proposed definition that an
requirements. In another example, an manufacturer may not actually know,
applicable manufacturer is ‘‘unaware’’ if but could easily ascertain. For example,
applicable manufacturer may provide a it does not know the identity of a we believe that a manufacturer that
general payment to a clinic for one of its covered recipient, and that ‘‘know’’ directs a third party to make payments
employed physicians to review means that the manufacturer has actual to the top billing cardiologists in a
materials. In this case, the applicable knowledge of the identity or acts in certain city or the chiefs of staff of a
manufacturer directed that the payment deliberate ignorance or reckless certain class of hospitals should be
be provided to a physician covered disregard of the identity. We appreciate required to report these payments, even
recipient, so it would constitute an the concerns about the knowledge though they do not have actual
indirect payment and would be a standard, but we are concerned that the knowledge of the identities of such
reportable indirect payment or other actual knowledge standard suggested by individuals. However, we do not require
transfer of value. several commenters is too limiting. An reporting of every payment that an
Comment: A number of commenters actual knowledge standard could applicable manufacturer makes through
recommended alternative definitions of potentially allow applicable a third party that is ultimately provided
‘‘aware.’’ For example, many manufacturers to direct payments to a to a covered recipient; rather, the intent
commenters recommended that we use limited category or subset of individuals is to require reporting of indirect
a standard of ‘‘actual knowledge’’ or and avoid the reporting requirements by payments where applicable
‘‘constructive knowledge,’’ rather than not knowing the names of the specific manufacturers know or should know the
the False Claims Act standard. covered recipients and claiming a lack identity of the covered recipients who
Additionally, many commenters also of actual knowledge. We believe that by receive them.
discussed an applicable manufacturer’s clarifying that applicable manufacturers We appreciate the comments
affirmative duty to investigate the must only report indirect payments or regarding awareness of an agent of an
identities of covered recipients. The other transfers of value that they direct applicable manufacturer of the identity
commenters suggested that applicable or instruct third parties to pay to of a covered recipient; however, we
manufacturers should not have an covered recipients, we will address have finalized the requirements as
affirmative duty to determine the some of the commenters’ concerns about proposed. We understand that
identity of a covered recipient, but that the broader knowledge standard. awareness by an agent is somewhat
the proposed definition of awareness Therefore, if a payment meets the different than awareness of the
meant that applicable manufacturers definition of an indirect payment or applicable manufacturer, but believe the
would have an affirmative duty. These other transfer of value in § 403.902, then reporting of indirect payments in this
commenters stated that an applicable the payment can only be excluded from situation is warranted. Otherwise,
manufacturer would be in reckless the reporting requirements if the applicable manufacturers could
disregard, if it knew that a payment or applicable manufacturer did not structure their business model, so that
payments are funneled through an agent payment was made in November 2013, Response: We appreciate the
that selects the recipients. However, we and the professional society provided comments and agree that providing
do not intend the concept of an agent of the names of the grantees to the more detail is necessary. However, we
the applicable manufacturer to be applicable manufacturer in April 2014, do not believe it is necessary to
merely any third party with a the payment would be reportable as part significantly change the reporting
connection to the applicable of the applicable manufacturer’s report requirements for indirect payments.
manufacturer. Instead, we intend the for CY 2014. Given the unfavorable comments
term to refer to legal agents acting on In determining this standard, we submitted regarding the proposal to
behalf of the applicable manufacturer. sought a definite time period, since the classify research payments as direct or
Finally, we agree that applicable applicable manufacturer may not know indirect, we believe that it would be
manufacturers should not be the selection and payment process of similarly confusing to classify all
responsible for tracking and reporting the third party making the actual payments or other transfers of value as
indirect payments or other transfers of payment to the covered recipient. We either direct or indirect. Additionally,
value indefinitely. However, we do not also sought a uniform cut off point for we do not believe it is necessary or
agree that the time period for awareness all payments or other transfers of value appropriate for CMS to provide any
of the identity of the covered recipient in a reporting year, rather than a rolling requirements on the information third
should be limited to the time the time period, which would be based on parties should or should not report.
applicable manufacturer made the the date of payment (such as 6 or 12 Applicable manufacturers will need to
months after the date of payment). We work with the third parties through
payment to the third party. We are
believe a rolling date would be difficult which they make payments to covered
concerned that this would allow
due to the reasons outlined previously recipients to ensure that the third
applicable manufacturers to funnel
regarding inconsistency in the date of parties are taking the appropriate steps
payments or other transfers of value to
payment, as well as due to operational to track the indirect payments. We
third parties, and thereafter direct them
difficulties for both CMS and applicable recognize that this will, in some cases,
to specific covered recipients, thus
manufacturers to track the awareness require the third parties to put in place
potentially avoiding the reporting
standard for each payment or other new tracking systems, but we believe
requirements. Additionally, we believe
transfer of value. In order to set a date that in many cases, such tracking
there are multiple dates which could be
which applied to an entire year, we systems already exist. For example, we
reported, such as the date the applicable needed to set a date beyond the end of
manufacturer decides to make the believe that physician professional
the reporting calendar year (December societies generally keep track of the
payment, or the date the payment is sent 31), which allows some time for indirect
to or received by the third party, making physicians to whom they provide
payments or other transfers of value industry-funded grants and may not
it difficult to standardize a policy. After made late in the year to be finalized.
reviewing the comments, we will need to put new accounting systems in
However, we did not want to set a time place in order for applicable
finalize that for the purposes of this period which was too long and would
exclusion, an applicable manufacturer manufacturers to be able to comply with
require applicable manufacturers to the reporting requirements of this rule.
must be unaware of the identity of a report indirect payments that were
covered recipient during the reporting Finally, we seek to clarify the situation
made several years prior. We believe when multiple applicable
year and the second quarter of the that two quarters beyond the end of the
subsequent year following the transfer manufacturers provide a payment or
payment reporting year is sufficient for
of the payment from the third party to other transfer of value to a covered
payments or other transfers of value
the covered recipient. Therefore, if an recipient through a third party. We
made late in the year.
applicable manufacturer becomes aware Comment: Several commenters intend to allow for flexibility because
of the identity of a covered recipient on questioned the process for reporting we want to ensure that no payment or
or before June 30th of the year following indirect payments, which was not other transfer of value is captured twice.
the year in which the payment is made addressed in detail in the proposed rule. Applicable manufacturers and third
by the third party to the covered A few commenters suggested that parties may work together to determine
recipient, then the payment or other applicable manufacturers should be the best method for reporting the
transfer of value must be reported. For required to label all payments as direct payment or other transfers of value, as
example, an applicable manufacturer or indirect and report the entity paid. long as the payment or other transfer of
makes a payment to a medical Similarly, some commenters value gets reported. We believe
professional society in March 2013 with recommended that CMS clarify the payments or other transfers of value
instructions to use the money to provide amount of information that a third party made through a third party to a covered
grants to physicians. This payment should be required to provide to recipient using funds from multiple
meets the definition of an indirect applicable manufacturers regarding applicable manufacturers will be
payment, since the applicable indirect payments or other transfer of limited, since the companies will be
manufacturer earmarked the payment value. These commenters expressed that required to report only those payments
for the physician grants. The it would be burdensome for third parties or other transfers of value directed to
professional society selects and makes to provide detailed information to covered recipients and not unrestricted,
payments to the grantees in April 2013 applicable manufacturers regarding the non-earmarked payments.
and alerts the sponsoring applicable recipients of payments made using the Comment: Numerous commenters
manufacturer to the grant recipients in manufacturer’s funding. Finally, a few questioned the reporting on indirect
June 2013. Since the applicable commenters also inquired about the payments or other transfers of value for
manufacturer became aware of the process for reporting payments when education, particularly accredited or
identity of the covered recipients multiple applicable manufacturers certified continuing education (both
receiving the grants during the reporting contribute to a specific payment or other CME and continuing dental education).
year in which the payment was made, transfer of value. For example, multiple A large number of these commenters
the payment or other transfer of value applicable manufacturers may fund a recommended that accredited or
must be reported. Similarly, if the single speaker. certified continuing education payments
to speakers (and payments for other transfer of value for the purposes transfers of value are discussed in
supporting materials) should not be of this rule and, therefore, does not need section II.B.1.h. of this final rule,
reported because there are safeguards to be reported, when all of the following dedicated to nature of payment
already in place, and they are not direct conditions are met: (1) The program categories.
payments or other transfers of value to meets the accreditation or certification Finally, we do not agree with
a covered recipient. Many of these requirements and standards of the comments that payments related to
commenters also stated that requiring ACCME, AOA, AMA, AAFP or ADA REMS with elements to assure safe use
that the reporting of payments or other CERP; (2) the applicable manufacturer that require prescriber education should
transfers of value related to continuing does not select the covered recipient have a blanket exclusion from the
education would be detrimental to speaker nor does it provide the third reporting requirements. We recognize
continuing education and would reduce party vendor with a distinct, identifiable that REMS are required by FDA for
the funding for and attendance at set of individuals to be considered as some prescription drug products to
continuing education programs. speakers for the accredited or certified ensure that the benefits of a drug
Additionally, some of these commenters continuing education program; and (3) outweigh the risks and that REMS often
also strongly indicated that they believe the applicable manufacturer does not requires a sponsor to inform or educate
that Congress did not intend to require directly pay the covered recipient health care providers about the risks
applicable manufacturers to report speaker. We believe that when associated with a product. However, we
payments related to accredited or applicable manufacturers suggest believe that payments made in
certified continuing education speakers, they are directing or targeting connection with prescriber education
programs. However, we did receive their funding to the speakers, so these required by REMS should be reportable
some comments supporting the payments will be considered indirect on the same basis as other education
reporting of accredited or certified payments for purposes of this rule. payments. For example, if a sponsor
continuing education-related payments Conversely, when they do not suggest directs the choice of a program speaker,
or other transfers of value, particularly speakers, they are allowing the or pays for covered recipients’ meals or
when the sponsor provides suggestions continuing education provider full transportation to a REMS educational
to the CME vendor for potential faculty discretion over the CME programming, program, such payments would be
or speakers at a CME program. No so the payment or other transfer of value reportable. However, applicable
commenters recommended that will not be considered an indirect manufacturers are not required to report
payments made to subsidize the costs of payment for purposes of these reporting the provision of written materials that
attendees of continuing education requirements. Additionally, since have been approved by FDA for
programs (as opposed to payments for industry support of CME programs that distribution to physicians, such as Dear
faculty or speakers) should be reported. meets all three requirements discussed Healthcare Provider letters. Other REMS
Beyond accredited or certified previously will not be considered educational materials may be excluded
continuing education, these comments indirect payments or other transfers of if they fall within the exclusion for
were mixed on whether unaccredited value for the purposes of reporting, the materials intended for patient use
and non-certified speaking engagements awareness standards for indirect described in § 403.904(i)(4).
should be reported. A few commenters payments are not applicable to such 2. Reports on Physician Ownership and
also addressed other types of education, support. We believe that this approach Investment Interests Under Section
such as Risk Evaluation and Mitigation will greatly reduce the number of 1128G(a)(2) of the Act
Strategies (REMS), suggesting that since
payments to speakers at accredited or Section 1128G(a)(2) of the Act
they were required by FDA, sponsorship
certified continuing education programs requires applicable manufacturers, as
of REMS education should be exempted
that must be reported. Applicable well as applicable GPOs, to report to the
from the reporting requirements.
Response: We appreciate the manufacturers will not be responsible Secretary, in electronic form, certain
comments and agree that industry for reporting payments made to CME information concerning ownership and
support for accredited or certified vendors that are used to subsidize investment interests held by physicians
continuing education is a unique attendees’ tuition fees for continuing or their immediate family members in
relationship. The accrediting and education events. However, as such applicable manufacturers and
certifying bodies, including ACCME, explained in the discussion of the applicable GPOs, and payments or other
AOA, AMA, AAFP, and ADA CERP, and nature of payment categories, payments transfers of value to such physician
the industry standards for commercial or other transfers of value associated owners or investors. In the proposed
support, create important and necessary with attendance of an event (such as rule, we proposed that applicable GPOs
safeguards prohibiting the involvement travel and meals) must be reported as were only required to report under
of the sponsor in the educational required. section 1128G(a)(2) of the Act.
content. However, we believe that even With regard to unaccredited and non- Comment: A few commenters
with this separation, the sponsor may certified education, we believe that suggested that Congress intended
still influence the selection of faculty by since this type of education program applicable GPOs to report under section
offering suggestions to the accredited or does not require the same safeguards as 1128G(a)(1) of the Act, as well as under
certified continuing education provider; an accredited and certified program, section 1128G(a)(2) of the Act. These
although the continuing education payments or transfers of value should be commenters supported their
provider may not be required to follow reported as required for any other interpretation with the introductory
these suggestions, we believe that it may payment or other transfer of value. If the language of section 1128G(a)(2) stating
often be impossible to distinguish when payment or other transfer of value is that ‘‘[i]n addition to the requirement
a suggestion is influential and when it made indirectly, it will be subject to the under paragraph (1)(A)’’ regarding
is not. same reporting requirements for all reporting of payments to covered
We have finalized at § 403.904(g)(1) indirect payments. The details for how recipients, applicable manufacturers
that an indirect payment made to a to report both accredited or certified, and applicable GPOs must report
speaker at a continuing education and unaccredited or non-certified information regarding physician
program is not an indirect payment or continuing education payments or other ownership and investment interests.
Response: We appreciate the (including physician-owned entities) as possible, while still aligning with the
comment but do not agree that that purchase, arrange for or negotiate statutory language. Finally, we do not
applicable GPOs are required to report the purchase of covered drugs, devices, intend our definition to apply to rare
under section 1128G(a)(1) of the Act. biologicals, or medical supplies for and circumstantial resale of a product in
While the phrasing in section 1128(a)(2) resale or distribution to others. response to a documented drug
could be phrased more clearly, we do Additionally, we also interpreted the shortage. Similarly, we believe that bulk
not believe it suggests that applicable statute to encompass not only more purchasing of covered products for
GPOs need to report under both traditional GPOs that negotiate contracts commonly owned entities, which will
sections. Applicable GPOs are not for their members, but also entities that be used only by those entities, would be
mentioned in section 1128G(a)(1) at all, purchase covered drugs, devices, considered ‘‘own use.’’
indicating that Congress did not intend biologicals, and medical supplies for
resale or distribution to groups of b. Physician Owners or Investors
for them to be subject to the
requirements of that section. individuals or entities. These Section 1128G(a)(2) of the Act differs
Additionally, other sections of the interpretations would include, for from section 1128G(a)(1) of the Act in
statute, such as the definition of example, physician owned distributors that section 1128G(a)(2) of the Act does
payment or other transfer of value (PODs) of covered drugs, devices, not use the term ‘‘covered recipient’’ as
(section 1128G(e)(10) of the Act), only biologicals, and medical supplies. defined in 1128G(e)(6) of the Act, which
refer to applicable manufacturers when Comment: A number of commenter explicitly excludes payments or other
discussing payments or other transfers supported the definition of ‘‘applicable transfers of value to employees of an
of value separately from ownership of GPOs,’’ particularly the inclusion of applicable manufacturer from the
investment interests. PODs. However, some commenters reporting requirements. Instead, section
suggested revisions to the definition in 1128G(a)(2) of the Act uses the term
a. Reporting Entities order to capture additional PODs. For ‘‘physician’’ as defined in section
(1) Applicable Manufacturers example, these comments included 1861(r) of the Act. Based on this
removing the reference to ‘‘group’’ in definition of ‘‘physician,’’ we proposed
Section 1128G(a)(2) of the Act the definition, as well as limiting the
includes applicable manufacturers as that the requirement to report physician
exclusion for entities that purchase the ownership and investment interests
defined for section 1128G(a)(1) of the products for their own use to only those
Act, as entities subject to the reporting includes any physician, regardless of
entities that are the end users of the whether the physician is an employee of
requirements in section 1128G(a)(2) of device based on billing under the same
the Act. the applicable manufacturer or
provider or supplier number as the applicable GPO. We did not receive any
(2) Applicable Group Purchasing entities that purchased the product. The comments on this interpretation, and we
Organizations commenters suggested that this would will finalize it.
capture both fee-based and buy-and-sell Additionally, as required by statute,
Section 1128G(a)(2) of the Act also POD models. Finally, a few commenters
includes applicable GPOs as entities ownership and investment interests of
recommended that CMS issue a few immediate family members of
required to submit reports on physician clarifications, including allowing
ownership or investment interests; these physicians must also be reported under
reselling in case of shortages and this provision. In the proposed rule, we
reports are also required to include explicitly including commonly owned
payments or other transfers of value defined immediate family member as
entities purchasing together as ‘‘own one of the following (as defined for
provided to the applicable GPO’s use.’’
physician owners or investors. Section purposes of section 1877(a) of the Act at
Response: We appreciate the
1128G(e)(1) of the Act defines 42 CFR 411.351):
comments, but do not agree with the
‘‘applicable group purchasing recommended changes to the definition • Spouse.
organization’’ as ‘‘a group purchasing to include additional PODs. While we • Natural or adoptive parent, child, or
organization (as defined by the appreciate the need to include as many sibling.
Secretary) that purchases, arranges for PODs as possible, we are concerned that • Stepparent, stepchild, stepbrother,
or negotiates the purchase of a covered removing the word ‘‘group’’ from the or stepsister.
drug, device, biological, or medical definition would be contrary to the • Father-, mother-, daughter-, son-,
supply, which is operating in the United statutory phrase ‘‘group purchasing brother-, or sister-in-law.
States, or in a territory, commonwealth organization’’ which clearly implies that • Grandparent or grandchild.
or possession of the United States.’’ in order to be a GPO, the entity must be • Spouse of a grandparent or
We proposed to define ‘‘applicable purchasing for a group. Therefore, we grandchild.
GPOs’’ as an entity that: (1) operates in are not going to remove the word In the proposed rule, we also stated
the United States, or in a territory, ‘‘group’’ from the definition. We are also that in cases when the ownership or
possession or commonwealth of the concerned that hospitals and large investment interest is held by an
United States; and (2) purchases, group practices may not always immediate family member of a
arranges for or negotiates the purchase purchase under the same provider or physician, applicable manufacturers
of a covered drug, device, biological, or supplier number with which they bill, and applicable GPOs should report not
medical supply for a group of making it difficult to determine the end only the required information for the
individuals or entities, and not solely user by billing number. Therefore, we physician, but also that the ownership
for use by the entity itself. will not be changing the language in the or investment interest is held by an
We proposed that the definition will definition to require use of the same immediate family member of the
not include entities that buy covered provider or supplier number. Based on physician. We considered whether to
drugs, devices, biologicals, or medical these considerations, we have decided require the reporting of the immediate
supplies solely for their own use, such to finalize the proposed definition. We family member’s relationship to the
as some large practices or hospitals recognize that this definition may not physician, as well as the immediate
(including those owned by physicians). include every POD model; however, we family member’s name, but did not
Rather, it is our intent to capture entities intend for it to capture as many PODs propose to require it.
Comment: A few commenters Regarding the requirements for ownership or investment interest must
recommended that ownership or obtaining information on ownership or not include the following:
investment interests held by immediate investment interests, we have revised • An interest in an applicable
family members of physicians should the definition to help clarify situations manufacturer or applicable GPO that
not be reported at all. Similarly, a few when the applicable manufacturer or arises from a retirement plan offered by
other commenters advocated that CMS applicable GPO does not know that a that applicable manufacturer or
employ a narrower definition of reportable ownership or investment applicable GPO to the physician (or a
‘‘immediate family member.’’ interest exists. We do not have the member of his or her immediate family)
Response: We appreciate the authority to require physicians or through the physician’s (or immediate
comments; however, both the owners or investors to report this family member’s) employment with that
requirement to report ownership or information; however, we believe that applicable manufacturer or applicable
investment interests of immediate an applicable manufacturer or GPO;
family members of physicians, as well applicable GPO may inquire about these • Stock options and convertible
as the proposed definition of immediate relationships. These situations are securities received as compensation,
family member, are required by statute. discussed more fully in the section on until the stock options are exercised or
Section 1128G(a)(2) requires the the definition of ‘‘ownership or the convertible securities are converted
reporting of ownership or investment investment interests.’’ to equity;
Finally, we also agree that applicable • An unsecured loan subordinated to
interests held by an immediate family
manufacturers and applicable GPOs a credit facility.
member of a physician and states that
may report a specific ownership or Comment: Some commenters
‘‘immediate family member’’ is defined recommended that CMS only require
as it is for purposes of section 1877(a) investment interest in aggregate across
multiple family members. Since we are that applicable manufacturers and
of the Act, which is codified at 42 CFR applicable GPOs report direct
411.351. Given the statutory finalizing that applicable manufacturers
and applicable GPOs do not need to ownership or investment interests,
requirements, we have finalized the rather than both direct and indirect
definition as proposed. report the name or relationship for an
immediate family member holding an interests. However, the commenters also
Comment: Many commenters recommended a few limitations in the
ownership or investment interest in
supported not reporting the name and event the agency decided to require
such entity, we do not believe the
relationship of the immediate family reporting of indirect ownership or
reported interests need to be on the
member. However, a few commenters investment interests. These
individual level and instead can be
suggested that applicable manufacturers recommendations included setting a
aggregated across multiple immediate
should not be required to report the minimum threshold amount for
family members. However, we intend
name or relationship of immediate ownership interests, following the
that applicable manufacturers and
family members, but applicable GPOs knowledge requirements in the
applicable GPOs can only aggregate
should be required to report the interests when multiple immediate physician self-referral regulation, and
information. Additionally, some family members have ownership or requiring that the physician has sole
commenters requested that CMS clarify investment interests with the same control of the interest. Beyond indirect
expectations for how applicable terms (as reported pursuant to ownership interests, a few commenters
manufacturers and applicable GPOs § 403.906(b)(5)) and the value reported also recommended that CMS require
should obtain ownership or investment includes the total value of all the reporting of stock options as ownership
interest information. A few commenters immediate family member’s interests. or investment interests when they are
also recommended that CMS should not granted, rather than only when
require physicians to disclose this c. Ownership or Investment Interests exercised. Similarly, a few commenters
information and applicable We proposed to define an ownership recommended that CMS not distinguish
manufacturers may rely on the or investment interest in an applicable between ownership or investment
representations by owners or investors manufacturer or applicable GPO in a interests arising from a retirement plan
regarding immediate family members. similar manner as in the physician self- and stock options once exercised.
Finally, a few commenters referral regulation (42 CFR 411.354(b)). Response: We appreciate the
recommended that in the event that Specifically, we proposed to define an comments. However, we do not agree
multiple family members hold an ownership or investment interest as one that applicable manufacturers and
ownership or investment interest in a that may be direct or indirect, and applicable GPOs should only report
specific entity, then the applicable through debt, equity, or other means. direct ownership or investment
manufacturer or applicable GPO should We further proposed that ownership or interests. Section 1128G(a)(2) of the Act
only report the ownership or investment investment interest includes, but is not requires that applicable manufacturers
interest in aggregate. limited to, stock, stock options (other and applicable GPOs report ‘‘any
Response: We appreciate the than those received as compensation, ownership or investment interest * * *
comments and agree that applicable until they are exercised), partnership held by a physician.’’ We believe that
manufacturers and applicable GPOs shares, limited liability company ‘‘any ownership or investment interest’’
should not report the name and memberships, as well as loans, bonds, encompasses both direct and indirect
relationship of immediate family or other financial instruments that are interests, since indirect ownership or
members of physicians holding secured with an entity’s property or investment interests are also true
ownership or investment interests in revenue or a portion of that property of interests. However, we do agree that
such entities. However, we do not agree revenue. As required by statute, we there should be some limitation on
that this standard should be applied proposed that an ownership or indirect ownership or investment
differently for applicable manufacturers investment interest shall not include an interests. We appreciate the comments
and applicable GPOs since we believe ownership or investment interest in a on ways to limit reporting of indirect
the privacy for immediate family publicly traded security or mutual fund, ownership or investment interests. We
members is the same regardless of the as described in section 1877(c) of the believe that limiting ownership or
entity at issue. Act. Additionally, we proposed that investment interests to those when the
physician has sole control and right to d. Physician Ownership or Investment applicable GPOs should use the data
receive the proceeds is too narrow. We Report Content elements outlined in section II.B.1.f. of
believe this will eliminate a significant Under section 1128G(a)(2) of the Act, the final rule on payments and other
number of ownership or investment applicable manufacturers and transfers of value report contents.
interests, greatly reducing those Comment: A few commenters
applicable GPOs are required to report
reported. Similarly, we believe that discussed the content of physician
information about each ownership or
setting a threshold for indirect ownership or investment interest
investment interest held by physician
ownership or investment interest creates reports. The commenters specifically
owners or investors (or their immediate
an incentive to structure relationships to recommended that CMS not require the
family member(s)).
remain below the threshold. However, reporting of the ‘‘terms’’ of the
As required in section 1128G(a)(2) of
we do understand that there should be ownership or investment interest.
the Act, we proposed that the applicable Response: We appreciate the
some limitations. We have decided to manufacturer or applicable GPOs
finalize the recommendation that aligns comments. However, we are unable to
should report the name, address, NPI, waive reporting of the terms of an
with the physician self-referral rule in and specialty of the physician owner or
that applicable manufacturers and ownership or investment interest, since
investor, as well as the dollar amount it is a statutory requirement. Because we
applicable GPOs will not have to report invested and the value and terms of the
ownership or investment interests held did not receive any comments on other
ownership or investment interest. aspects, we will finalize these
by physicians or their immediate family Section 1128G(a)(2)(C) of the Act
members if they did not know about provisions to align with the reporting
requires the reporting of ‘‘[a]ny payment requirements for payments or other
such interests. We agree that this or other transfer of value provided to a
limitation is warranted, since it is transfers of value reports to the extent
physician holding such an ownership or the requirements overlap. For example,
impossible for an applicable investment interest (or to an entity or
manufacturer or applicable GPO to applicable manufacturers and
individual at the request of or applicable GPOs should report both
report an indirect ownership or designated on behalf of a physician
investment interest that is unknown to physician NPI and State professional
holding such an ownership interest) license number(s) for at least one State
it. Additionally, we believe that many * * *’’ Applicable manufacturers and
stakeholders are already familiar with where the physician maintains a license
applicable GPOs must report all the (including the name of the applicable
this standard from the physician self- information required in section
referral regulation. Therefore, we have State) to ensure that the agency is able
1128G(a)(1)(A) of the Act for those to attribute ownership and investment
finalized that applicable manufacturers physicians who hold ownership or interests to the appropriate physician.
and applicable GPOs do not have to investment interests in such entity. Similarly, requirements for reporting
report indirect ownership or investment With regard to reporting payments and name, primary business address and
interests held by physicians or transfers of value to physician owners or specialty should also be the same as
immediate family members of investors, we proposed that applicable described for reporting payments or
physicians about which they do not manufacturers and applicable GPOs other transfers of value. Finally, as
know (as defined for the purposes of follow the procedures outlined in this described in the section on the
this rule). preamble for reporting payments and assumptions document, both applicable
Finally, we understand the concerns other transfers of value. manufacturers and applicable GPOs
regarding stock options received as We also noted that there was some may submit an assumptions document
compensation and requiring reporting of overlap between the requirements for including information on their
options when granted, rather than when reporting payments or other transfers of assumptions and methodologies when
exercised. However, we believe that value and reporting ownership or reporting payments or other transfers of
stock options before they are exercised investment interests. In order to help value, or ownership or investment
are traditionally considered manage the overlap, we proposed that interests.
compensation, rather than an ownership applicable manufacturers submit one Comment: We also received a few
or investment interest, so we do not report for all their payments and other comments concerning the potential for
believe that we should require them to transfers of value and another for all duplicative reporting due to the overlap
be reported as held ownership or their physician ownership or between the two sections. The
investment interests. This is consistent investment interests. To comply with comments requested clarification of the
with the definition in the physician self- section 1128G(a)(2)(C) of the Act, we proposed rule but did not have any
referral regulation. However, we note proposed that applicable manufacturers specific recommendation or advocate
stock options will need to be reported report the payments or other transfers of any particular changes.
when granted under sections value provided to physician owners or Response: We appreciate the
1128G(a)(1) and 1128G(a)(2)(C) of the investors (regardless of whether the comments and seek to clarify as much
Act as a payment or other transfer of physician owner is a covered recipient) as possible; however, we have finalized
value. Reporting under sections in the report for payments and other these provisions as proposed.
1128G(a)(1) and 1128G(a)(2)(C) may not transfers of value, but should note that Applicable manufacturers must report
include all stock options that are the covered recipient receiving the all payments or other transfers of value
granted to physicians. For example, payment or other transfers of value is a to covered recipients and physician
stock options that are granted to a physician owner or investor. owners or investors, including the
physician who is an employee of the Since applicable GPOs are not subject provision of ownership and investment
applicable manufacturer and is not to the reporting requirements in section interests. In the event that a physician
already an existing owner or investor of 1128G(a)(1) of the Act, we believe there receives an ownership or investment
that entity would not be reported; is less of a potential for duplicative interest in a given year, an applicable
however, we believe reporting under reporting. However, we proposed that manufacturer should report it as a
sections 1128G(a)(1) and 1128G(a)(2)C) when an applicable GPO has payments payment or other transfer of value
will capture a significant portion of or other transfers of value to report for (under section 1128G(a)(1) of the Act),
stock options when granted. physician owners or investors, the as well as a standing ownership or
investment interest (under section recommended it, stating it would greatly previous calendar year must register and
1128G(a)(2) of the Act). reduce disputes and inaccuracies in the submit reports. Similarly, we proposed
Additionally, an individual may be data. that only applicable GPOs with
both a covered recipient and a physician Response: We appreciate the physician owners or investors would be
owner or investor, so an applicable comments and agree that pre- required to register and submit
manufacturer should only report a submission review would help ensure information. For applicable
payment or other transfer of value once, the accuracy of the data. However, we manufacturers and applicable GPOs that
regardless of whether the individual is have finalized that CMS will not did have information to disclose, we
a covered recipient, a physician owner administer or manage a pre-submission proposed that applicable manufacturers
or investor, or both. The payment or review process and will not make it and applicable GPOs register with us
other transfer of value and all the mandatory. We recommend that prior to submission to facilitate
additional required information must be applicable manufacturers voluntarily communication. We proposed the
reported in the ‘‘payments or other provide covered recipients the registration process would require the
transfers of value’’ reporting template; opportunity to review the data prior to applicable manufacturer or applicable
however for physician owners or submission to CMS, but doing so is not GPO to designate a point of contact,
investor (regardless of whether the mandatory. We understand that the which we would use for
physician is a covered recipient) the processes and systems of applicable communications related to the
applicable manufacturer should mark manufacturers and applicable GPOs submitted data. Alternatively, we
that that payment or other transfer of may not allow for a review of this considered requiring that all applicable
value was provided to a physician capacity. Similarly, since there is a post- manufacturers and applicable GPOs
owner or investor. All payments or submission review period, we do not register with CMS, regardless of whether
other transfer of value should only be believe that it is worth the additional they had information to report, in order
reported once regardless of whether it is burden for applicable manufacturers help us better understand the extent of
required to be reported under section and applicable GPOs to make significant these relationships and ensure
1128G(a)(1) and/or section system changes in order to provide a compliance with the reporting
1128G(a)(2)(C) of the Act. pre-submission review. However, we do requirements.
believe a pre-submission review could Comment: Many commenters
C. Report Submission and Review
be extremely useful and recommend supported the registration requirement,
The statute requires the Secretary to that applicable manufacturers and but disagreed on which entities should
establish procedures for applicable applicable GPOs consider ways that be required to register. Some
manufacturers and applicable GPOs to they could administer a pre-submission commenters supported the proposal to
submit the required information and for review external to CMS. Because CMS is require registration only by those
the Secretary to make such information not requiring the review, we do not feel entities with payments or other transfers
submitted available to the public. We it is appropriate for CMS to prescribe of value or ownership or investment
recognize that these regulations require the process and standardize it; interests to report; other commenters
applicable manufacturers and nevertheless, we believe that ongoing recommended that CMS employ the
applicable GPOs to collect and submit notice throughout the year of any alternative and require all entities that
large amounts of new data, so we have reportable interactions would be ideal. meet the definition of applicable
tried to finalize flexible processes for manufacturer or applicable GPOs to
data collection and submission. 2. Report Submission
register.
However, we also recognize that in Applicable manufacturers and Response: Given the comments
order to accept and aggregate the data applicable GPOs are statutorily required received, we believe that we do not
effectively and efficiently, there needs to submit their reports for the preceding need to require all entities that meet the
to be system standardization. calendar year electronically to CMS on definition of applicable manufacturer or
March 31, 2013 and on the 90th day of applicable GPO to register and have
1. Prior to Submission each calendar year thereafter. We finalized the position as proposed.
In the proposed rule, we considered proposed to interpret ‘‘on’’ March 31, Because the statute only requires the
that prior to submission of data to CMS, 2013 or the 90th of the each year reporting of payments or other transfers
applicable manufacturers and thereafter as ‘‘by’’ March 31, 2013 or the of value, we will not require action by
applicable GPOs would provide each 90th of each year thereafter and intend entities without payments or other
covered recipient or physician owner or to allow applicable manufacturers and transfers of value to report. All
investor with information regarding the applicable GPOs to submit data prior to applicable manufacturers with
information that the applicable this date to provide applicable payments or other transfers of value to
manufacturer plans to report to CMS on manufacturers and applicable GPOs report under paragraph 1 of the
the covered recipient’s or physician with more flexibility for submission. We definition must register individually,
owner or investor’s behalf. While we did not receive any comments on this regardless of whether they intend to be
did not propose to require this type of interpretation and have finalized it as part of a consolidated report being
pre-review, we recommended that proposed; however, as discussed in the submitted by another applicable
applicable manufacturers and timing section, because of the manufacturer. We believe this will
applicable GPOs provide it. publication date of this final rule, better allow CMS to ensure that
Comment: Several commenters reports including 2013 data will not be applicable manufacturers required to
supported the pre-submission review. due until March 31, 2014. report are reporting under the reporting
However, the commenters were divided requirements. However, applicable

over whether to require it or leave it a. Registration manufacturers that are submitting data
voluntary. Many commenters stated that In the proposed rule, we proposed as a part of a consolidated report under
there simply was not time between the that only applicable manufacturers that another applicable manufacturer may
end of the data collection year and the have payments or other transfers of indicate during registration that they
data of submission to facilitate the value and/or physician ownership or intend to be part of the consolidated
review; whereas some commenters investment interests to disclose for the report to be submitted by another
applicable manufacturer, allowing CMS b. File Format to first day of data collection for the
to approximate the number of We also received several comments of next reporting year. In providing revised
consolidated reports to anticipate. the format of the data and process for templates, we will also comply with the
Additionally, as stated in the applicable submission to CMS. We proposed that requirements of the Paperwork
manufacturer section, the reporting applicable manufacturers and Reduction Act to seek public comments
entity submitting a consolidated report applicable GPOs submit their data on the proposed changes to the
must indicate all the applicable electronically in a comma-separated information collections, as required by
manufacturers for which it is reporting. value (CSV) format and solicited law. This will allow applicable
Similarly, applicable manufacturers that comments on and suggestions for manufacturers and applicable GPOs to
are reporting separately must each alternatives to that format. Additionally, make any necessary changes to prepare
register individually. for the next reporting year. This is the
we proposed that each line item in the
same time as the date by which we will
Comment: A few commenters dataset should represent a unique
publish the list of teaching hospitals.
discussed reporting of the point of payment or other transfer of value, or a We appreciate the comments on the
contact, specifically recommending that unique ownership or investment organization of the submitted files, but
two points of contact be provided for a interest. In the event that a single file per the statute, we will only allow
single applicable manufacturer or does not have sufficient volume for all submission of a single report consisting
applicable GPO. the data required, then we proposed the of the entire reporting period (for
applicable manufacturer or applicable example CY 2014). We will only be
Response: We agree that establishing GPO could submit as many files as
and maintaining appropriate points of collecting and staging data for public
necessary to provide the entirety of its posting in accordance with annual
contact are important because it is data.
essential that we be able to contact submissions, so we will not be
Comment: Many commenters accepting ongoing or quarterly
applicable manufacturers and recommended that CMS create a
applicable GPOs in the event that submissions. We believe that not only is
standardized format and template and annual publication sufficient for end
questions arise regarding their allow stakeholders an opportunity to
submission. We believe that requiring a users, but also allows for a single review
review. Additionally, a few commenters and dispute period prior to publicly
second point of contact to serve as a supported the use of CSV files, whereas publishing the data, which is
backup will be beneficial and ensure a few other commenters recommended operationally easier for all parties. In
that CMS can contact applicable using Pipe Line Delineated files rather addition, submission extensions will
manufacturers and applicable GPOs. We than CSV files. These commenters not be granted. After receiving all the
are finalizing that applicable explained that since some numbers are submitted data, we will need to process
manufacturers and applicable GPOs presented with comma separators (for all the data to aggregate across
must indicate two points of contact example, $100,000), CSV files may be manufacturers and applicable GPOs and
when they register to allow for a problematic. Similarly, a few provide a single review and dispute
primary and backup point of contact for commenters recommended that CMS period to correct submitted data prior to
each reporting entity. In order to ensure establish a uniform naming system for public posting. Late data will be
that the points of contact are up to date applicable manufacturers. considered failure to report and may be
in the CMS system, applicable Besides the format of the report, we subject to penalties. Similarly, as
manufacturers and applicable GPOs will also received comments on the required in the regulations, applicable
be able to change them as appropriate organization and submission of the data. manufacturers and applicable GPOs
(subject to CMS user security protocols). A few commenters recommended that should not aggregate any payments or
CMS accept submission of data multiple other transfers of value, or ownership or
We did not receive any comments on
times throughout the year, such as investment interests (except as
our proposed timing for registration, so
quarterly or ongoing, and allow described for small payments or other
we have finalized those provisions as
extensions. Conversely, other transfers of value). All reported
proposed. We proposed that applicable
commenters recommended allowing transactions must be at the individual
manufacturers or applicable GPOs with
applicable manufacturers to submit payment or other transfer of value, or
payments or other transfers of value to multiple reports, organized by topic or
report must register prior to the ownership or investment interest level
individual. Finally to receive the data, and do not intend applicable
deadline for data submission for data for a few commenters recommended that
the preceding calendar year for every manufacturers or applicable GPOs to
CMS develop a data exchange and data organize or group specific transactions.
annual reporting cycle. We intend portal to accept files. Finally, we appreciate the comments
applicable manufacturers and Response: We appreciate the regarding a data exchange portal and
applicable GPOs to register sufficiently comments and agree that CMS should agree that CMS should create an
prior to the deadline in order to allow provide applicable manufacturers and electronic system for accepting the data.
registration to be completed applicable GPOs with reporting We plan to publish additional
appropriately. Applicable templates and more details on reporting. information along with greater detail on
manufacturers or applicable GPOs will However, we do not believe it is the submission process.
be able to choose to submit the data necessary or beneficial to provide this
immediately after completing the information in regulation, in order to c. Attestation Process
registration process successfully. We allow the agency more flexibility to In the proposed rule, we proposed
proposed to open the registration make changes in response to feedback that annually, following the submission
process at the beginning of the calendar from stakeholders. If we intend to make of data, an authorized representative
year, giving applicable manufacturers changes to the reporting template or from each applicable manufacturer and
and applicable GPOs time to register other details for reporting (which we applicable GPO will be required to
and submit their data; however, we may envision could happen particularly as submit a signed attestation certifying the
open registration earlier to allow the program evolves in early years), we timeliness, accuracy, and completeness
additional time. will provide them at least 90 days prior of the data submitted to the best of the
signer’s knowledge and belief. We Finally, as discussed in the section on • Form of payment or other transfer
specified that such attestations must be applicable manufacturers, applicable of value.
signed by the chief executive officer, manufacturers for which covered drugs, • Nature of payment or other transfer
chief financial officer or chief devices, biologicals, or medical supplies of value.
compliance officer. represent less than 10 percent of total • Name(s) of the related covered drug,
Comment: The majority of (gross) revenue for the preceding year device, biological, or medical supply, as
commenters supported the attestation that have payments or other transfers of applicable.
requirement. However, a few value to report, as a part of the • NDCs of related covered drugs and
commenters recommended revising the attestation process, must attest that less biologicals, if any. *
attestation to certify that the entity made than ten percent of total (gross) revenue • Name of entity that received the
a reasonable effort to ensure that data in the immediately preceding year came payment or other transfer of value, if not
meets regulatory requirements. These from covered drugs, devices, biological, provided to the covered recipient
commenters explained that the or medical supplies. We also note that directly. *
reporting requirements are, in their for consolidated reports, the applicable • Whether the payment or other
view, complicated, so it would be manufacturer that submitted the transfer of value was provided to a
impossible to know whether the data consolidated report will be required to physician holding ownership or
submitted was accurate. Similarly, a few attest on behalf of all the entities investment interests in the applicable
commenters suggested that CMS allow included in the consolidated report. manufacturer. (Yes or No response).
other officers (at the discretion of the Applicable manufacturers that have • Statement providing additional
reporting entity) to attest. reportable payments or other transfers of context for the payment or other transfer
Response: We appreciate the value that are submitted through a of value (optional). *
comments, but we continue to believe consolidated report by another For each research-related payment or
that applicable manufacturers and applicable manufacturer will be other transfer of value, the following
applicable GPOs can and should be required to register with CMS, but will information is required:
confident that the data is accurate. We not be required to attest. Accordingly • Applicable manufacturer’s name.
recognize that the reporting we encourage applicable manufacturers • Name of research institution/entity
requirements require significant data to considering submitting a consolidated receiving payment.
be collected, but the majority of report to fully consider the ramifications • Total amount of research payment.
comments supported the language of doing so, particularly the applicable • Name of study.
without revision, suggesting that manufacturer actually attesting on • Name(s) of related covered drug,
reporting entities can be confident in behalf of all the entities included in the device, biological or medical supply
their data. Additionally, the penalties consolidated report. (same requirements as for all payments
are significantly less for unknowing or other transfers of value).
errors, so the statute provides safeguards 3. Report Content • NDCs of related covered drugs and
for unexpected errors. Finally, we do We have outlined the fields of biologicals, if any. *
understand that applicable information to be included when • Principal investigator(s) (including
manufacturers and applicable GPOs reporting payments or other transfers of name (as listed in NPPES), NPI (as listed
may have different business structures. value and physician ownership and in NPPES), State professional license
We do not want to confine applicable investment interests. Some changes number(s) for at least one State where
manufacturers and applicable GPOs have been made below based on the physician maintains a license
with regard to which officers must comments submitted; however, these including the applicable State where the
attest, so we have finalized that other decisions and changes are discussed license(s) is held, specialty and primary
officers will be allowed to attest, as throughout the final rule. The asterisks business address).
designated by the company. indicate the additional information that • Context of research (optional).
We also seek to clarify the timing of
we will require under the discretion • ClinicalTrials.gov identifier
the attestation requirement. Applicable (optional).
provided by the statute.
manufacturers and applicable GPOs For each payment and other transfer • Whether the payment or other
must provide an attestation for their of value, the following information is transfer of value should be granted a
data at the time of original submission required: delay in publication because it was
for it to be considered submitted; • Applicable manufacturer’s name. made pursuant to a product research
however, they will also be required to • Covered recipient’s— agreement, development agreement, or
provide an attestation any time the data ++ Name (for physicians only, clinical investigation. (Yes or No
is changed or updated. The most recent provide name as listed in NPPES, response).
data for which there is an attestation including first and last name, and For each physician ownership or
will be considered the official data middle initial and suffix (if applicable)); investment interest, the following
submission from the applicable ++ Specialty (for physicians only); information is required:
manufacturer or applicable GPO. Data ++ Primary business street address • Applicable manufacturer’s or
without such attestation will not be (practice location); applicable GPO’s name.
considered an official submission for ++ NPI (for physicians only, as • Physician owner or investor’s—
purposes of reporting under section listed in NPPES); ++ Name (as listed in NPPES,
1128G of the Act. This is discussed in ++ State professional license including first and last name, middle
more detail in the section on dispute number(s) for at least one State where initial, and suffix (if applicable));
resolution. However, we believe this the physician maintains a license, ++ Specialty;

may alleviate some of the concerns of including the applicable State where the ++ Primary business street address
applicable manufacturers regarding the license(s) is held; * (practice location);
difficulty in knowing whether the data • Amount of payment or other ++ NPI (as listed in NPPES);
submitted originally will be transfer of value in U.S. dollars. ++ State professional license
appropriately amended during the • Date of payment or other transfer of number for at least one State where the
review and correction period. value. physician maintains a license including
the applicable State where the license(s) the CMS Web site or in the Federal Register) and directly (likely by email)
is held; * and Register). We also considered an to any physicians or teaching hospitals
• Whether the ownership or alternative method, in which we would that have registered with CMS ahead of
investment interest is held by the require applicable manufacturers and time. We strongly recommend that all
physician, or an immediate family applicable GPOs to collect and report covered recipients and physician
member of the physician. whether the covered recipient, or owners or investors register. Although
• Dollar amount invested. physician owner or investor would like registration is not mandatory for these
• Value and terms of each ownership to be notified by USPS or email of the entities, in order for covered recipients
or investment interest. processes for their review, as well as the to be able to review the data attributed
• Any payments or other transfers of individual’s email address, if indicated. to them, they will be required to register
value provided to the physician owner We received numerous comments on so we can appropriately match them to
or investor, including the following this which are described later in this their data. In addition to the methods
(applicable manufacturers should report section. proposed, we plan to work with
this information with their other Finally, we proposed that the physician professional societies and
payments or other transfers of value, notification to physicians and teaching provide the information to applicable
and indicate that the covered recipient hospitals would be provided annually to manufacturers and applicable GPOs to
is a physician investor or owner): announce the review and correction provide voluntarily to covered
++ Amount of payment or other period, and would include the specific recipients and physician owners or
transfer of value in U.S. dollars. instructions for performing this review. investors. We understand that these
++ Date of payment or other transfer We did not receive any comments on methods do not constitute direct,
of value. this provision, so we have decided to personal notification, but believe that
++ Form of payment or other finalize it as proposed. these methods are sufficient and
transfer of value. Comment: Many commenters significantly more cost effective for both
++ Nature of payment or other addressed how to notify physicians and CMS, and applicable manufacturers and
transfer of value. teaching hospitals of the opportunity to applicable GPOs.
++ Name(s) of related covered drugs, review payments or other transfers of Finally, we note that since applicable
devices, biologicals, or medical value or ownership or investment manufacturers and applicable GPOs
supplies. interests that were attributed to them in only submit data for the previous
++ NDCs of related covered drugs reports submitted by applicable calendar year to CMS once annually, the
and biologicals, if any. * manufacturers or applicable GPOs. agency may not provide ongoing
++ Name of entity that received the Some of these commenters supported notifications to covered recipients or
payment or other transfer of value, if not the methods outlined in the proposed physician owners or investors for data
provided to the physician owner or rule and provided other suggestions. submitted on their behalf outside of the
investor directly. * Many commenters requested that formal period (such as in response to a
++ Statement providing additional physicians and teaching hospitals be dispute). Similarly, we will only
context for the payment or other transfer notified personally of the processes for provide for one formal review and
of value (optional).* review and correction. Some of these correction period prior to the
commenters recommended the publication of that year’s data. We
4. 45-Day Review Period for Applicable
alternative method of collecting contact discuss our plans to allow for updates
Manufacturers, Applicable GPOs,
information (applicable manufacturers to submitted data or submission of data
Covered Recipients, and Physician
and applicable GPOs providing previously omitted, as well as
Owners or Investors
preferred method of communication), additional time to review and dispute,
Section 1128G(c)(1)(C)(ix) of the Act while others recommended another later in this section, but the formal
requires that the Secretary allow method or simply stated that CMS review and correction period will only
applicable manufacturers, applicable should notify physicians and teaching happen once annually prior to the next
GPOs, covered recipients, and physician hospitals, but supported flexibility in publication on the public Web site.
owners or investors the opportunity to the notification method. Conversely,
review the data submitted for a period many other commenters indicated that b. Length of Review and Correction
of at least 45-days prior to the data being the proposed alternative would be Period
made available to the public. This overly burdensome, and recommended Section 1128G(c)(1)(D) of the Act
section outlines the comments received that CMS notify physicians and teaching requires that CMS provide a review and
on the processes for and length of this hospitals in another manner. Finally, correction period of ‘‘not less than 45
review and correction period. some commenters recommended more days.’’ We proposed a 45-day review
ongoing approaches to notification and period to maximize the time for the
a. Notification of Review and Correction agency to aggregate and publish the
allowing review to happen multiple
Period data. Additionally to facilitate the
times throughout the year.
In the proposed rule, we stated that Response: We appreciate the review, we proposed that applicable
we would notify covered recipients and comments and have tried to balance the manufacturers, applicable GPOs,
physician owners or investors about the necessity to notify physicians and covered recipients, and physician
review and correction period in a few teaching hospitals with the desire to owners and investors would sign into a
ways. We proposed to allow, but not avoid adding any additional burden on secure Web site to view the data
require, covered recipients, and applicable manufacturers and submitted. We proposed that only the
physician owners or investors to register applicable GPOs. We have also current and previous years would be
with CMS to ensure they receive considered what is operationally available for review and correction. For
communication about the processes for possible and concluded that we will example, during the 45-day review
review. Additionally, we proposed to notify physicians and teaching period in 2015, applicable
notify physicians and hospitals through hospitals, as proposed, using email list manufacturers, applicable GPOs,
CMS’s list-serves and by posting the serves, online postings (including both covered recipients, and physician
information publicly (for example: on on the CMS Web site and the Federal owners or investors would be able to
review and amend the data submitted 15 days to correct data for purposes of recommended that CMS allow review
for 2013 and 2014. During the 2016 resolving disputes, and after which they and correction of more data, beyond the
review, 2014 and 2015 would be may submit (and provide attestation for) 2 previous years. Additionally, a few
available for changes. updated data to CMS to finalize their commenters recommended that for data
Comment: Many commenters data submission. Undisputed data will granted delayed publication, CMS
requested a longer review period, be finalized for publication after the should allow review and correction of
particularly to allow for additional time close of the annual 45-day review and the data in the year the data is
to resolve disputes. Many of these correction period. Regarding the 15-day submitted, rather than the year it will be
commenters recommended a 60- or 90- period for resolving and correcting published. These commenters explained
day review period and asked that the disputes following the 45-day review that it will be easier for covered
review period include a distinct phase period, we recognize that 15 days is not recipients and physician owners and
to resolve disputes. These commenters much time for applicable manufacturers investors to review and correct the data
stated that this was particularly and applicable GPOs to resolve disputes immediately after the payment was
important for disputes which may be submitted late in the review and made, rather than up to four years later.
initiated towards the end of the review correction period. Because we do not Response: We appreciate the
and correction period. believe that we have the authority to comments on the review and correction
Response: We appreciate the shorten the period when covered process and what data should be
comments and are sympathetic to the recipients and physician owners and available for review during the review
need to provide time for review and investors can review and submit and correction period. Regarding the
correction and tried to maximize the corrections to the data, the 15-day review and correction process, we have
time as much as possible. However, period to correct data and resolve finalized our proposal of facilitating the
time constraints restrict flexibility in disputes must be after the 45-day review process on a CMS-secure Web site. We
this area given the statutory date for and correction period. Extending the 15- are working to develop a system to
publication of the submitted data on the day dispute resolution period would not allow secure registration, data
public Web site. In finalizing the allow us sufficient time to prepare for submission, data review and submission
proposal, we tried to balance providing public posting and we cannot delay of corrections processes. Applicable
appropriate time for review which public posting for the review and manufacturers and applicable GPOs will
allows us sufficient time to process the correction period. Only data changes only be able to access and review the
data for review and publication. initiated during the 45-day review and data they submitted or that was
Following the first year of reporting, in correction period and resolved by the submitted for them within a
which we must publish the data within end of the 15-day period for dispute consolidated report submitted by
approximately 6 months of receiving the resolution will be captured in the initial another covered entity; covered
data, we must thereafter publish the publication of the current reporting year recipients and physician owners and
data within 90 days of the last day for of data on the public Web site. Disputes investors will only be granted access to
data submission (March 31), so a 90-day submitted earlier in the review and data regarding payments or other
review period is not feasible. Similarly, correction period will have more time to transfers of value and/or ownership or
we also believe that a 60-day review be resolved. In order to try to maximize investment interests submitted on their
period would not leave us enough time the successful resolution of disputes behalf. We agree that we will need to
to aggregate the data and prepare it for and have more accurate data for validate the identities of individuals
publication within 90 days of data publication, we plan to encourage signing on to the Web site and plan to
submission. Nevertheless, we do agree covered recipients and physician employ a system that will allow for
that there should be a distinct phase for owners and investors to register with secure user identification and
correcting data to resolve disputes since the CMS system, review their data and authorization. We also plan to allow
we recognize that it is not practical to if necessary, initiate disputes as soon as physicians and teaching hospitals to
resolve disputes initiated at the end of possible within the 45-day review and register prior to the start of the annual
the review and correction period, within correction period to maximize the formal review and correction period to
the time allotted. We believe that there likelihood of successful resolution and establish their profile, allowing them
should be a distinct period after the accurate data available for publication. immediate access to the information at
review and correction period We also note that covered recipients the beginning of the formal review and
specifically for correcting data to resolve and physicians owners and investors correction period. The secure user-based
potential disputes. will have the opportunity to review and authentication requires that the actual
Given these constraints, we have submit corrections for data updated by individual register and interact with the
finalized a 45-day review and correction applicable manufacturers and system to ensure the utmost security of
period, during which covered recipients applicable GPOs (either in response to the data. The registration process will
and physician owners and investors a dispute, omission, or other error). also help us collect additional
may register and then sign into the CMS There is no limit to the number of times information from the covered recipients
secure Web site and review the data a particular transaction can be reviewed and physician owners or investors to
submitted by applicable manufacturers and disputed. ensure that only the appropriate data is
and applicable GPOs on their behalf and Comment: Many commenters also available to them and able to be
choose to dispute certain payments or discussed the processes for the review aggregated and presented to the
other transfers of value, or ownership of and correction period, including what appropriate individual.
investment interests. As soon as a data would be available during the 45- Beyond the process for accessing the
dispute is initiated, applicable day period. The majority of these information, we do not agree that more
manufacturers or applicable GPOs may commenters supported the secure Web than 2 years of data should be available
begin resolving the dispute and site to view the data and recommended for review and correction. While we
correcting the data. Following the end of that CMS determine a process to believe that covered recipients and
the review and correction period, validate the identities of the applicable physician owners and investors should
applicable manufacturers and manufacturers. Regarding the data have appropriate opportunity to review
applicable GPOs will have an additional available, many commenters the data, we believe that the data should
be finalized and no longer open to covered recipient or physician owner or commenters supported that CMS should
disputes and updates after a certain time investor, for any aggregated totals. not be involved and that it should be at
period. As discussed later in this We also received numerous comments the discretion of the disputing parties.
section, we have worked to improve the on the proposed process for dispute Many commenters also recommended
review and correction processes to resolution. In the proposed rule, we options for resolution, such as engaging
allow covered recipients and physician stated that we should not be actively a third party to mediate the disputes or
owners and investors the opportunity to involved in arbitrating disputes between developing an appeals process.
review and correct their data and applicable manufacturers or applicable Several commenters recommended
resolve disputes with applicable GPOs, and covered recipients, or that CMS allow applicable
manufacturers and applicable GPOs physician owners or investors regarding manufacturers and applicable GPOs
throughout the year. Given this the receipt, classification or amount of discretion over which payments or other
increased flexibility, we believe that any payment or other transfer of value, transfers of value or ownership or
allowing only the review of the previous or ownership or investment interest. We investment interests to resolve. A few of
year’s data (submitted in that year) proposed that covered recipients, and these commenters noted that the statute
provides covered recipients and physician owners or investors may only requires that CMS grant a review
physician owners and investors request from us the contact information and correction period, but not that all
sufficient time to review and, if for a specific applicable manufacturer or disputes must be resolved. Conversely,
necessary, correct disputes. applicable GPO, in the event of a a few commenters recommended that
Additionally, we agree that all data potential dispute over the reported data. CMS impose a materiality threshold,
from the previous reporting year, However, it would be the responsibility and applicable manufacturers and
including data granted delayed of the covered recipient, or physician applicable GPOs would not be required
publication should be available for owner or investor, to contact and to resolve disputes below the threshold.
review during the review and correction resolve the dispute with the applicable Additionally, a few commenters
period following the reporting year. For manufacturer or applicable GPO. We recommended that applicable
example, a payment or transfer of value proposed that at least one of any entity manufacturers and applicable GPOs
granted delayed publication, but made involved (applicable manufacturer, should be responsible for reporting the
in 2014 and reported in 2015, would be applicable GPO, covered recipient, or resolution of disputes to CMS since they
made available to the covered recipient physician owner or investor) must are subject to penalties for incorrect
for review and correction in 2015, but report to CMS that a payment or other reporting. Most of these commenters
would not be published until the transfer of value, or ownership or recommended that applicable
appropriate time for release. We believe investment interest is disputed and the manufacturers and applicable GPOs
covered recipients and physician results of that dispute. should be allowed to re-certify the data
owners and investors, as well as Regarding the timing for submitting after the dispute resolution. Finally, a
applicable manufacturers and disputes, we proposed that the 45-day few commenters discussed how the
applicable GPOs will be better able to review period is the primary post-submission review process would
review and correct the data during the opportunity to correct errors or contest interact with a pre-submission review.
period of time immediately following the data submitted by applicable Response: We appreciate the
the transaction, rather than years manufacturers and applicable GPOs to comments and agree that effective and
afterward when the data is about to be CMS. Once the 45-day review period accurate resolution of disputes is
published. Finally, we intend to provide has passed and the parties have essential to the program. After
additional information and guidance on identified all changes or disputes and reviewing the comments, we believe
the reporting requirements and timing we have made or noted them all, we that we do have a responsibility to
of data review and correction to help proposed that neither applicable facilitate the capability for correcting
applicable manufacturers, applicable manufacturers, applicable GPOs, the data and resolving disputes among
GPOs, covered recipients and physician covered recipients, nor physician the parties. However, we maintain that
owners or investors understand how owners or investors would be permitted we should not be actively engaged in
transactions should be reported. to amend the data for that calendar year. mediating dispute resolutions. The
We also proposed that applicable relationship exists between the
c. Dispute Resolution manufacturers, applicable GPOs, applicable manufacturer or applicable
In the proposed rule, we provided covered recipients, or physician owners GPO, and the covered recipient or
information on the public presentation or investors alert us as soon as possible physician owner or investor, so these
of disputed, but unresolved regarding any errors or omissions, but parties should be involved in the
transactions. We proposed that if an these changes may not be made until the resolution of the dispute, not CMS. We
applicable manufacturer or applicable data is updated for the following believe that we are not the appropriate
GPO, and covered recipient, or reporting year. At that time, all parties party to mediate the disputes. However,
physician owner or investor have would once again have an opportunity we do plan to provide the opportunity
contradictory information that cannot be to review and amend the data. However, for covered recipients, or physician
resolved by the parties involved, then we proposed that we would have the owners or inventors to review and
the data would be identified as option to make changes to the data at correct the data submitted on their
contradictory and both the original any time (for example, to correct behalf. We also plan to monitor the rate
submission from the applicable mathematical mistakes). of disputes and resolutions, including
manufacturer or applicable GPO, and Comment: Commenters had mixed whether an applicable manufacturer or
the modified information provided by reactions to the proposal that CMS not applicable GPO has an abnormally high
the covered recipient or physician play a central role in mediating number of disputes or has an
owner or investor, would appear in the disputes. Many commenters stated that abnormally high rate of unresolved
final publicly available Web site. We CMS should manage the process to disputes.
also proposed that for aggregation ensure it is standardized and intervene When covered recipients and
purposes, we would use the in situations when disputes cannot be physician owners or investors register
contradictory data, as corrected by the resolved. Conversely, many other and sign on to the secure CMS Web site,
all payments or other transfers of value, situations when the cost of initiating transaction should be listed on the
and all ownership or investment and resolving a dispute may not be public Web site.
interests, submitted on their behalf will worth the potential benefits. We intend We also do not agree that disputed
be available for review. The covered to monitor the volume and terms of transactions should not be published
recipient or physician owner or investor disputes and resolutions, and plan to publicly until they are resolved. We
will be responsible for reviewing each provide additional guidance regarding believe that this method would
payment or other transfer of value, or situations when the cost of resolving a potentially create an incentive for
ownership or investment interest, and dispute may outweigh the benefits. covered recipients and physician
will be able to initiate a dispute on a Finally, since we are neither requiring, owners or investors to dispute each
particular transaction, if he/she chooses. nor managing the pre-submission transaction of the public Web site to
If a covered recipient or physician review process, we do not believe there prevent them from being made public.
owner or investor decides to initiate a should be any connection between any We also believe that publication of
dispute, he or she will be directed to fill pre-submission processes and the CMS disputed transactions will incentivize
out electronic fields detailing the processes for data submission and the parties to resolve disputes in a
dispute, including the proposed review and correction. For example, we timely manner. We do not believe that
corrections. The system will will not restrict a physician who any additional incentives are necessary.
automatically flag that the transaction reviewed and approved a payment in We believe that the interest to only
was disputed and the system will notify the pre-submission review from publish accurate and undisputed
the appropriate applicable manufacturer disputing such payment or other information will push all parties to
or applicable GPO of the dispute, transfer of value during the CMS actively resolve disputes.
detailing the information submitted by process for review and correction, since Therefore, we will finalize that on the
the disputing covered recipient or we will not know whether the physician public Web site, payments or other
physician owner or investor. The received an opportunity to pre-review transfers of value or ownership or
applicable manufacturer or applicable the payments or the result of his/her investment interests that cannot be
GPO and physician or teaching hospital pre-review. resolved by the end of the 15-day
will then be responsible for resolving resolution period will be marked as
Comment: Numerous commenters
the dispute, after which the applicable ‘‘disputed,’’ but the applicable
opposed CMS’s proposed approach for
manufacturer or applicable GPO will be manufacturer’s or applicable GPO’s
presenting disputed data. Many
responsible for submitting corrected most recent attested data subject to the
commenters stated that it would be
data and re-attesting to the new data by dispute will be the only account of the
misleading to end users of the data to
the end of the 15-day resolution period. information published. We believe
include both accounts. However, they publishing the most recent attested
If a dispute cannot be resolved in this differed in their preferred options for
time, the parties may and should account by the applicable manufacturer
presenting unresolved transactions. or applicable GPO (rather than the
continue to work to reach resolution Several commenters recommended that
and update the data. However, we will corrected account provided by the
disputed transactions should be flagged covered recipient or physician owner or
continue to move forward with as disputed, but only one account of the
publishing the original and attested investor during the review and
transaction be included. The majority of correction period) is appropriate
data, but will mark it as disputed.
these commenters suggested that the because applicable manufacturers and
If an applicable manufacturer or
applicable GPO submits updated data to information, as submitted by the applicable GPOs are responsible for
resolve dispute(s), the applicable applicable manufacturer or applicable collecting, reporting, and attesting to the
manufacturer or applicable GPO must GPO, should be the account of the accuracy of the information and are
re-attest to the timeliness, accuracy, and transaction published, since they are the subject to penalties for failure to report.
completeness of the data, as required entities with the reporting requirements The parties may continue to resolve
during the original data submission. If and subject to penalties. Other disputes after the close of the resolution
an applicable manufacturer or commenters recommended that the period and after the data has been
applicable GPO does not update its data unresolved data should not be published publicly, or may leave the
at the end of the correction period, then published until it has been resolved. data as disputed; however, we
its original attestation will be used. We Beyond the data reported, a few discouraged leaving data as disputed
recognize that this requirement adds a commenters recommended that CMS and advocate for timely dispute
second attestation for applicable outline incentives for resolving disputes resolution.
manufacturers and applicable GPOs that in order to ensure that applicable Comment: Several commenters did
submit updated data, but we believe it manufacturers, applicable GPOs, not support the 45-day review period
is important that all the data presented covered recipients and physician being the only opportunity to review
on the public Web site be subject to the owners and investors participate in the and correct the data and recommended
same attestation requirements. We also dispute resolution process. that review and correction be available
believe applicable manufacturers and Response: We appreciate the more frequently. Many commenters also
applicable GPOs will appreciate the comments and agree that publishing recommended that CMS allow for
opportunity to re-attest in response to both accounts of a disputed transaction changes to be made more than once
any updates to the data changed during would be misleading. Although we annually to ensure that mistakes are
the review and correction period. believe publishing both accounts would identified and corrected on the public
Additionally, we do not agree that the provide the details of the dispute Web site as soon as possible. Finally, a
statute does not require applicable thereby providing the greatest few commenters also recommended that
manufacturers and applicable GPOs to transparency, we believe that this level applicable manufacturers, applicable
resolve disputes. We believe that by of detail would not be useful for end GPOs, covered recipients, and physician
requiring a review and correction users of the data. We also agree that any owners or investors should not have to
period, Congress intended any disputes disputed transactions that have not yet report mistakes immediately, but allow
identified to be resolved; however, we been resolved should be labeled as such, time to investigate the mistake
do recognize that there may be but that only a single account of the internally.
Response: We appreciate the resolve them with applicable stakeholders regarding the content of
comments on updating the public Web manufacturers and applicable GPOs as the Web site, since we recognize that
site and agree that we have a quickly as possible. It will be the stakeholders and the public must be a
responsibility to allow for updates to the responsibility of the applicable part of the development process. We
data more frequently than once a year manufacturer or applicable GPO that agree that it is important that the final
during the formal 45-day review and submitted and attested to the data to Web site is user-friendly and provide
correction period and 15-day resolution submit any updates, including errors accurate and understandable
period, particularly given the short time and omissions, immediately after information to the public. In order to
period for the data to be reviewed and confirming that an update is needed or regain flexibility over the details of the
updated. We believe that some disputes an error needs to be corrected; failure to Web site and allow the opportunity to
will not be resolved in time for updated do so may be considered incomplete work with stakeholders on
data to be included in the public data reporting and may give rise to penalties. development, we have only provided
release for that reporting year, but will general information on the public Web
D. Public Availability
be resolved and require changes site in the final rule. We believe that it
thereafter. These should not be Under the statute, we are required to is important that we have flexibility to
incorrectly listed on the Web site for a publish on a publicly available Web site make changes to the Web site as they are
whole year, when they have in fact been the data reported by applicable identified, but do plan to engage the
resolved. Nevertheless, we also believe manufacturers and applicable GPOs for public on the future development. We
that we do not have the resources to CY 2012 by September 30, 2013. For intend to release additional information
make continual changes to the Web site each year thereafter, we must publish about the Web site through education
and should not be required to the data for the preceding calendar year and outreach to the stakeholder
continually update the data. We will by June 30th. Given the timing of the community.
update the current and a previous year’s final rule, no data will be collected for Comment: In response to our request
data at least once annually, beyond the CY 2012, so the first data publication for comment on the structure of the
initial data publication following the will be in 2014 for data collected in public Web site, we received numerous
submission of the data. 2013. comments recommending specific
Similarly, we also believe that In the proposed rule, we noted that information to be included, as well as
covered recipients, and physician section 4 of Executive Order 13563 calls the Web site’s capabilities. Some
owners or investors should be allowed upon agencies to consider approaches commenters recommended that specific
to review and dispute the contents of that ‘‘maintain flexibility and freedom information and research should be
the public Web site throughout the year. of choice for the public,’’ including the included on the Web site as background
After registering with the CMS system, ‘‘provision of information to the public or contextual information, particularly
physicians and teaching hospitals, and in a form that is clear and intelligible.’’ including details of the reporting
physician owners and investors may We requested comment on how to requirements and the benefits of
sign in to the system to review or structure this Web site for ultimate relationships between manufacturers
dispute officially submitted and attested usability and proposed, as required by and physicians and teaching hospitals.
transactions any time during the year. statute, that the Web site will include Additionally, some other commenters
However, any disputes and subsequent information on any enforcement recommended that CMS link to other
updates initiated and resolved outside activities taken under section 1128G of Web sites, such as physician codes of
the 45-day review and correction period the Act for the previous year; conducts or a manufacturer’s published
and 15-day resolution period may not be background or other helpful information data.
reflected on the public Web site until on relationships between the drug and Regarding the capabilities of the Web
the next update of the data. We believe device industry and physicians and site, some commenters recommended
this fairly allows covered recipients and teaching hospitals; and publication of that the data should be easily searchable
physician owners or investors control information on payments or other and downloadable. Other commenters
over reviewing and correcting their data transfers of value that were granted recommended specific file structures
at all times, but does not require us to delayed reporting. and details for the data, for public use,
make continual changes to the Comment: Numerous commenters as well as use by researchers, including
published data. This system will also provided feedback on the public Web allowing researchers to obtain
allow covered recipients and physician site, particularly the development of the information that is not publicly
owners and investors the opportunity to Web site. Many commenters called available.
easily and efficiently review (and upon CMS to solicit stakeholder Response: We appreciate the
dispute, if necessary) data updated and assistance in the development of the comments and agree that both the
re-submitted by an applicable public Web site and that stakeholders information included and capabilities of
manufacturer or applicable GPO. should be given the opportunity to the Web site are extremely important.
Finally, we also understand comment on the Web site content prior We support many of the
applicable manufacturers, applicable to it being finalized. A few commenters recommendations and have provided
GPOs, covered recipients, and physician also recommended various methods to general plans for the information to be
owners or investors may want to better develop the Web site, such as presented, as well as the capabilities of
investigate errors internally before reviewing existing Web sites with the Web site. We plan to ensure that the
notifying CMS of errors or omissions. similar information as examples. public Web site accurately and
However, we believe that errors and Finally, a few other commenters completely describes the nature of
changes need to be reported to us as requested that CMS provide more relationships between physicians and
soon as possible so that we have the information on the public Web site in teaching hospitals, and the industry,
most accurate information possible. We the final rule. including an explanation of beneficial
believe that covered recipients and Response: We appreciate the interactions. In addition, we plan to
physician owners or investors should comments and agree that stakeholder provide information to stakeholders
use the CMS review and correction input is essential to the success of the regarding the data submission, review,
processes to report errors and begin to public Web site. We plan to engage dispute, dispute resolution and other
applicable operational processes. As downloadable, understandable, and able ++ Amount of payment or other
proposed, the Web site will clearly state to be aggregated: transfer of value in U.S. dollars.
that disclosure of a payment or other • Applicable manufacturer’s name. ++ Date of payment or other transfer
transfer of value on the Web site does • Covered recipient’s— of value.
not indicate that the payment was ++ Name; ++ Form of payment or other transfer
legitimate nor does it necessarily ++ Specialty (physician only); and of value.
indicate a conflict of interest or any ++ Primary business street address ++ Nature of payment or other
wrongdoing. We appreciate the support (practice location). transfer of value.
of this language and plan to emphasize • Amount of payment or other ++ Name(s) of the related covered
it on the Web site. We also plan to transfer of value in U.S. dollars. drugs, devices, biologicals, or medical
provide Frequently Asked Questions • Date of payment or other transfer of supplies, as applicable.
(FAQs) and other methods to help users value. ++ NDCs of related covered drugs
• Form of payment or other transfer and biologicals, if any.*
find and understand this important
of value. ++ Name of the entity that received
contextual information.
• Nature of payment or other transfer the payment or other transfer of value,
While we appreciate that there is of value.
similar information available from if not provided to the physician directly.
• Name(s) of the related covered ++ Statement providing additional
industry and stakeholders that may be drugs, devices, biologicals, or medical context for the payment or other transfer
beneficial to include on the public Web supplies, as applicable. of value (optional).*
site, we also want to try to reduce the • NDCs of related covered drugs and
promotional or company specific biologicals, if any.* E. Delayed Publication for Payments
information on the Web site, so we will • Name of the entity that received the Made Under Product Research or
need to assess the best way to include payment or other transfer of value, if not Development Agreements and Clinical
this information, if at all. Finally, we are provided to the covered recipient Investigations
also cognizant that the Web site will directly. Section 1128G(c)(1)(E) of the Act
include a significant amount of • Statement providing additional provides for delayed publication of
information and are considering the best context for the payment or other transfer payments or other transfers of value
way to provide sufficient context of value (optional).* from applicable manufacturers to
without overwhelming the consumer. For research payments or other covered recipients made pursuant to
As required by statute, we plan to transfers of value, at a minimum the certain kinds of product research or
aggregate the data submitted and following research related information development agreements and in
publish the data on a Web site that is will be available on the public Web site: connection with clinical investigations.
searchable across multiple fields and • Name of research institution/entity This provision seeks to balance the need
available for downloads. In addition, we receiving payment. for confidentiality of proprietary
plan to establish mechanisms for • Total amount of research payment.
information with the need for public
researchers who may want information • Name of study.
• Name(s) of the related covered transparency of payments to covered
that is not publicly available. We recipients that could affect prescribing
believe that the data included in the drugs, devices, biologicals or medical
supplies. habits or research outcomes.
database is primarily important for In the proposed rule, we proposed
consumers, but understand that it also • NDCs of related covered drugs and
biologicals, if any.* that payments or other transfers of value
provides numerous opportunities for would be granted delayed publication
research on provider-industry • Principal investigator(s) (including
name, specialty and primary business only if they were made in the context
relationships. We plan to provide of a relationship for bona fide research
opportunities to download the data that address).
• Context of research. or clinical investigation activities. We
support researchers, as well as proposed that the ‘‘product research or
• ClinicalTrials.gov identifier
consumers, since we believe that development agreement’’ referenced in
(optional).
research on this information is an For physician ownership and the statute included a written statement
important benefit of any transparency investment interests, at a minimum the or contract between the applicable
initiative. following information would be manufacturer and covered recipient, as
1. Data Elements included on the public Web site in a well as a written research protocol.
format that is searchable, downloadable, Section 1128G(c)(1)(E) of the Act
In the proposed rule, we listed the understandable, and able to be provides specific situations when
data elements that would be available aggregated: delayed publication of payments or
on the public Web site. We did not • Applicable manufacturer’s or other transfers of value is appropriate,
receive any comments on these, so we applicable GPO’s name. including the following:
have finalized them as proposed. As • Physician owner or investor’s— • Research in connection with a
required by statute, a physician’s NPI ++ Name; potential new medical technology or a
will not be published on the public Web ++ Specialty; and new application of an existing medical
site. In these lists, we have included any ++ Primary business street address. technology.
necessary changes as required by other • Whether the ownership or • The development of a new drug,
sections of the final rule. The asterisks investment interest is held by the device, biological, or medical supply.
indicate the additional information that physician or an immediate family • In connection with a clinical
we will publish under the discretion member of the physician. investigation regarding a new drug,
provided by the statute. As required in • Dollar amount invested. device, biological, or medical supply.
section 1128G(c)(1)(C)(ii) of the Act, at • Value and terms of each ownership In the proposed rule, we noted the
a minimum the following information or investment interest. difficulty in separating medical
on payments and other transfers of • Any payment or other transfer of technology from the definition of
value would be included on the public value provided to the physician owner covered drug, device, biological or
Web site in a format that is searchable, or investor, including: medical supply and proposed to
consider ‘‘medical technology’’ broadly only devices or even only a subset of for delayed publication under section
to include any drug, device, biological, devices. A few commenters also 1128G(c)(1)(E) of the Act, new generic
or medical supply. Similarly, due to the recommended that CMS not allow any products will be considered new
overlap between the terms ‘‘research’’ delayed publication for payments or products, including drugs receiving
and ‘‘development,’’ we proposed to other transfers of value related to new approval under an Abbreviated New
treat them similarly in this provision. In applications of existing products. Drug Application, and devices under
the proposed rule, we noted that the Finally, a few other commenters the 510(k) process.
definition of clinical investigations in requested that CMS allow for delayed Finally, while we recognize the
section 1128G(e)(3) of the Act is distinct publication of sensitive payments or potentially sensitive nature of business
from both ‘‘research’’ and other transfers of value that are not development activities, we do not
‘‘development’’ for the purposes of related to research, such as business believe that the statute grants us the
section 1128G the Act. We noted that development activities. ability to granted delays for payment
this definition may also differ from Response: We appreciate these types other than research.
those that applicable manufacturers may comments. However, we believe that Regarding the written agreement and
be familiar with in 21 CFR 312.3 and our proposal strikes a good balance for research protocol, we discussed
812.3. granting certain payments or other numerous comments on these
Given these interpretations, we transfers of value a delay in publication. requirements earlier in the research
proposed that delayed publication In order to provide additional context to section, particularly regarding the
should apply to payments to covered stakeholders, we seek to clarify our requirement that a research study must
recipients for services in connection interpretation of the proposed be subject to both a written agreement
with research on, or development of, requirements for delayed publication. and a research protocol. We have
new drugs, devices, biologicals, or All payments or other transfers of finalized the same requirements for
medical supplies, as well as new value that are related to research, as payments or other transfers of value
applications of existing drugs, devices, defined in § 403.902, and are made granted delayed publication. In general,
biologicals, or medical supplies. pursuant to a written research a payment or other transfer of value can
Conversely, we proposed limiting agreement for research related to new only be granted delayed publication if
delayed publication for payments in products will be granted a delay. the payment meets the definition of
connection with clinical investigations However, payments or other transfers of research and could be reported under
to new drugs, devices, biologicals, or value related to research for new the ‘‘research’’ nature of payment
medical supplies, but not new applications of products already on the category. Any related payments or other
applications of existing drugs, devices, market will be treated differently due to transfers of value that would not be
biologicals, or medical supplies. the statutory distinction between new reported as a part of the research nature
Finally, the statute also requires that products and new applications of of payment category, pursuant to the
information about payments and other existing products. Pursuant to the discussion in section II.B.1.i. of this
transfers of value that are delayed from statute, payments related to research on final rule, will not be granted delayed
publication must be made publicly new applications of existing products publication.
available on the first publication date will be granted a delay only if the Comment: Commenters specifically
after the earlier of either: (1) the research does not meet the definition of recommended that 4 years is not enough
approval, licensure or clearance by the ‘‘clinical investigation.’’ We recognize time for full development of a product,
FDA of the covered drug, device, that clinical investigations are a subset and that payments should only be
biological or medical supply; or (2) 4 of research; however, we believe that published after FDA approval, licensure
calendar years after the date of payment the statute clearly differentiates them for or clearance.
or other transfer of value. purposes of delayed publication from Response: We appreciate the
Comment: Numerous commenters research and development, and comments, but the timelines are clearly
provided input on these interpretations indicates that payments or other delineated in section 1128G(c)(1)(E) of
and proposals. Some commenters transfers of value made in connection the Act. We do not have the authority
recommended that CMS expand the with clinical investigations (as defined to alter them. Additionally, we believe
situations when a payment or other in section 1128G(e)(3) of the Act) related Congress clearly intended that all
transfer of value may be granted delayed to new applications of existing products payments should be included on the
publication. For example, a few should not be granted a delay. Given the public Web site, even if a product never
commenters suggested that all research- broad scope of the statutory definition received FDA approval, licensure or
related payments or other transfers of of ‘‘clinical investigation,’’ we believe clearance.
value should be granted a delay in this includes Phases I through IV
publication, regardless of the product 1. Process for Reporting Payments or
clinical research for drugs and
under consideration. Some commenters biologicals, and approval trials for Other Transfers of Value Granted
also explained that research on non- devices (including medical supplies). Delayed Publication
covered products should also be granted We also amended the regulatory We received numerous comments on
delayed publication, including pre- definition to include biologicals and our proposed method for notification to
clinical research, which is often not medical supplies, as well as drugs and CMS which payments or other transfers
expressly connected to a product. devices, since all product types should of value are eligible for delayed
Conversely, other commenters be treated similarly. publication on the public Web site, as
recommended that CMS narrow the We recognize that the interpretation well as additional methods for reporting
situations when a payment or other of the meaning of a new product (as the information to CMS. We proposed
transfer of value is granted delayed opposed to a new application of an that applicable manufacturers should
publication. For example, a few existing product) for the purposes of indicate on their reports whether or not
commenters suggested interpreting section 1128G of the Act may differ a payment or other transfer of value
medical technology as a subset of from other definitions, such as the should be granted a delay from
covered drugs, devices, biologicals or definition of new drug in 21 U.S.C. 355. publication. In addition, we proposed
medical supplies, which would include For purposes of determining eligibility that payments or other transfers of value
subject to delayed reporting need to be publication, it will be published transfer of value, or ownership or
reported each year with a continued immediately on the next publication investment interest not reported as
indication that publication should date. required. The maximum total CMP with
remain delayed and any updated We also appreciate the comments respect to each annual submission for
information on the payment or other regarding alternative methods for failure to report is $150,000. For
transfer of value, as necessary. Further, reporting payments or other transfers of knowing failure to submit required
we proposed that following FDA value granted delayed publication; information in a timely manner, an
approval, licensure or clearance, however, we believe that the proposed applicable manufacturer or applicable
applicable manufacturers must indicate method is preferable. We believe that GPO will be subject to a CMP of at least
in their next annual submission that the continual reporting is beneficial because $10,000, but no more than $100,000, for
payment should no longer be granted a it will allow us to ensure that payments each payment or other transfer of value,
delay and should be published in the or other transfers of value made more or ownership or investment interest not
current reporting cycle. Finally, we than four years earlier will be published reported as required. The maximum
proposed that if a report includes a date appropriately. Otherwise, payments or total CMP with respect to each annual
of payment 4 years prior to the current other transfers of value from the same submission for a knowing failure to
year, then the payment or other transfer applicable manufacturer may be stored report is $1,000,000.
of value would be automatically in various places. Additionally, we In the proposed rule, we outlined the
published, regardless of whether the believe it will be difficult for us to penalty amounts as required by statute
applicable manufacturer indicates that enforce and audit payments or other for failure to report and knowing failure
the payment should be delayed. transfers of value eligible for delayed to report. In addition, we proposed that
Comment: A few commenters publication if they are not reported until all CMPs would be collected and
requested clarification on whether they are scheduled to be published. imposed in the same manner as the
applicable manufacturers would be Nevertheless, we understand the CMPs collected and imposed under
required to indicate that a payment or confidentiality concerns, particularly for section 1128A of the Act. Additionally,
other transfer of value should be granted new products that have not yet been we proposed that the procedures in 42
delayed publication. Other commenters granted FDA approval, licensure, or CFR part 402 subpart A would apply
provided alternative methods for clearance. However, after reviewing the with regard to imposition and appeal of
reporting payments or other transfers of comments, we believe that allowing CMPs. Similarly, we defined the term
value eligible for delayed publication. applicable manufacturers to report in a ‘‘knowingly’’ based on the meaning in
For example, some commenters different manner and allowing special the False Claims Act, 31 U.S.C. 3729(b),
recommended that applicable considerations for certain research as required by statute. Finally, we also
manufacturers should only report the payments or other transfers of value proposed that a CMP may be imposed
payment or other transfer of value to makes the reporting requirements for failure to report information in a
CMS in the year it was made and then significantly more complicated. timely, accurate, or complete manner.
again in the year it is to be published. Additionally, section 1128G(c)(1)(E)(ii) In the proposed rule, we outlined the
Similarly, other commenters of the Act requires CMS to keep the factors that we would consider when
recommended that applicable information submitted confidential determining the amount of a CMP, as
manufacturers should only report prior to publication. We believe that well as when the maximum CMP would
payments or other transfers of value in creating separate requirements is too be imposed. We did not receive any
the year they are to be published. In burdensome particularly when the comments on these factors, so we have
addition, a few commenters expressed statute and regulations already provide decided to finalize these provisions as
concern about confidentiality and for confidentiality. We do not intend proposed. The factors to be considered
recommended that applicable applicable manufacturers to provide include, but are not limited to, the
manufacturers should not be required to research protocols or other such following:
report the identifying details of the agreements to CMS for verification. • The length of time the applicable
payment or other transfer of value until Finally, pursuant to the statute, manufacturer or applicable GPO failed
the payment was scheduled to be information reported by applicable to report, including the length of time
published. Beyond identifying details, manufacturers that is subject to delayed the applicable manufacturer and
some commenters recommended that publication under section applicable GPO knew of the payment or
CMS allow applicable manufacturers to 1128G(c)(1)(E) of the Act shall be other transfer of value, or ownership or
report ‘‘research and development’’ for considered confidential and shall not be investment interest.
the product name, rather than the subject to disclosure under 5 U.S.C. 552, • Amount of the payment or other
product, in order to better protect or any other similar Federal, State or transfer of value or the value of the
proprietary interests. Similarly, local law, until after the date on which ownership or investment interest the
commenters recommended that CMS the information is made available to the applicable manufacturer or applicable
never require the collection of research public via publication on the Web site. GPO failed to report.
protocols in order to ensure a payment
F. Penalties • Level of culpability.
or other transfer of value should be • Nature and amount of information
granted delayed publication. Section 1128G(b) of the Act reported in error.
Response: We appreciate the authorizes the imposition of CMPs for • Degree of diligence exercised in
comments and agree that applicable failures to report required information correcting information reported in error.
manufacturers are not required to on a timely basis in accordance with the Finally, we proposed that in order to
indicate that payments or other transfers regulations. If an applicable facilitate audits and enforcement,
of value are eligible for delayed manufacturer or applicable GPO fails to applicable manufacturers and
publication and may instead choose not submit the required information, then applicable GPOs must maintain all
to indicate eligibility for the delay. the applicable manufacturer or books, records, documents, and other
However, if a manufacturer does not applicable GPO will be subject to a CMP materials sufficient to enable an audit,
indicate that a payment or other transfer of at least $1,000, but no more than evaluation or inspection of the
of value is eligible for delayed $10,000, for each payment or other applicable manufacturer’s or applicable
GPO’s compliance with the a maximum combined annual total of consolidated report for itself (Company
requirements in section 1128G of the $1,150,000. Finally, we also realized A) and two other applicable
Act and the implementing regulations. that in the proposed rule we did not manufacturers (Subsidiary B and C). We
We proposed that applicable refer to the procedures for collection of discover six instances of a failure to
manufacturers and applicable GPOs CMPs in 42 CFR part 402 subpart B, so report a payment or other transfer of
must maintain these books, records, we are clarifying in this final rule that value in Company A’s submission (each
documents, and other materials for a the procedures in 42 CFR part 402 penalized at $10,000), seven instances
period of at least 5 years from the date subpart A and subpart B will apply with of a knowing failure to report in
the payment or other transfer of value, regard to imposition, appeal, and Subsidiary B’s submission (each
or ownership or investment interest is collection of CMPs. penalized at $100,000) and finally nine
published publicly on the Web site. Regarding corrections made during knowing instances of failure to report
Comment: A few commenters the review and correction, and dispute (each penalized at $100,000) in
discussed the proposed penalties for resolution periods, we want applicable Subsidiary C’s submission. Company A,
failure to report. These commenters manufacturers and applicable GPOs to as the submitter and attester of the data,
generally supported higher CMP correct any errors they have submitted would be subject to a penalty of $60,000
amounts for knowing failures to report. without fear of alerting CMS to errors for Company A’s failure to report,
However, a few of these commenters that will be subject to penalties; $700,000 for Subsidiary B and $900,000
suggested that the penalties were too however, we do not want to allow for Subsidiary C. To be clear, Company
low. The commenters also applicable manufacturers to submit A would be subject to the penalties for
recommended that penalties should be grossly inaccurate or incomplete data by knowing failure to report from both
imposed for inaccurate reporting, as the original submission date without Subsidiary B’s and Subsidiary C’s
well as omitted transactions. risk of sanction. Therefore, we are submissions even though the penalties
Beyond the structure of the penalties, requiring applicable manufacturers and together exceed $1,000,000, because we
a few commenters also requested applicable GPOs to attest the timeliness, interpret the maximum to apply
additional information on how CMS accuracy, and completeness of their individually to each applicable
planned to enforce the program. They original submission to CMS prior to the manufacturer’s submission, even if the
requested information on which review and correction period. submission is contained within a
agencies would be responsible for Applicable manufacturers and consolidated report. We believe this
enforcement, as well as the enforcement applicable GPOs should make a good appropriately handles the penalty
mechanisms. Finally, a few commenters faith effort to ensure that the original requirements for applicable
requested clarification on when the data submitted to CMS is correct. We do manufacturers submitting consolidated
maximum penalty would be imposed not intend that errors corrected during reports, since each applicable
and recommended that errors corrected the review and correction, and dispute manufacturer should be subject to the
during the review and correction period resolution periods will be subject to same maximum penalties regardless of
would not be subject to penalties. penalties for failure to report in
Response: We appreciate the whether it submits individually, or as a
instances when the original submission part of a consolidated report. Two
comments. However, we cannot change was made in good faith. As noted
the amount or terms of the penalties, applicable manufacturers submitting a
earlier, applicable manufacturers and consolidated report should not be
since they were authorized by statute. applicable GPOs will be required to re-
Section 1128G(b) of the Act outlines the subject to lower penalties than two
attest after the submission of updated or
CMP amounts and requires that they are applicable manufacturers not submitting
new data. Outside this period, any
imposed and collected in the same a consolidated report. Additionally,
errors or omissions will be considered
manner as those in section 1128A of the because the applicable manufacturer
failures to report timely, accurately, or
Act. Nevertheless, we do agree that the submitting the consolidated report is the
completely, and will be subject to
penalties should be imposed for entity attesting to the data, we believe
penalties. Additionally, both CMS and
inaccurate reporting. We have finalized it is fair that it be subject to the CMPs
the HHS OIG are authorized to impose
our proposal that a CMP may be for each applicable manufacturer
CMPs and both agencies will have the
imposed for failure to report included in the consolidated report.
ability to investigate failures to report
information in a timely, accurate, or Therefore, as noted previously we
timely, accurately or completely.
complete manner. This includes failure Finally, in light of the increased encourage applicable manufacturers
to report timely or accurately an entire flexibility for consolidated reports, we considering consolidated reports to fully
transaction, as well as failure to report have clarified how penalties will be assess the requirements and potential
timely or accurately certain fields enforced for applicable manufacturers penalties.
related to a transaction. For example, submitting consolidated reports. As Comment: A few commenters
this could entail reporting an erroneous explained previously, for consolidated discussed the retention period; in
payment amount or not reporting that reports, the applicable manufacturer particular, many of them stated that the
an ownership or investment interest was that submitted the consolidated report 5-year retention period was too long. A
held by an immediate family member of will be required to attest on behalf of all few other commenters recommended
a physician. In order to clarify this, we the entities included in the consolidated that the 5 years should begin on the date
have revised the regulation text in 42 report. Therefore, the applicable of first submission, rather than the date
CFR 402.105 to include the same text manufacturer actually submitting the of publication. These commenters
regarding reporting in a timely, consolidated report and signing the explained that retention based on date
accurate, or complete manner. In attestation will be subject to the of publication would require applicable
addition, we have revised the regulation maximum penalties (based on manufacturers and applicable GPOs to
text at § 402.105 and § 403.912 to clarify unknowing and knowing failures to retain some records for longer than 5
that the penalties imposed for failures to report) for each individual applicable years. Finally, a few commenters
report and knowing failures to report manufacturer included in the questioned whether the 5-year retention
will be aggregated separately and are consolidated report. For example, an requirement was considered absolute in
subject to separate aggregate totals, with applicable manufacturer submitted a terms of liability.
Response: We appreciate the during the previous calendar year which GPO submitted during the preceding
comments, but do not agree that 5 years was submitted in the current year. We calendar year (that is, data collected in
is too long. We believe that 5 years is also proposed that neither the CY 2013 and submitted in March of
sufficient, since it is less than other Congressional nor State reports will 2014), as well as any enforcement
retention requirements with which include any payments or other transfers actions taken and any penalties paid.
applicable manufacturers and of value that were not published under
applicable GPOs may be familiar. In the delayed publication requirements in H. Relation to State Laws
addition, we believe that the retention section 1128G(c)(1)(E) of the Act. We Section 1128G(d)(3) of the Act
period should begin at the date of did not receive any comments on these preempts any State or local laws
publication. While we understand this provisions and have finalized them as requiring reporting, in any format, of the
policy may require the records to be proposed. same type of information concerning
retained for up to 9 years, we believe Comment: A few commenters did not payments or other transfers of value
this information is essential for audits, support the proposed timing for the made by applicable manufacturers to
and given the confidentiality Congressional report and instead covered recipients. No State or local
requirements for data granted delayed recommended that CMS publish the government may require the separate
publication, these activities may not be Congressional report along with the reporting of any information regarding a
possible until after the data is publication of the data. Additionally, a payment or other transfer of value that
published. If the date of retention began few commenters recommended that is required to be reported under section
when the data was reported, in some CMS provide more information on the 1128G(a) of the Act, unless such
cases there may be less than a year content of the Congressional reports. information is being collected by a
between when the data was published Particularly, they recommended that the Federal, State or local governmental
and the end of the retention period, report provides aggregate spending agency for public health surveillance,
which we do not believe is sufficient across applicable manufacturers and investigation, or other public health
time to allow for audits, penalties, and applicable GPOs, including aggregate purposes or health oversight.
appeals. Given these decisions, we have spending for payments or other transfers Comment: A few commenters
finalized the retention requirements as of value granted delayed publication. discussed the relation of section 1128G
proposed. Finally, the requirements set Finally, a few commenters also of the Act to relevant State laws. These
forth in this final rule are in addition to, recommended that CMS establish a commenters strongly supported
and do not limit, any other applicable process for sharing information across preemption, but requested information
requirements that may obligate government agencies, such as OIG and
on how CMS interpreted the timing,
applicable manufacturers or applicable the Department of Justice (DOJ).
given the missed statutory deadline.
GPOs to retain and allow access to Response: We appreciate the
comments. We agree that the annual Many commenters also requested that
records. CMS identify what elements of current
Congressional report should include
G. Annual Reports summary statistics on the annual State laws will be preempted.
We are required to submit annual aggregate totals across applicable Additionally, these commenters
reports to the Congress and the States. manufacturers and applicable GPOs. We recommended clarifying the statutory
The Report to Congress is due annually also agree that inclusion of the aggregate language to prevent preemption from
on April 1st, beginning April 1, 2013, total of payments or other transfers of being applied too narrowly to
and shall include aggregated value would be useful for oversight of successfully consolidate reporting. A
information on each applicable the program. We plan to include this few commenters explained that a broad
manufacturer and applicable GPO information in our annual Congressional interpretation of the exceptions to
submitted during the preceding report; however, in general we believe preemption, particularly ‘‘other public
calendar year, as well as any that we should not include specific health purposes or health oversight
enforcement action taken and any details in the final rule to allow us purposes’’ could require applicable
penalties paid. Similarly, we must flexibility to include and present manufacturers and applicable GPOs to
report information submitted during the information as appropriate. We also report the same information to States, as
previous year to States annually by plan to work closely with other Federal well as the Federal program. These
September 30, 2013 and June 30 for agencies, since we recognize that other commenters recommended that CMS
each year thereafter. In the preamble to agencies are involved in similar clarify these terms to prevent them from
the proposed rule, we explained that activities. However, the purpose of this being interpreted so broadly to not
since we will not receive data for the program is not to prosecute reporting allow for any preemption.
prior year until the 90th day of each entities, but to promote transparency. Response: We appreciate the
year, the data submitted that year will Regarding the timing of the comments and acknowledge that the
not be ready for the April 1st report. Congressional report, we recognize the statute seems to provide that
Instead, we proposed that we report to awkwardness of the timing, but note preemption of State or local
the Congress information submitted by that the report could be submitted early transparency and disclosure laws is
applicable manufacturers and since it is only required by April 1st. We effective for payments or other transfers
applicable GPOs during the preceding do not believe we have the authority to of value made on or after January 1,
year. change the statutory deadline in 2012. We understand that the delay in
Finally, we proposed that the State regulation, but will try to publish the publication of the rule implementing
reports would be State-specific and report as soon as possible. section 1128G of the Act, which was to
include summary information on the Based on the timing of the publication be published by October 1, 2011, has led
data submitted regarding covered of the final rule we have finalized that to uncertainty regarding when
recipients and physician owners or the Report to Congress will be submitted preemption actually becomes effective.
investors in that State. Since these annually on April 1st, beginning April We urge manufacturers to continue to
reports are due later in the year than the 1, 2015, and will include aggregated report under State or local disclosure
Report to Congress, we proposed that information submitted by each laws until the requirements under the
the reports would include data collected applicable manufacturer and applicable Federal rule take effect.
We also seek to provide some that are charged with preventing or most about 9 years for payments or
additional guidelines to clarify the controlling disease, injury or disability other transfers of value eligible for
preemption requirements; however, we and/or with conducting oversight delayed publication. In our proposed
note that preemption determinations activities authorized by law, including rule, we requested comment on the
will need to be analyzed on a case-by- audits, investigations, inspections, information required in the proposed
case basis. licensure or disciplinary actions, or regulation, but did not include all the
We interpret ‘‘type of information’’ for other activities necessary for oversight data elements we expected applicable
purposes of the preemption clause at of the health care system. manufacturers and applicable GPO’s to
1128G(d)(3)(A) of the Act, to refer to the report, nor did we include detailed
categories of information for each III. Collection of Information
Requirements information about the mechanism for
payments or other transfer of value submission, amendment, or correction.
required to be reported under the statute Under the Paperwork Reduction Act For this reason, we are publishing a 60-
at 1128G(a)(1)(A)(i) through (viii) of the of 1995, we are required to provide day notice elsewhere in today’s Federal
Act and § 403.904(c) of the regulations. notice in the Federal Register and Register seeking public comment on the
We believe this is consistent with the solicit public comment before a information collection. As part of the
statutory exception from preemption in collection of information requirement is
process, we will be seeking public
section 1128G(d)(3)(B)(i) of the Act submitted to the Office of Management
comment on templates that contain the
pertaining to the reporting to States and and Budget (OMB) for review and
data specifications for the system we
localities of information not of the type approval. The information collections
will be building.
required to be disclosed under Federal contained in this rulemaking are
law. Thus, State and local entities may numerous and somewhat complex. We B. Registration for Applicable
require reporting of nonrequired plan to obtain approval for the Manufacturers and Applicable GPOs
categories of information for payments information collections in a step-wise (§ 403.908(c))
or other transfers of value reported to fashion as we develop our system for
CMS, which are not required under receiving and displaying the required As required by § 403.908(c), any
Federal law. This includes payment information and for allowing covered applicable manufacturer or applicable
categories excluded by the Federal law recipients and physician owners or GPO that is required to report under this
(including those listed at section investors to review the reported data subpart must register with CMS within
1128G(e)(10)(B) of the Act), with the prior to display on our Web site. Below, 90 days of the end of the calendar year
exception of those that do not meet the we provide an outline of the for which a report is required. During
minimum dollar threshold set forth in information collections and the current registration, two points of contact must
section 1128G(e)(10)(B)(i) of the Act. In status of our requests for OMB approval. be provided, as well as other
addition, States and localities may A. Recordkeeping and Reporting of information. Registration is required
require reporting of payments or other Payments or Other Transfers of Value once, but upon filing the annual reports
transfers of value not required to be and Physician Ownership and the system will prompt applicable
reported at all under the Federal law. Investment Interests (§ 403.904, manufacturers and applicable GPOs to
For example, they may require the § 403.906, § 403.908(a),(b),(d),(f) and (g), confirm that the registration information
reporting of payments to non-covered § 403.912(e)) (for example, points of contact) is still
recipients or by nonapplicable accurate. If it is not accurate, the
manufacturers. We believe this is Section 403.904 requires applicable applicable manufacturers and
consistent with the statutory exceptions manufacturers of covered drugs, applicable GPOs will be prompted to
from preemption in section devices, biologicals, and medical provide updated information. We have
1128G(d)(3)(B)(iii) of the Act. supplies to report annually to CMS all yet to seek OMB approval for the
Finally, we understand the concern payments and other transfers of value to
information collections associated with
over other public health and oversight physicians and teaching hospitals
these provisions. We plan to seek public
activities; however, this language is (collectively, covered recipients). This
comment consistent with the
required by statute, so we cannot includes special reporting rules for
requirement of the Paperwork
expressly change it. However, these research-related payments. Section
Reduction Act and request OMB
exceptions cannot be used to avoid 403.906 requires applicable
approval at a later date. Consistent with
preemption. If a Federal, State or local manufacturers and applicable GPOs to
5 CFR part 1320, these provisions will
government agency seeks to collect report ownership and investment
not be effective until OMB approves the
information reportable under this interests held by physicians or the
immediate family members of collection of information.
regulation for public health and/or
oversight purposes and specifically physicians in such entities. This C. Attestation (§ 403.908(e))
needs the information for a purpose information is to be aggregated and
other than transparency, then such posted publicly by CMS on a searchable As required by § 403.908(e), each
collection will not be preempted. Web site. Annually, under § 403.908(g) report, including corrections, must
However, if the purpose of the applicable manufacturers and include a certification that the
collection does not meet this exception applicable GPOs will be able to review information reported is timely, accurate,
and in actuality seeks to achieve the and correct the data provided in any and complete. We have yet to seek OMB
same transparency goal as the collection reporting period during the 45 day approval for the information collections
required under section 1128G of the period to review and correction period. associated with these provisions. We
Act, we believe such a collection would Under § 403.912(e), applicable plan to seek public comment consistent
be preempted, and the States or manufacturers and applicable GPOs with the requirement of the Paperwork
localities can obtain the information must retain records to support their Reduction Act and request OMB
they want from the Federal program. reports for 5 years from the date when approval at a later date. Consistent with
We have finalized the proposed the information is publicly posted on 5 CFR part 1320, these provisions will
discussion of public health agencies. We the CMS Web site. This is, in some not be effective until OMB approves the
intend such agencies to include those cases, a recordkeeping requirement of at collection of information.
D. Assumptions Document (§ 403.908(f)) have yet to seek OMB approval for the be transparent,’’ while pointing out that
Under (§ 403.908(f)), applicable information collections associated with ‘‘transparency does not imply that all—
manufacturers and applicable GPOs these provisions. We plan to seek public or even most—of these financial ties
may submit an assumptions document comment consistent with the undermine physician-patient
requirement of the Paperwork relationships.’’ 5 While a few comments
with their reports. This document can
Reduction Act and request OMB discussed the reliability of the data used
set out the assumptions and
approval at a later date. Consistent with for the MedPAC report, we believe that
methodologies used to produce the
5 CFR part 1320, these provisions will the overall conclusions of the report are
reports. It will not be made available to
not be effective until OMB approves the valid and continue to see the report’s
the public, covered recipients or
collection of information. findings as a reason to promote
physician owners or investors, but it
transparency.
will provide CMS with information to G. Notice of Errors or Omissions
help identify areas where additional (§ 403.908(h)) B. Overall Impact
guidance and clarity is needed. This is We have examined the impacts of this
Under § 403.908(h), applicable
a voluntary collection and CMS does rule as required by Executive Order
manufacturers and applicable GPOs
not plan to request that it be submitted 12866 on Regulatory Planning and
must notify CMS immediately upon
in any particular way. We have yet to Review (September 30, 1993), Executive
discovering errors or omissions in their
seek OMB approval for the information Order 13563 on Improving Regulation
reports. We have not yet established the
collections associated with these and Regulatory Review (January 18,
content or form of this notice, and
provisions. We plan to seek public 2011), the Regulatory Flexibility Act
therefore we have yet to seek OMB
comment consistent with the (RFA) (September 19, 1980, Pub. L. 96–
approval for the information collections
requirement of the Paperwork 354), section 1102(b) of the Social
associated with these provisions. We
Reduction Act and request OMB Security Act, section 202 of the
plan to seek public comment consistent
approval at a later date. Consistent with Unfunded Mandates Reform Act of 1995
with the requirement of the Paperwork
5 CFR part 1320, these provisions will (March 22, 1995; Pub. L. 104–4),
Reduction Act and request OMB
not be effective until OMB approves the Executive Order 13132 on Federalism
approval at a later date. Consistent with
collection of information. (August 4, 1999) and the Congressional
5 CFR part 1320, these provisions will
E. Information Collections Regarding not be effective until OMB approves the Review Act (5 U.S.C. 804(2)).
Review and Correction by Physicians collection of information. Executive Orders 12866 and 13563
and Teaching Hospitals (§ 403.908(g)) direct agencies to assess all costs and
IV. Regulatory Impact Analysis benefits of available regulatory
As required by section 1128G of the alternatives and, if regulation is
Act, applicable manufacturers, A. Statement of Need
necessary, to select regulatory
applicable GPOs, covered recipients, This final rule is necessary to approaches that maximize net benefits
and physician owners or investors must implement the requirements in section (including potential economic,
have an opportunity to review and 1128G of the Act (as added by section environmental, public health and safety
submit corrections to the information 6002 of the Affordable Care Act), which effects, distributive impacts, and
submitted for a period of not less than requires applicable manufacturers of equity). Executive Order 13563
45-days before CMS makes the covered drugs, devices, biologicals, and emphasizes the importance of
information available to the public. To medical supplies to report annually to quantifying both costs and benefits, of
accomplish this review, we plan to ask the Secretary all payments and other reducing costs, of harmonizing rules,
covered recipients and physician transfers of value to physicians and and promoting flexibility. Section 4 of
owners and investors that would like to teaching hospitals (collectively, covered Executive Order 13563 calls upon
review the information to register with recipients). Section 1128G of the Act agencies to consider approaches that
CMS using the CMS Enterprise Portal also requires applicable manufacturers ‘‘maintain flexibility and freedom of
and associated identity and access and applicable GPOs to report choice for the public,’’ including the
management system. Once registered, ownership and investment interests ‘‘provision of information to the public
they will be able to access a secure Web held by physicians or the immediate in a form that is clear and intelligible.’’
site that allows them to submit or family members of physicians in such A regulatory impact analysis (RIA) must
review data securely. We have yet to entities. be prepared for major rules with
seek OMB approval for the information These provisions of the Act were
economically significant effects ($100
collections associated with these modeled largely on the
million or more in any 1 year). We
provisions. We plan to seek public recommendations of the MedPAC,
estimate that this rulemaking is
comment consistent with the which voted in 2009 to recommend
‘‘economically significant’’ as measured
requirement of the Paperwork Congressional enactment of a new
by the $100 million threshold.
Reduction Act and request OMB regulatory program. The problem
Accordingly, we have prepared a
approval at a later date. Consistent with addressed, as stated by MedPAC, is that
Regulatory Impact Analysis that
5 CFR part 1320, these provisions will ‘‘at least some’’ drug and device
presents estimated costs and benefits of
not be effective until OMB approves the manufacturer interactions with
the rulemaking. We solicited comments
collection of information. physicians ‘‘are associated with rapid
on all assumptions and estimates in this
prescribing of new, more expensive
F. Notice of Resolved Disputes by regulatory impact analysis, including
drugs and with physician requests that
Applicable Manufacturers and some assumptions and estimates that

such drugs be added to hospital
Applicable GPOs (§ 403.908(g)(4)) were presented in the Collection of
formularies,’’ as well as ‘‘concern that
Information Requirements section of the
Under § 403.908(g)(4), applicable manufacturers’ influence over
proposed rule. As is standard practice in
manufacturers and applicable GPOs physicians’ education may skew the
must notify CMS of resolved disputes. information physicians receive.’’ 5 All quotes from pages 315–316 of ‘‘Public
We have not yet established the content MedPAC went on to say that ‘‘there is reporting of physicians’ financial relationships’’ at
or form of this notice, and therefore we no doubt that those relationships should http://www.medpac.gov/chapters/Mar09_Ch05.pdf.
meeting these various requirements for employees generates annual revenues of also requires that agencies assess
regulatory analysis, this section of the $200,000 per employee, or $20 million, anticipated costs and benefits before
final rule addresses all of them together. a cost of $80,000 would be less than 0.5 issuing any rule whose mandates
The RFA requires agencies to analyze percent of the revenues. Firms this require spending in any single year of
options for regulatory relief of small small would potentially face costs $100 million in 1995 dollars, updated
entities, if a rule has a significant impact considerably less than $80,000, and annually for inflation. In early 2013,
on a substantial number of small hence an even lower effect. that threshold is approximately $139
entities. Under the RFA, ‘‘small As previously noted, most teaching million. The estimates presented in this
entities’’ are those that fall below size hospitals and physicians are small section of this rule exceed this threshold
thresholds set by the Small Business entities under the RFA, since most and as a result, we have provided a
Administration, or are not-for-profit teaching hospitals are not-for-profit and detailed assessment of the anticipated
organizations or governmental some have revenues below $34.5 costs and benefits in section V.C.4. of
jurisdictions with a population of less million. We estimate that 95 percent of this final rule. Reporting under section
than 50,000. We did not receive any physician practices have revenues 1128G of the Act is required by law, so
comments on these aspects of the RFA, under $10 million. We believe the we are limited as to policy options.
so have finalized it as proposed. For regulatory effects of this provision on Section IV.D. of this final rule, as well
purposes of the RFA, we estimate that physicians and teaching hospitals are as other parts of the preamble, provide
the majority of teaching hospitals and relatively minor. Physicians and detailed additional information on the
physicians, and most applicable teaching hospitals are provided with the alternatives we considered.
manufacturers and applicable GPOs are opportunity to review and correct this Executive Order 13132 establishes
small entities under either the size or information, but are not involved in the certain requirements that an agency
not-for-profit standard. According to the data collection or reporting processes. must meet when it promulgates a
Small Business Administration size We estimated that this review would proposed rule (and subsequent final
standards 6 the threshold size standard take 1 hour from the individual rule) that imposes substantial direct
for ‘‘small’’ pharmaceutical physicians and 5 hours for the requirement costs on State and local
manufacturers is 750 employees, for supporting staff to perform the duty to governments, preempts State law, or
biological products, and surgical maintain records and review the reports otherwise has Federalism implications.
equipment, surgical supplies, and annually. For teaching hospitals, it is While this final rule does preempt
electromedical/electrotherapeutic estimated that on average 40 hours of certain elements of State law, the
apparatus manufacturers is 500 compliance officer and 80 hours of regulatory standard simply follows the
employees and for drug and medical supporting staff would needed. Given express preemption provision in the
equipment wholesalers is 100 that their review will take such a small statute. Because of this and the fact that
employees. We estimate that amount of their time annually, the costs this regulation does not impose any
approximately 75 percent of applicable faced by physicians and teaching costs on State or local governments, the
manufacturers and applicable GPOs are hospitals are not substantial. As a result, requirements of Executive Order 13132
smaller than these size standards. In this we believe that the cost burden of this are not applicable. We offer a more
final rule, we assume that applicable review and correction period will be far detailed discussion of preemption in
manufacturers that do not have below the 3 percent threshold for § 403.914 of this final rule.
payments or other transfers of value or ‘‘significant impact.’’ Therefore, we
C. Anticipated Effects
physician ownership or investment have determined that this proposed rule
interests to report do not need to submit will not have a significant economic The regulatory impact of this
a report. We believe that many small impact on a substantial number of small provision includes applicable
applicable manufacturers and entities in any category of entities it manufacturers and applicable GPOs
applicable GPOs will have no affects. collection and submitting this
relationships, thus will not have to In addition, as stated in the proposed information to CMS, and physician and
report, so the burden on them will be rule, section 1102(b) of the Act requires teaching hospital review and correction
negligible. For small entities with us to prepare a regulatory impact period. The costs of these requirements
financial relationships to report, we analysis if a rule may have a significant are outlined in section III. of this final
believe that they will only have a small impact on the operations of a substantial rule. We estimate a total cost of about
number to report, making the reporting number of small rural hospitals. This $269 million for the first year of
process significantly less burdensome. analysis must conform to the provisions reporting, followed by about $180
We believe that the average burden of of section 604 of the RFA. For purposes million in the second year and annually
the reporting requirements will be about of section 1102(b) of the Act, we define thereafter.
$80,000 in the first year (the sum of 0.25 a small rural hospital as a hospital that
is located outside of a metropolitan 1. Effects on Applicable Manufacturers
FTEs of compliance officer at $48 and Applicable GPOs
hourly rate and 1 administrative support statistical area and has fewer than 100
FTE at $26 hourly rate times 40 hours beds. In the proposed rule, we stated For applicable manufacturers, only
and 52 weeks) for smaller that we did not believe that any of the those that made reportable payments or
manufacturers, and even less in affected teaching hospitals are small other transfers of value, or have
subsequent years. This amount is far rural hospitals, so did not believe that physicians (or immediate family
below the 3 percent of revenues that the rule had a significant impact on the members of physicians) holding
HHS uses as a threshold for ‘‘significant operations of small rural hospitals. We ownership and investment interests,
impact’’ under the RFA, so these did not receive any comments on this, will be required to submit reports.
regulations will not have a significant so we have determined that this final Similarly, only applicable GPOs that
effect on these small entities. For rule will not have a significant impact have ownership or investment interests
example, if a firm with only 100 on the operations of a substantial held by physicians (or immediate family
number of small rural hospitals. members of physicians) would be
6 http://www.sba.gov/sites/default/files/ Section 202 of the Unfunded required to submit reports. We estimate
Size_Standards_Table.pdf. Mandates Reform Act of 1995 (UMRA) that approximately 1,150 applicable
manufacturers, (150 drug and biologic number of GPOs, so have finalized these requirements are too low, and CMS
manufacturers, and 1,000 device and assumptions. should increase the FTE estimates.
medical supply manufacturers), and In the public comments, we received Response: We agree with the
approximately 420 applicable GPOs comments on the estimated costs of the comment and have increased our
would submit reports. We based these reporting requirements, but not the estimates of the average FTE burden
estimates on the number of individual activities associated with associated with the manufacturer and
manufacturers reporting in States with them. Given these comments, we have GPO reporting requirements. However,
similar transparency provisions, as well revised the estimates, but have not we believe that applicable
as the number of manufacturers revised the activities the FTEs will be manufacturers and applicable GPOs
registered with FDA. The number of required to perform, since we believe vary in their readiness to comply with
drug manufacturers is based on they accurately portray the the reporting requirements. Some
reporting in Massachusetts, Minnesota, requirements. Coordinating the data companies have existing reporting
and Vermont, whereas the number of collection will require ensuring that all systems in place, which can be used to
device manufacturers is based on payments and other transfers of value comply with the government
reporting in Massachusetts and are attributed to the correct covered requirements. These systems track the
Vermont, since Minnesota does not recipient and reported in the manner wide range of financial interactions
require device manufacturers to report. required in this final rule. These between the company, and physicians
Because the State laws have higher estimates include our aggregate estimate and teaching hospitals. Additionally,
payment thresholds and are specific to of the overall time required to build and the efforts and workload varies with the
the physicians in the State, we maintain the reporting systems size of the company as larger
estimated that the number of (including the development of new manufacturers will have more
manufacturers reporting would be information technology systems), train transactions, so may need more FTEs
greater under section 1128G of the Act, appropriate staff, obtain NPI and other accordingly. As in the proposed rule, we
so we increased the State reporting information from the NPPES system estimated the impact based on all sizes
numbers by 50 percent. For device (and if necessary supplement that of companies, recognizing that there are
manufacturers, we also used data from information), establish whether any a few very large companies for which
the FDA to identify the total number of owners or investors have physicians as this would be a low estimate, but there
manufacturers to use as a ceiling for our immediate family members (if are small companies which may need
estimate, combining the two data necessary), organize the data for fewer FTEs. Additionally, we also took
sources we increased the State reporting submission to CMS (within the into account the finalized provisions
numbers by 75 percent. We believe that organization and with any third party that applicable manufacturers with less
device manufacturers are often smaller vendors), register with CMS and submit than 10 percent of gross revenues
and more region specific, which is why the required data, review the aggregated coming from covered products would
we increased the State estimates by a data that CMS produces, respond to any only have to report payments or other
greater percentage. We did not receive physician or teaching hospital queries transfers of value related to covered
comments on the number of reporting during the review process, and resubmit products, rather than all products. This
entities, except for information on the and re-attest to certain disputed will greatly reduce the reporting burden
number of device manufacturers information (if necessary). Finally, it for these manufacturers, so we have
reporting in Vermont, where the also includes any time required to considered them small companies for
maintain records, as required. However, reporting purposes. Finally, we
legislature amended the transparency
we believe that much of this separated the FTE estimates to include
scheme in 2009 to include reporting by
information will be collected and stored a full time compliance officer, as well as
device manufacturers, so have finalized
already for financial reasons, so we do multiple support staff for bookkeeping,
these assumptions.
not anticipate a significant burden. It accounting, and auditing; this change in
It is difficult to establish with allows for time applicable approach yields a lower average cost per
precision the number of GPOs, as manufacturers and applicable GPOs FTE than we estimated in the PRA.
proposed, because the definition of GPO may sometimes use for ‘‘pre- We estimate that, for year 1, on
includes some physician owned submission’’ reviews but assumes that average, smaller applicable
distributorships (PODs). However, we would be rarely used, and only for manufacturers will have to dedicate 25
did rely on a recent report by the Senate complex cases. It also includes the time percent of an FTE employee (mainly in
Finance Committee which identified 20 that applicable manufacturers may elect the range of zero to 50 percent), whereas
States with multiple PODs and more to spend to submit with their data a larger applicable manufacturers may
than 40 PODs in California.7. When we document describing their assumptions have to dedicate 1 to 10 FTE employees
extrapolate these estimates to the and methodology for categorizing the to comply with the reporting
national level, taking into account the nature of payments. The estimates also requirements (we assume 2 FTEs on
disproportionately higher number in include a downward adjustment to average). Furthermore, we estimated
California, we estimate that there are reflect the potential time savings that that reporting activities will be
approximately 260 PODs currently in would accrue to applicable conducted by the managerial staff and
the U.S. We further estimate that there manufacturers who register with the supporting staffs, the compliance or
are an additional 160 GPOs, which have CMS system and thus have the ability to similar level of staffs will oversee the
some form of physician ownership or query CMS, receive informal guidance reporting activities, which will largely
investment. This is based on a review of through a listserv or other methods of be supported by staff involved with
what little literature exists and providing technical assistance, and bookkeeping, accounting and auditing.
discussions with knowledgeable ultimately obtain useful information on Since there are many more small
persons. Our research found that there low cost methods of compliance. companies, we estimate that on average,
are approximately 800 GPOs and that Comment: Several commenters stated 0.5 FTEs of compliance officer and 2
approximately 20 percent of GPOs have that the current cost estimation for FTEs of supporting staff would be
at least one physician owner or investor. applicable manufactures and applicable needed for each applicable
We did not receive comments on the GPOs to comply with the reporting manufacturer in the first year (2 FTEs of
compliance officer and 8 FTEs of change or eliminate their current compliance officer. According to the
supporting staffs in 150 larger firms and practices. Our assumption that smaller Bureau of Labor Statistics Occupational
0.25 FTEs of compliance officer and 1 firms could in some cases incur no new Employment Statistics, in May 2011, the
FTE of supporting staffs in 1,000 smaller costs assumes that some do not now average hourly rates for a compliance
firms). We appreciate that this is have any such financial relationships officer and bookkeeping, accounting and
considerable simplification of a far more and that this proportion would grow as auditing staff in the pharmaceutical and
complex distribution of firms, but we some firms decide that the benefits of medicine manufacturing field was
believe that it captures the distribution such relationships are less than the $35.75 and $19.84, respectively. We
in manufacturing sectors where a costs of reporting. Other smaller firms applied a 33 percent increase to this
relative handful of firms have sales in with only a few products and only a few amount to account for fringe benefits,
the billions of dollars annually over a financial relationships might well making the total hourly compensation
wide range of products, and a far larger already have systems in place that $47.55 and $26.39, respectively. The
number have annual sales in low essentially meet the proposed total number of hours for applicable
millions of dollars annually for just a requirements or that could do so with manufacturers (including the hours for
few products, with practices regarding minimal effort. compliance officers and support staff)
financial relationships with physicians We anticipate it would be less
during year 1 would be 5,980,000 (1,150
varying widely within each group and, burdensome for an applicable GPO to
applicable manufacturers × 100 hours
in many cases by product or product comply with these proposed reporting
requirements, since we believe (2.5 FTEs) × 52 weeks). For year 2 and
class.
Therefore, for applicable companies will have fewer relationships subsequent years, we estimate a total of
manufacturers, the revised cost with physician owners or investors (or 4,485,000 hours (1,150 applicable
estimation assumes a compliance officer immediate family members). This will manufacturers × 75 hours (1.875 FTEs)
(0.5 full-time equivalents (FTEs)) and 2 make it much easier for applicable GPOs × 52 weeks). On average, this equals
FTEs of bookkeeping, accounting and to match ownership and investment 4,983,333 hours annually for all
auditing staff support in the first year. interests to the appropriate physicians applicable manufacturers for the first 3
In the second year and thereafter, we (or family members). Based on years. The total number of hours for
reduced the estimates, since we believe discussions with officials of some GPOs applicable GPOs (including the hours
the system will be more automated. In and industry observers, we estimate that for compliance officers and support
year 2 and thereafter we assumed 0.375 it would take from 5 to 25 percent of a staff) for year 1 would be 305,760 (420
FTEs (780 hours) of a compliance officer FTE staff member, depending on the applicable GPOs × 14 hours (0.35 FTE)
and 1.5 FTEs (3,120 hours) of size of the applicable GPO. We assume × 52 weeks) and for year 2 would be
bookkeeping, accounting, and auditing that applicable GPOs already know the 229,320 hours (420 applicable GPOs ×
support. Compared with the estimates ownership and investment interests of 10.5 hours (0.2625 FTEs) 52 weeks). For
we provided in the proposed rule, the its major investors, so the burden of the first 3 years in total, applicable
total first-year FTE increased from 1.74 these requirements include any changes GPOs will spend on average 254,800
to 2.5 FTEs for applicable to internal procedures to record and hours annually.
manufacturers. It should be noted that report the information. Also again, we The following tables provide our total
this is an average cost while the large have not found any empirical studies to cost estimates for applicable
manufacturers may need more and the better inform this estimate. Accordingly, manufacturers and applicable GPOs to
small manufacturers may need less we estimate that on average, an comply with the data collection
FTEs. applicable GPO would dedicate 10 requirements in section 1128G of the
The greater staff time for year 1 percent of an FTE (208 hours) of Act such as collecting information,
represents time for applicable compliance officer and 0.25 FTEs (520 responding to inquiries, developing
manufacturers to alter their systems to hours) of support staff to reporting reports, and submitting reports to CMS.
collect and report this data. We estimate under this section for year 1, followed In total, we estimate that for applicable
that once procedures and systems are by 25-percent reductions in both the manufacturers and applicable GPOs
modified, costs would be 25 percent compliance officer’s time and support required to report, it will cost
lower, which reduces this value to an staff’s time for year 2 and annually $193,037,104 for year 1 and will cost
average of 0.375 FTEs of compliance thereafter. Compared with the estimates
$144,777,828 for year 2 and annually
officer and 1.5 FTEs of support staff in we provided in the proposed rule, the
year 2 and annually thereafter. We thereafter. For the first 3 years, this
total first-year FTE estimates increased
emphasize that these are very rough averages to a cost of $160,864,253
from 0.1 FTE (208 hours) to 0.35 (728
estimates. The actual burdens could annually. All estimates are in 2011
hours) for GPOs.
easily average 25 percent lower or While many individuals within the dollars.
higher, and would depend on applicable manufacturer or applicable We note that Tables 1A and 1B
manufacturers’ changes in practices GPO may contribute to the data contain revised estimated labor costs.
after the regulations are made final. collection and reporting, we believe that The original cost estimates were
Some may welcome the new majority of the work will be performed included in the December 19, 2011
transparency; others may decide to by the support staff and overseen by a proposed rule (76 FR 78742).
TABLE 1A—YEAR 1 ESTIMATED LABOR COSTS FOR APPLICABLE MANUFACTURERS AND APPLICABLE GPOS
Estimated hours Average total

Estimated report- per reporting Hourly rate cost per Total cost
ing organizations organization organization
Compliance officer in AM ................................. 1,150 1,040 $48 $49,452 $56,869,800

Supporting staffs in AM ................................... 1,150 4,160 26 109,782 126,249,760
Compliance officer in Applicable GPOs .......... 420 208 48 9,890 4,153,968
TABLE 1A—YEAR 1 ESTIMATED LABOR COSTS FOR APPLICABLE MANUFACTURERS AND APPLICABLE GPOS—Continued
Supporting staffs in Applicable GPOs ............. 420 520 26 13,723 5,763,576
Total .......................................................... ............................ ............................ ............................ ............................ 193,037,104
TABLE 1B—YEAR 2 AND SUBSEQUENT YEAR ESTIMATED LABOR COSTS FOR APPLICABLE MANUFACTURERS AND
APPLICABLE GPOS
[Annual]

Compliance officer in AM ................................. 1,150 780 $48 $37,089 $42,652,350

Supporting staffs in AM ................................... 1,150 3,120 26 82,337 94,687,320
Compliance officer in Applicable GPOs .......... 420 156 48 7,418 3,115,476
Supporting staffs in Applicable GPOs ............. 420 390 26 10,292 4,322,682
Total .......................................................... ............................ ............................ ............................ ............................ 144,777,828
In addition to FTE costs, we also which we believe is reasonable given required to report the same information
assume that there would be some CMS’s experience with system to States after the final rule is issued. In
infrastructure costs associated with the maintenance. We note that this only addition, a few large companies are
reporting requirements under section covers the system and equipment already reporting similar information on
1128G of the Act. We acknowledge a maintenance and not the staff time to a national level in order to comply with
substantial amount of uncertainty in comply with the reporting requirements. Corporate Integrity Agreements (CIAs)
these estimates. For example, we do not For applicable GPOs, we assume the with HHS OIG. These companies may
know how many companies will be infrastructure costs associated with the not have to invest as much as we
using existing systems and technology reporting requirements will be lower estimated earlier in this section to
to comply with the requirements and than that for applicable manufacturers. comply with the requirements in section
how many will be obtaining new We assume that the applicable GPO 1128G of the Act. However, given the
equipment and technology; in both costs will be roughly 20 percent of those differing requirements for each State
cases, there will be opportunity costs of for applicable manufacturers. This is and CIA, and broad scope of section
using the systems for the reporting based on the fact that estimated FTE 1128G of the Act, we do not believe it
required by this rule, but with new costs for applicable GPOs are roughly 20 is possible to approximate any lessened
systems, there might be higher-set-up percent of that of applicable burden for entities already reporting.
costs. We also envision that companies manufacturers. Therefore, we estimate Because applicable manufacturers
of varying size will have different that in year 1 the infrastructure costs for have some influence in getting their
infrastructure needs, so have selected an applicable GPOs will be $2,000. products on a Part D plan formulary,
average amount based on CMS Similarly, we estimate that maintenance obtaining billing codes, or getting
infrastructure estimates of the costs will be 10 percent of the initial Medicaid coverage, they have some
requirements. We estimate that in year cost, so in year 2 and beyond the control over whether Medicare,
1 the infrastructure costs for applicable maintenance costs for applicable GPOs Medicaid and CHIP payments are
manufacturers will be $10,000. This will be $200. Table 2A and 2B contain available for their products. If
represents an average of $4,000 for small the estimated infrastructure costs for applicable manufacturers were to stop
companies (estimated to be 1000 applicable manufacturers and accepting such payments so as to avoid
companies) and $50,000 for large applicable GOPs in year 1 and year 2 reporting requirements, it would reduce
companies (estimated to be 150 and thereafter, respectively. We further the rule-induced cost that they bear
companies). We assume that the assume that the combined infrastructure themselves, but might negatively affect
majority of these costs will be and maintenance costs per burden hour the well-being of Medicare, Medicaid
infrastructure costs, such as purchasing will be the same for physicians and and CHIP patients who no longer have
equipment and initial training, but teaching hospitals as for GPOs. coverage for a full range of medical
assume that some costs will be required We note, and discuss in the benefits products. However, because these
to maintain the systems. Therefore, we section later in this section, that the public programs represent a very large
estimate that in year 2 and annually costs of applicable manufacturers may patient population, we do not anticipate
thereafter, applicable manufacturers be partially offset because many that applicable manufacturers will
will spend about $1,000 annually to companies are already required to report refrain from participating in the
maintain their systems. This represents to States with similar disclosure programs just to avoid reporting
10 percent of the original infrastructure, requirements, but would no longer be requirements.
TABLE 2A—YEAR 1 ESTIMATED INFRASTRUCTURE COSTS FOR APPLICABLE MANUFACTURERS AND APPLICABLE GPOS
Organizations Annual cost Total cost
Large Applicable Manufacturers ...................................................................................... 150 $50,000 $7,500,000

Small Applicable Manufacturers ...................................................................................... 1000 4,000 4,000,000
Applicable GPOs ............................................................................................................. 420 2,000 840,000
Total .......................................................................................................................... ............................ ............................ 12,340,000
TABLE 2B—YEAR 2 AND SUBSEQUENT YEAR ESTIMATED INFRASTRUCTURE COSTS FOR APPLICABLE MANUFACTURERS
AND APPLICABLE GPOS
[Annual]
Organizations Annual cost Total cost
Large Applicable Manufacturers ...................................................................................... 150 $5,000 $750,000

Small Applicable Manufacturers ...................................................................................... 1000 400 400,000
Applicable GPOs ............................................................................................................. 420 200 84,000
Total .......................................................................................................................... ............................ ............................ 1,234,000
2. Effects on Physicians and Teaching than 50 percent of the physicians have reduced the amount of time it would
Hospitals transactions with industry. We assume take the physicians choosing to review
that 50 percent of physicians have no the information, since we believe they
We also have estimated costs for relationships with applicable will be familiar with the review,
physicians and teaching hospitals, since manufacturers or applicable GPOs, correction and dispute process. For
they would have an opportunity to which reduces our universe of affected teaching hospitals, we know that about
review and correct the data submitted physicians to approximately 448,850. 1,100 hospitals receive Medicare GME
by applicable manufacturers. The Further, stakeholders have expressed or IME payments, all of which are
statute uses the definition of physician that many physicians maintain defined as teaching hospitals for this
in section 1861(r) of the Act, which relationships with applicable provision. We believe that the vast
includes doctors of medicine and manufacturers that are relatively majority of teaching hospitals would
osteopathy, dentists, dental surgeons, insignificant from a financial point of have at least one financial relationship
podiatrists, optometrists and licensed view, so we estimate that many with an applicable manufacturer, so we
chiropractors. Using the Bureau of Labor physicians will not devote any time to did not apply any adjustments to this
Statistics Occupational Outlook reviewing and correct the aggregated estimate. We also anticipate that there
Handbook, we estimate that information reports from CMS. We estimate that would not be a reduction in the number
may be available for as many as 897,700 only 50 percent of the remaining
of teaching hospitals that review the
physicians. However, we believe that 448,850 physicians will review the
information after the first year because
not all physicians will have report, which reduces our universe of
relationships with applicable teaching hospitals probably have more
affected physicians to 224,425 for year
manufacturers or applicable GPOs. In 1. For year 2, we anticipate that there complex financial relationships.
the proposed rule, we assumed that would be a further reduction in the See the Table 3 for a breakdown of
roughly 75 percent of physicians would number of physicians choosing to this calculation. In the proposed rule,
have relationships. However, based on review the data because they would be we mistakenly omitted dental surgeons
feedback we received from stakeholders, familiar with the type of information on from the table, so have added estimates
including a private firm with data of the database, so we reduced the number for them in the final rule. The definition
roughly 50 companies currently of physicians reviewing by another 25 of physician at section 1861(r) of the Act
reporting, we now estimate that less percent, to 168,319 physicians. We also explicitly includes them.
TABLE 3—NUMBER OF PHYSICIANS BY TYPE

Physician type Number
Doctor of Medicine/Doctor of Osteopathy ........................................................................................................................................... 660,000

Doctor of Dental Medicine ................................................................................................................................................................... 155,700
Doctor of Podiatric Medicine ............................................................................................................................................................... 12,000
Doctor of Optometry ............................................................................................................................................................................ 35,000
Licensed Chiropractors ........................................................................................................................................................................ * 35,000
Total .............................................................................................................................................................................................. 897,700

Adjustment for Physicians with no reports (only 50% had transaction with industry) ........................................................................ 448,850
Adjustment for Physicians who do not review reports (Year 1—reduction by 50%) .......................................................................... 224,425
Adjustment for Physicians who do not review reports (Year 2—reduction by 25%) .......................................................................... 168,319
* Reduced from 50,000 in BLS to account for licensure.
We received numerous comments on facilitate reviews. In the final rule, we the proposed rule, we used an estimate
the cost estimations for physicians and estimated the supporting staffs such as for the hourly wage that included other
teaching hospitals, and have responded bookkeeping, accounting, and auditing provider types, but having received
to them and revised our cost estimates would perform the tasks while the numerous comments that the resulting
accordingly. compliance officer would oversee the wage was too low, we increased the
Comment: Several commenters review process. estimate for this final RIA. The average
questioned the time and cost estimation When reviewing the information hourly rate for the supporting staff is
for physicians. Specifically, the reported, physicians and teaching $16.35 which rises to $21.75 with 33
commenters stated that the time allotted hospitals are allowed to review the percent fringe benefits. The total
for the physicians to review the data is information attributed to them by number of hours for physicians
too short, since physicians will need to applicable manufacturers and (including supporting staffs in
maintain records in order to review the applicable GPOs that submitted data to physician offices) would be 1,346,550
information submitted on their behalf CMS. A number of commenters (224,425 × 6 hours) for year 1 and
accurately. Similarly, several suggested that physicians and teaching 757,436 hours (168,319 × 4.5 hours) for
commenters noted that the current hospitals would spend some time year 2, which averages to 953,807 hours
hourly rate for the physician ($75) is during the year maintaining records to annually for the first 3 years. The total
low. facilitate their review. In response to estimated cost for the review and
Response: We agree with commenters this feedback, we added estimates for correction period for physicians and the
that the physicians and teaching recordkeeping for physicians and supporting staffs in year 1 is
hospitals may need to maintain ongoing teaching hospitals and assumed that $55,152,444. For year 2 and annually
records of the activities for verification support staff would perform these thereafter, the estimated cost for
purposes, so have increased the time functions. We estimate that on average, physician and supporting staffs to
dedicated to the physician and teaching physicians would need 1 hour annually conduct review and correction is
hospital review. However, we assume to review the information reported. For $31,023,250. For the first 3 years, the
that most of these recordkeeping physicians that choose to review the average cost for all physicians review
activities will fall on the duty of the information, this would range from a and correction will be $39,066,314
office assistants, but the physician may few minutes for physicians with few annually.
need to review the records. The hours relationships with applicable
manufacturers, to at most 10 or 20 hours For teaching hospitals, as explained,
of bookkeeping are added in the revised
for the small number of physicians who we expect a compliance officer to
cost estimation for physician and
have lengthy disputes over a payment or review the payments and other transfers
teaching hospital accordingly.
other transfer of value, or ownership or of value with supporting staff to
Additionally, we agree that the
investment interest. In addition, we also maintain any necessary records. Since
physician hourly rate should be
estimated 5 hours annually of this review could be done by employees
increased. The hourly rate for
supporting staff for each physician to with multiple titles, we used the Bureau
physicians in the final rule is updated
help them to maintain records to of Labor Statistics Occupational
to $137 per hour, which is based on the
facilitate the review. We believe that Employment Statistics reported
most recent data from Bureau of Labor
teaching hospitals will have to review compensation for Management
Statistics (BLS).
Comment: A few commenters more payments or other transfers of Occupations at General Medical and
questioned CMS’s cost estimate of 10 value and have more complex Surgical Hospitals in 2010. The hourly
hours of compliance officer in teaching relationships, so we estimate that, on average rate for compliance officer in
hospitals, which state that teaching average, it would take a representative, hospitals is $32.94 or $43.81 when
hospitals will need more time to review such as a compliance officer, from a fringe benefit costs are applied. The
the transactions and maintain records to teaching hospital 40 hours annually to average hourly rate for the supporting
facilitate the review. review the submitted data, ranging from staff in a teaching hospital is $16.22
Response: We agree with commenters 10 hours for small teaching hospitals which rises to $21.57 with 33 percent
that teaching hospitals will likely need that receive few payments or other fringe benefits. For year 1, the total
more time for their review. The hospital transfer of value, to 200 hours for number of hours would be 132,000
compliance officer’s annual hours have teaching hospitals that have lengthy (1,100 × 120 hours). For year 2 this
been increased from 10 hours to 40 disputes. In addition, we also estimated would decrease to 99,000 hours (1,100
hours. In addition, we revised the cost 80 hours annually of administrative × 90 hours). For the first 3 years, the
estimation to include 80 hours of support staff for each teaching hospital average number of hours for teaching
administrative supporting staff at to help them maintain their records. hospitals will be 110,000 annually. The
teaching hospitals to maintain the The Bureau of Labor Statistics total estimated cost for the review and
records. The role of the compliance Occupational Employment Statistics correction period for teaching hospitals
officer will be review and oversight, publishes data on hourly compensation is $3,825,800 for year 1 and $2,869,350
while the administrative supporting for Healthcare Practitioners and for year 2 and annually thereafter. On
staff will conduct the recordkeeping. Technical Occupations in physicians’ average, the cost for all teaching
In response to the comments, even offices. The average hourly rate for hospitals will be $3,188,167 annually
though there is no requirement for physicians and surgeons is $103.32,8 for the first 3 years.
physician and teaching hospitals to which rises to $137 with 33-percent We note that Tables 4A and 4B
review the reports or maintain records fringe benefits. This average includes contain revised cost estimates. The
of interaction, we estimated the covered physicians, who account for about half original cost estimates were included in
recipients may maintain records to of the employment in this category. In the proposed rule (76 FR 78742).
8 http://www.bls.gov/oes/current/
naics4_621100.htm.
TABLE 4A—YEAR 1 ESTIMATED COSTS FOR PHYSICIANS AND TEACHING HOSPITALS

Estimated num- Estimated hours Average total
ber of entities Hourly rate Total cost
for review cost per entity
reviewing
Physicians ........................................................ 224,425 1.00 $137 $137 $30,746,225

Physicians Support staffs ................................ 224,425 5.00 22 109 24,406,219
Compliance officer, Teaching Hospitals .......... 1,100 40.00 44 1,752 1,927,640
Administrative supporting staffs in teaching
Hospitals ....................................................... 1,100 80.00 22 1,726 1,898,160
Total .......................................................... ............................ ............................ ............................ ............................ 58,978,244
TABLE 4B—YEAR 2 AND SUBSEQUENT YEAR ESTIMATED COSTS FOR PHYSICIANS AND TEACHING HOSPITALS
[Annual]
Estimated num- Estimated hours Average total

ber of entities Hourly rate Total cost
for review cost per entity
reviewing
Physicians ........................................................ 168,319 0.75 $137 $103 $17,294,751

Physicians Support staffs ................................ 168,319 3.75 22 82 13,728,498
Compliance officer, Teaching Hospitals .......... 1,100 30.00 44 1,314 1,445,730
Administrative supporting staffs in teaching
Hospitals ....................................................... 1,100 60.00 22 1,294 1,423,620
Total .......................................................... ............................ ............................ ............................ ............................ 33,892,600
For purposes of analysis, we also and maintain equipment for internal will be the same as those for GPOs. For
include estimates of the infrastructure tracking purposes. We assume that the physicians, we assume a total cost of $2
costs for physicians and teaching combined infrastructure and million in the first year, and 10 percent
hospitals, which may need to purchase maintenance costs for teaching hospitals thereafter.
TABLE 5A—YEAR 1 ESTIMATED INFRASTRUCTURE COSTS FOR PHYSICIANS AND TEACHING HOSPITALS
Number Annual cost Total cost
Physicians ........................................................................................................................ 224,425 ............................ $2,000,000

Teaching Hospitals .......................................................................................................... 1,100 2,000 2,200,000
Total .......................................................................................................................... ............................ ............................ 4,200,000
TABLE 5B—YEAR 2 AND SUBSEQUENT YEAR ESTIMATED INFRASTRUCTURE COSTS FOR PHYSICIANS AND TEACHING
HOSPITALS
Number Annual cost Total cost
Physicians ........................................................................................................................ 168,319 ............................ $200,000

Teaching Hospitals .......................................................................................................... 1,100 $200 220,000
Total .......................................................................................................................... ............................ ............................ 420,000
3. Effects of Third Parties Response: In the final rule, we have since they are neither required to report
clarified the requirements for third nor review. However, we recognize that
We also received some comments on parties which received payments at the some business models may require third
including estimates for entities that request of, or on behalf of, covered parties to report recipients of payments
were not included in the proposed rule. recipients (§ 403.904(c)(10)), as well as back to applicable manufacturers, so we
We have provided the comment, as well the requirements for third parties which have included in the final rule estimates
as our response. receive and make indirect payments to on the burden for third parties. We
Comment: Many commenters covered recipients (§ 403.904(i)(1)). We estimate that 58 third parties will incur
suggested that the costs of believe these revisions will help clarify costs under this final rule. We assume
recordkeeping for third parties, such as and minimize any reporting that there will be significantly fewer
contract research organizations or requirements that third parties viewed third parties than applicable
professional associations that receive as burdensome to them, but we manufacturers affected by these
indirect payments or other transfers of maintain that the requirements in provisions, so we reduced the number
value, should be included in the cost section 1128G of the Act do not impose of applicable manufacturers by 95
estimation. significant burden on third parties, percent to obtain the number of third
parties as 5 percent the number of plus a 33 percent increase for fringe requirements. Similarly to other
applicable manufacturers. Given the benefits), which is the same hourly rate estimates, we decreased this estimate by
range of entities that could be third described in section IV.C.1. the final 25 percent in year 2 (for a total of 30
parties, we believe it is difficult to rule for a compliance officer at an hours) to account for increased
estimate the hourly rate for these applicable manufacturer or applicable familiarity with the systems. In total,
entities. We assume that the role will be GPO. As described, we do not believe third parties will dedicate 2,320 hours
similar to that of compliance officers in these requirements set significant in year 1 and 1,740 hours in year 2 with
applicable manufacturers and burden on third parties, since they are a total cost of $110,316 in year 1 and
applicable GPOs, since it may require neither required to report nor review. $82,737 in year 2.
them to track similar relationships. We estimate that third parties may need In summary, the first year and
Therefore, we estimate the hourly rate to spend 40 hours in year 1 on tasks that subsequent year annual costs are
for third parties will be $47.55 ($35.75, are associated with the reporting presented in the following tables.
TABLE 6A—TOTAL YEAR 1 ESTIMATED COSTS

Infrastructure
Labor costs Total cost
costs
($) ($)
($)
Applicable Manufacturers ................................................................................................ 183,119,560 11,500,000 194,619,560

Applicable GPOs ............................................................................................................. 9,917,544 840,000 10,757,544
Third-Parties .................................................................................................................... 110,316 ............................ 110,316
Physicians ........................................................................................................................ 55,152,444 2,000,000 57,152,444
Teaching Hospitals .......................................................................................................... 3,825,800 2,200,000 6,025,800
Total .......................................................................................................................... 252,125,664 16,540,000 268,665,664
TABLE 6B—TOTAL COSTS, YEAR 2, AND SUBSEQUENT YEARS

[Annual]
Infrastructure
Labor costs Total cost
costs
($) ($)
($)
Applicable Manufacturers ................................................................................................ 137,339,670 1,150,000 138,489,670

Applicable GPOs ............................................................................................................. 7,438,158 84,000 7,522,158
Third-Party Recordkeeping .............................................................................................. 82,737 ............................ 82,737
Physicians ........................................................................................................................ 31,023,250 200,000 31,223,250
Teaching Hospitals .......................................................................................................... 2,869,350 220,000 3,089,350
Total .......................................................................................................................... 178,753,165 1,654,000 180,407,165
4. Effects on the Medicare, Medicaid, comments supporting these benefits. We a system that encourages constructive
and CHIP appreciate these comments. collaboration, while also discouraging
Although the Department proposes to Collaboration among physicians, relationships that threaten the
administer this program through the teaching hospitals, and industry underlying integrity of the health care
CMS, the final rule would have no manufacturers can contribute to the system.
direct effects on the Medicare, design and delivery of life-saving drugs Both the Institute of Medicine and
Medicaid, and CHIP. Reporting is and devices. While collaboration is
other experts, such as MedPAC, have
required for physicians and teaching beneficial to the continued innovation
noted the recent increases in both the
hospitals regardless of their association and improvement of our health care
amount and scope of industry
with Medicare, Medicaid, or CHIP. system, some payments from
involvement in medical research,
Manufacturers are identified by whether manufacturers to physicians and
teaching hospitals can introduce education, and clinical practice has led
the company has a product eligible for to considerable scrutiny and
payment by Medicare, Medicaid or conflicts of interests that may influence
research, education, and clinical recommended enhanced disclosure and
CHIP, but this does not affect whether
decision-making in ways that transparency to discourage the
or not the product may be covered
compromise clinical integrity and inappropriate use of financial incentives
under titles XVIII, XIX, or XXI of the
patient care, and lead to increased and lessen the risk of such incentives
Act. We will incur some costs in
administering the program. However, as program costs. It is important to interfering with medical judgment and
required by statute, we will be able to understand the extent and nature of patient care. We recognize that
use any funds collected from the CMPs relationships between physicians, disclosure is not sufficient to
assessed under this rule to support the teaching hospitals, and industry differentiate beneficial, legitimate
program, decreasing the agency funding manufacturers through increased financial relationships from those that
required. transparency, and to permit patients to create a conflict of interest or are
make better informed decisions when otherwise improper. However,
5. Benefits choosing health care professionals and transparency can shed light on the
We outlined numerous benefits in the making treatment decisions. nature and extent of relationships, and
proposed rule and received numerous Additionally, it is important to develop
discourage inappropriate conflicts of relationships, while maintaining the ownership portion of two or more
interest.9 beneficial relationships. Public entities, but are finalizing an alternate
We have no empirical basis for reporting and publication is the only interpretation that would limit the
estimating the frequency of such statutorily permissible option for common ownership definition to
problems, the likelihood that obtaining this transparency and circumstances where the same
transparent reporting will reduce them, achieving the intentions of this individual, individuals, entity, or
or the likely resulting effects on provision. In developing this final rule, entities own 5 percent or more of total
reducing the costs of medical care. we tried to minimize the burden on ownership in two or more entities.
Although a few States do have similar reporting entities by trying to simplify Additionally, we provided further
reporting requirements, determining the the reporting requirements as much as guidance on the phrase ‘‘assistance and
benefits based on their experiences is possible within the statutory support’’ in order to limit the number of
difficult. Transparency does not identify requirements and in response to public entities under common ownership
which relationships are conflicts of comment. reporting. We could have employed a
interests or whether public reporting The statute is prescriptive as to the higher threshold of common ownership
dissuaded a relationship from forming, types of information required to be to further lower the burden; however, as
making it difficult to assess the benefits reported, and the ways in which it is explained in section II.B.1.a.(3). of this
of public reporting. We plan to continue required to be reported; however final rule, we believe that 5 percent is
considering methods to use the data wherever possible we tried to allow a standard threshold.
collected to identify any changes in flexibility in the reporting requirements. • In the proposed rule, we considered
these relationships as a result of public For example, we note the following: whether we should require that
reporting. However, we observe, that the • We did not require the submission applicable manufacturers report another
costs for preparing reports are small in of an assumptions document for nature unique identifier, such as State license
relation to the size of the affected of payment categories, but allow number, for physicians who are
industry sectors. applicable manufacturers and identified but do not have an NPI. Such
Finally, section 1128G(d)(3) of the Act applicable GPOs to submit this an approach would provide additional
preempts State laws requiring the voluntarily. information by which to cross-reference
• The Secretary is allowed discretion physicians who do not have an NPI, but
reporting of the same type of
to require the reporting of additional the approach could also cause confusion
information as required by section
information, but we tried to use this if the additional information is not
1128G(a) of the Act. Applicable
discretion as sparingly as possible, in captured in a consistent manner. We
manufacturers and applicable GPOs
large part because of the strong desire received numerous comments on this
subject to State requirements would not
expressed by stakeholders that we not provision and finalized the reporting of
have to comply with multiple State
expand reporting categories. For State professional license number for all
requirements, and instead would only
example, we considered asking physician covered recipients. The
have to comply with a single Federal applicable manufacturers and
requirement with regard to the types of comments and rationale for this
applicable GPOs to report the method of decision is discussed in section
information required to be reported preferred communication and email
under 1128G(a) of the Act. This benefits II.B.1.d.(1) of the preamble to this final
address for physicians and teaching rule.
applicable manufacturers and hospitals with which they have • The Congress gave the Secretary
applicable GPOs by allowing them to relationships, but based on the authority to define a GPO and also
comply with a single set of reporting comments that this would be specified that such organizations would
requirements for this information, burdensome, we did not finalize it. In include organizations that purchase
lessening the potential for multiple, order to reduce the burden further, we covered drugs, devices, biologicals, and
conflicting State requirements. This could have not added any additional medical supplies, as well as
benefit may also lead to potential cost- reporting categories (such as requiring organizations that arrange for or
savings, since a single reporting system State professional license number or negotiate the purchase of covered drugs,
for reporting this information is less NDC (if any)); however, we believe that devices, biologicals, and medical
burdensome than multiple programs. all the additional reporting elements are supplies. Therefore, we interpret the
D. Alternatives Considered necessary for the successful statute to encompass entities that
administration of the program and have purchase covered drugs, devices,
Reporting under section 1128G of the
tried to provide sufficient explanation of biological, and medical supplies for
Act is required by law, which limits the resale or distribution to groups of
each decision.
other policy options available. Section • We limited the definition of individuals or entities. This would
1128G of the Act encourages covered drug, device, biological, and include physician owned distributors
transparency of financial relationships medical supply to reduce the number of (PODs) of covered drugs, devices,
between physicians and teaching entities meeting the definition of biological, and medical supplies. We
hospitals, and the pharmaceutical and applicable manufacturer and applicable received numerous comments on this
device industry. Although, many of GPO. We proposed limiting covered proposal and finalized the definition as
these relationships are beneficial, close drugs and biologicals to those that proposed (see section II.B.2.a.(2). of the
relationships between manufacturers require a prescription to be dispensed preamble of this final rule).
and prescribing providers can lead to and limiting covered devices (including • We also finalized limitations that
conflicts of interests that may affect medical supplies that are devices) to will reduce the reporting requirements
clinical decision-making. Increased those that require premarket approval for applicable manufacturers that only
transparency of these relationships tries by or notification to the FDA. The manufacture a few covered products.
to discourage inappropriate comments strongly supported these Applicable manufacturers with less than
9 Information on the IOM recommendations may
limitations, so we have finalized them 10 percent of revenues from covered
be found here: http://www.iom.edu/Reports/2009/ in the final rule. products do not need to report all
Conflict-of-Interest-in-Medical-Research-Education- • In the proposed rule, we defined payments or other transfers of value as
and-Practice.aspx. ‘‘common ownership’’ as covering any proposed. This will greatly reduce the
burden of reporting for these entities, finalized a dispute resolution system E. Accounting Statement
allowing them greater flexibility. We which will allow covered recipients and
could have lowered the burden by physician owners or investors to more The Office of Management and
including additional limitations to easily review the information submitted Budget, in Circular A–4, requires an
reporting by certain applicable on their behalf and a more streamline accounting Statement for rules with
manufacturers, but believe that the process to initiate disputes, as significant economic impacts. The table
statute did not provide much flexibility necessary. that follows shows the estimated costs
to do so. annualized over a 10-year period. The
• We have finalized, as required by Finally, it is important to evaluate and
estimated costs are $269 million in year
statute, a 45-day review period during monitor if the changes reflected in this
1 and $180 million in year 2. We
which applicable manufacturers and rule achieve the goal of improving
assume that future outlay costs may be
GPOs, covered recipients, and physician transparency and accountability
similar to those costs experienced in
owners or investors can review the data between health care providers and drug
year 2. We envision that the number of
before it is made available to the public. manufacturers. We will evaluate over
financial relationships required to be
In response to the comments, we have time, and encourage others to evaluate,
reported will remain similar, so the cost
considered the best methods to the effects of this rule on Medicaid
of reporting the information will not
administer this review, as well as any enrollment, on Federal, State, and
change significantly.
dispute resolution processes. We have enrollee costs, and on health outcomes.
TABLE 7—ACCOUNTING STATEMENT

Discount rate
Category Primary estimate Year dollars Period covered
(percent)
Annualized Monetized Costs ........................................................... $192 2011 7 2013–2022

190 2011 3 2013–2022
Benefits ............................................................................................ Public reporting of the extent and nature of relationships between
physicians, teaching hospitals, and industry manufacturers through
increased transparency will permit patients to make better informed
decisions when choosing health care professionals and making treatment
decisions, and deter inappropriate financial relationships.
F. Conclusions vast majority of the financial impact is Authority: Secs. 1102 and 1871 of the
included in the collection of Social Security Act (42 U.S.C. 1302 and
Section 1128G of the Act requires 1395hh).
information requirements. Therefore
applicable manufacturers to report ■ 2. Section 402.1 is amended as
earlier in the preamble of this final rule,
annually to CMS certain payments or follows:
we summarize and respond to the
transfers of value provided to ■ A. In paragraph (c) introductory text,
comments regarding our cost
physicians or teaching hospitals. In by removing the reference ‘‘(c)(33)’’ and
assumptions.
addition, applicable GPOs are required adding the reference ‘‘(c)(34)’’ in its
to report annually certain physician In accordance with the provisions of
Executive Order 12866, this regulation place.
ownership interests. We estimate that ■ B. Adding a new paragraph (c)(34).
the impact of these reporting was reviewed by the Office of
Management and Budget. The addition reads as follows:
requirements will be about $269 million
for the first year of reporting, and $180 List of Subjects § 402.1 Basis and scope.
million for the second year and * * * * *
annually thereafter. As we have 42 CFR Part 402 (c) * * *
indicated throughout, these are rough Administrative practice and (34) Section 1128G (b) (1) and (2)–
estimates and subject to considerable procedure, Medicaid, Medicare, Any applicable manufacturer or
uncertainty. Better estimates might well Penalties. applicable group purchasing
be 25 percent higher or lower. organization that fails to timely,
Nonetheless, we believe that the public 42 CFR Part 403 accurately, or completely report a
comment period offers an excellent Grant programs-health, Health payment or other transfer of value or an
opportunity for all stakeholders to insurance, Hospitals, Intergovernmental ownership or investment interest to
consider alternatives and to present relations, Medicare, Reporting and CMS, as required under part 403,
quantitative or qualitative information recordkeeping requirements. subpart I, of this chapter.
that will enable us to both improve the * * * * *
effectiveness and lower the costs of the For the reasons set forth in the
preamble, the Centers for Medicare & ■ 3. Section 402.105 is amended as
final rule. Therefore, we solicited follows:
comment on the analysis and Medicaid Services amends 42 CFR
chapter IV as set forth below: ■ A. In paragraph (a), by removing the
assumptions provided throughout this reference to ‘‘paragraphs (b) through (g)’’
preamble and in the alternatives section PART 402—CIVIL MONEY PENALTIES, and adding the reference ‘‘paragraphs
of the regulatory impact analysis in ASSESSMENTS, AND EXCLUSIONS (b) through (h)’’ in its place.
particular. ■ B. Adding paragraphs (d)(5) and (h).
Many of the comments received Subpart A—General Provisions The additions read as follows:
discuss our assumptions for the costs of
collecting this information. Because this ■ 1. The authority citation for part 402 § 402.105 Amount of penalty.
rule involves the collection of data, the continues to read as follows: * * * * *
(d) * * * provided to covered recipients, as well expects to receive, payment because of

(5) CMS or OIG may impose a penalty as for applicable manufacturers and the patient’s inability to pay.
of not more than $10,000 for each applicable group purchasing Clinical investigation means any
failure of an applicable manufacturer or organizations to report ownership or experiment involving one or more
an applicable group purchasing investment interests held by physicians human subjects, or materials derived
organization to report timely, or immediate family members of from human subjects, in which a drug,
accurately, or completely a payment or physicians in such entities. device, biological or medical supply is
other transfer of value or an ownership administered, dispensed or used.
or investment interest (§ 402.1(c)(34)). § 403.902 Definitions. Common ownership refers to
The total penalty imposed with respect For purposes of this subpart, the circumstances where the same
to failures to report in an annual following definitions apply: individual, individuals, entity, or
submission of information will not Applicable group purchasing entities directly or indirectly own 5
exceed $150,000. organization means an entity that: percent or more total ownership of two
(1) Operates in the United States; and entities. This includes, but is not
* * * * *
(2) Purchases, arranges for or limited to, parent corporations, direct
(h) $100,000. CMS or OIG may impose
negotiates the purchase of a covered and indirect subsidiaries, and brother or
a penalty of not more than $100,000 for
drug, device, biological, or medical sister corporations.
each knowing failure of an applicable
supply for a group of individuals or Covered device means any device for
manufacturer or an applicable group
entities, but not solely for use by the which payment is available under Title
purchasing organization to report
entity itself. XVIII of the Act or under a State plan
timely, accurately or completely a
Applicable manufacturer means an under Title XIX or XXI of the Act (or a
payment or other transfer of value or an
entity that is operating in the United waiver of such plan), either separately
ownership or investment interest
States and that falls within one of the (such as through a fee schedule) or as
(§ 402.1(c)(34)). The total penalty
following categories: part of a bundled payment (for example,
imposed with respect to knowing (1) An entity that is engaged in the
failures to report in an annual under the hospital inpatient prospective
production, preparation, propagation, payment system or the hospital
submission of information will not compounding, or conversion of a
exceed $1,000,000. outpatient prospective payment system)
covered drug, device, biological, or and which is of the type that, by law,
PART 403—SPECIAL PROGRAMS AND medical supply, but not if such covered requires premarket approval by or
PROJECTS drug, device, biological or medical premarket notification to the Food and
supply is solely for use by or within the Drug Administration (FDA).
■ 4. The authority citation for part 403 entity itself or by the entity’s own Covered drug, device, biological, or
continues to read as follows: patients. This definition does not medical supply means any drug, device,
Authority: Secs. 1102 and 1871 of the include distributors or wholesalers biological, or medical supply for which
Social Security Act (42 U.S.C. 1302 and (including, but not limited to, payment is available under Title XVIII
1395hh). repackagers, relabelers, and kit of the Act or under a State plan under
■ 5. A new subpart I is added to part assemblers) that do not hold title to any Title XIX or XXI of the Act (or a waiver
403 to read as follows: covered drug, device, biological or of such plan), either separately (such as
medical supply. through a fee schedule or formulary) or
Subpart I—Transparency Reports and (2) An entity under common
Reporting of Physician Ownership or
as part of a bundled payment (for
ownership with an entity in paragraph example, under the hospital inpatient
Investment Interests
(1) of this definition, which provides prospective payment system or the
Sec. assistance or support to such entity with
403.900 Purpose and scope.
hospital outpatient prospective payment
respect to the production, preparation, system) and which is of the type that in
403.902 Definitions.
403.904 Reports of payments or other
propagation, compounding, conversion, the case of a—
transfers of value. marketing, promotion, sale, or (1) Drug or biological, by law, requires
403.906 Reports of physician ownership distribution of a covered drug, device, a prescription to be dispensed; or
and investment interests. biological or medical supply. (2) Device (including a medical
403.908 Procedures for electronic Assistance and support means supply that is a device), by law, requires
submission of reports. providing a service or services that are premarket approval by or premarket
403.910 Delayed publication for payments necessary or integral to the production, notification to the FDA.
made under product research or preparation, propagation, compounding, Covered recipient means— (1) Any
development agreements and clinical conversion, marketing, promotion, sale, physician, except for a physician who is
investigations.
or distribution of a covered drug, a bona fide employee of the applicable
403.912 Penalties for failure to report.
403.914 Preemption of State laws. device, biological or medical supply. manufacturer that is reporting the
Charitable contribution includes, but payment; or
Subpart I—Transparency Reports and is not limited to, any payment or (2) A teaching hospital, which is any
Reporting of Physician Ownership or transfer of value made to an institution that received a payment
Investment Interests organization with tax-exempt status under 1886(d)(5)(B), 1886(h), or 1886(s)
under the Internal Revenue Code of of the Act during the last calendar year
§ 403.900 Purpose and scope. 1986, which is not provided in for which such information is available.
The regulations in this subpart exchange for any goods, items or Employee means an individual who is
implement section 1128G of the Act. services. considered to be ‘‘employed by’’ or an

These regulations apply to applicable Charity care means services provided ‘‘employee’’ of an entity if the
manufacturers and applicable group by a covered recipient specifically for a individual would be considered to be an
purchasing organizations and describe patient who is unable to pay for such employee of the entity under the usual
the requirements and procedures for services or for whom payment would be common law rules applicable in
applicable manufacturers to report a significant hardship, where the determining the employer-employee
payments or other transfers of value covered recipient neither receives, nor relationship (as applied for purposes of
section 3121(d)(2) of the Internal (3) Exceptions. The following are not applicable manufacturer to CMS on an
Revenue Code of 1986). ownership or investment interests for annual basis.
Immediate family member means any the purposes of this section: (2) For CY 2013, only payments or
of the following: (i) An ownership or investment other transfers of value made on or after
(1) Spouse. interest in a publicly traded security or August 1, 2013 must be reported to
(2) Natural or adoptive parent, child, mutual fund, as described in section CMS.
or sibling. 1877(c) of the Act. (b) Limitations. Certain limitations on
(3) Stepparent, stepchild, stepbrother, (ii) An interest in an applicable reporting apply in the following
or stepsister. manufacturer or applicable group circumstances:
(4) Father-, mother-, daughter-, son-, purchasing organization that arises from (1) Applicable manufacturers for
brother-, or sister-in-law. a retirement plan offered by the whom total (gross) revenues from
(5) Grandparent or grandchild. applicable manufacturer or applicable covered drugs, devices, biologicals, or
(6) Spouse of a grandparent or group purchasing organization to the medical supplies constituted less than
grandchild. physician (or a member of his or her 10 percent of total (gross) revenue
Indirect payments or other transfers of immediate family) through the during the fiscal year preceding the
value refer to payments or other physician’s (or immediate family reporting year are only required to
transfers of value made by an applicable member’s) employment with that report payments or other transfers of
manufacturer (or an applicable group applicable manufacturer or applicable value that are related to one or more
purchasing organization) to a covered group purchasing organization. covered drugs, devices, biologicals or
recipient (or a physician owner or (iii) Stock options and convertible medical supplies.
investor) through a third party, where securities received as compensation, (2) Applicable manufacturers under
the applicable manufacturer (or until the stock options are exercised or paragraph (2) of the definition in
applicable group purchasing the convertible securities are converted § 403.902 are only required to report
organization) requires, instructs, directs, to equity. payments or other transfers of value that
or otherwise causes the third party to (iv) An unsecured loan subordinated are related to a covered drug, device,
provide the payment or transfer of to a credit facility. biological, or medical supply for which
value, in whole or in part, to a covered (v) An ownership or investment they provided assistance or support to
recipient(s) (or a physician owner or interest if an applicable manufacturer or an applicable manufacturer under
investor). applicable group purchasing paragraph (1) of the definition.
Know, knowing, or knowingly—(1) organization did not know, as defined in (3) Applicable manufacturers under
Means that a person, with respect to this section, about such ownership or either paragraph (1) or (2) of the
information— investment interest. definition in § 403.902 that have
(i) Has actual knowledge of the Payment or other transfer of value
separate operating divisions that do not
information; means a transfer of anything of value.
manufacture any covered drugs,
Physician has the same meaning given
(ii) Acts in deliberate ignorance of the devices, biologicals, or medical supplies
that term in section 1861(r) of the Act.
truth or falsity of the information; or (for example, animal health divisions)
Related to a covered drug, device,
(iii) Acts in reckless disregard of the are only required to report payments to
biological, or medical supply means that
truth or falsity of the information; and covered recipients related to the
a payment or other transfer of value is
(2) Requires no proof of a specific activities of these separate divisions if
made in reference to or in connection
intent to defraud. those payments or other transfers of
with one or more covered drugs,
NPPES stands for the National Plan & value are related to a covered drug,
devices, biologicals, or medical
Provider Enumeration System. device, biological, or medical supply.
supplies.
Operating in the United States means Research includes a systematic This includes reporting of payments or
that an entity— investigation designed to develop or other transfers of value that are related
(1) Has a physical location within the contribute to generalizable knowledge to covered drugs, devices, biologicals, or
United States or in a territory, relating broadly to public health, medical supplies made by applicable
possession, or commonwealth of the including behavioral and social-sciences manufacturers to covered recipients
United States; or research. This term encompasses basic through these operating divisions.
(2) Otherwise conducts activities and applied research and product (4) Applicable manufacturers that do
within the United States or in a development. not manufacture a covered drug, device,
territory, possession, or commonwealth Third party means another individual biological, or medical supply except
of the United States, either directly or or entity, regardless of whether such when under a written agreement to
through a legally-authorized agent. individual or entity is operating in the manufacture the covered drug, device,
Ownership or investment interest—(1) United States. biological, or medical supply for
Includes, but is not limited to the another entity, do not hold the FDA
following: § 403.904 Reports of payments or other approval, licensure, or clearance for the
(i) Stock, stock option(s) (other than transfers of value to covered recipients. covered drug, device, biological, or
those received as compensation, until (a) General rule. (1) Direct and medical supply, and are not involved in
they are exercised). indirect payments or other transfers of the sale, marketing, or distribution of
(ii) Partnership share(s); value provided by an applicable the product, are only required to report
(iii) Limited liability company manufacturer to a covered recipient payments or other transfers of value that
membership(s). during the preceding calendar year, and are related to one or more covered
(iv) Loans, bonds, or other financial direct and indirect payments or other drugs, devices, biologicals, or medical
instruments that are secured with an transfers of value provided to a third supplies.
entity’s property or revenue or a portion party at the request of or designated by (c) Required information to report. A
of that property or revenue. the applicable manufacturer on behalf of report must contain all of the following
(2) May be direct or indirect and a covered recipient during the preceding information for each payment or other
through debt, equity or other means. calendar year, must be reported by the transfer of value:
(1) Name of the covered recipient. For other transfer of value, as described in was provided to a third party at the
physician covered recipients, the name paragraph (e) of this section. request of or designated on behalf of a
must be as listed in the National Plan & (8) Related covered drug, device, covered recipient, the payment or
Provider Enumeration System (if biological or medical supply. The transfer of value must be reported in the
applicable) and include first and last name(s) of the related covered drugs, name of that covered recipient.
name, middle initial, and suffix (for all devices, biologicals, or medical (ii) If the payment or other transfer of
that apply). supplies, unless the payment or other value was provided to a third party at
(2) Address of the covered recipient. transfer of value is not related to a the request of or designated on behalf of
Primary business address of the covered particular covered drug, device, a covered recipient, the name of the
recipient, including all the following: biological or medical supply. entity that received the payment or
(i) Street address. Applicable manufacturers may report other transfer of value (if made to an
(ii) Suite or office number (if up to five covered drugs, devices, entity) or indicate ‘‘individual’’ (if made
applicable). biologicals or medical supplies related to an individual). If a covered recipient
(iii) City. to each payment or other transfer of performed a service, but neither
(iv) State. value. If the payment or other transfer accepted the offered payment or other
(v) ZIP code. of value was related to more than five transfer of value nor requested that it be
(3) Identifiers for physician covered covered drugs, devices, biologicals, or made to a third party, the applicable
recipients. In the case of a covered medical supplies, the applicable manufacturer is not required to report
recipient who is a physician, the manufacturer should report the five the offered payment or other transfer of
following identifiers: covered drugs, devices, biologicals, or value unless the applicable
(i) The specialty. medical supplies that were most closely manufacturer nonetheless provided it to
(ii) National Provider Identifier (if related to the payment or other transfer a third party and designated such
applicable and as listed in the NPPES). of value. payment or other transfer of value as
If a National Provider Identifier cannot (i) For drugs and biologicals, having been provided on behalf of the
be identified for a physician, the field applicable manufacturers must report covered recipient.
may be left blank, indicating that the the name under which the drug or (11) Payments or transfers of value to
applicable manufacturer could not find biological is or was marketed and the physician owners or investors. Must
one. relevant National Drug Code(s), if any. indicate whether the payment or other
(iii) State professional license If the marketed name has not yet been transfer of value was provided to a
number(s) (for at least one State where selected, the applicable manufacturer physician or the immediate family of
the physician maintains a license), and must indicate the name registered on the physician who holds an ownership
the State(s) in which the license is held. clinicaltrials.gov. or investment interest (as defined
(4) Amount of payment or other (ii) For devices and medical supplies, § 403.902) in the applicable
transfer of value. A payment or other applicable manufacturers must report at manufacturer.
transfer of value made to a group of least one of the following: (12) Additional information or context
covered recipients should be distributed (A) The name under which the device for payment or transfer of value. May
appropriately among the individual or medical supply is or was marketed. provide a statement with additional
covered recipients who requested the (B) The therapeutic area or product context for the payment or other transfer
payment, on whose behalf the payment category for the device or medical of value.
was made, or who are intended to supply. (d) Reporting the form of payment or
benefit from the payment or other (iii) If the payment or other transfer of other transfer of value. An applicable
transfer of value. value is not related to a covered drug, manufacturer must report each payment
(5) Date of payment or transfer of device, biological or medical supply, or transfer of value, or separable part of
value. The date of each payment or but is related to a specific non-covered that payment or transfer of value, as
other transfer of value. product, applicable manufacturers must taking one of the following forms of
(i) For payments or other transfers of indicate ‘‘non-covered product.’’ payment that best describes the form of
value made over multiple dates (rather (iv) If the payment or other transfer of the payment or other transfer of value,
than as a lump sum), applicable value is not related to any drug, device, or separable part of that payment or
manufacturers may choose whether to biological, or medical supply (covered other transfer of value.
report each payment or other transfer of or not), applicable manufacturers must (1) Cash or cash equivalent.
value as separate line item using the indicate ‘‘none.’’ (2) In-kind items or services.
dates the payments or other transfers of (v) If the payment or other transfer of (3) Stock, stock option, or any other
value were each made, or as a single value is related to at least one covered ownership interest.
line item for the total payment or other drug, device, biological, and medical (4) Dividend, profit or other return on
transfer of value using the first payment supply and at least one non-covered investment.
date as the reported date. drug, device, biological, or medical (e) Reporting the nature of the
(ii) For small payments or other supply, applicable manufacturers must payment or other transfer of value. (1)
transfers of value reported as a single report the name(s) of the covered drug, General rule. The categories describing
line item, applicable manufacturers device, biological or medical supply (as the nature of a payment or other transfer
must report the date that the first required by paragraphs (c)(8)(i) and (ii) of value are mutually exclusive for the
bundled small payment or other transfer of this section) and may indicate ‘‘non- purposes of reporting under subpart I of
of value was provided to the covered covered products’’ in addition. this part.
recipient. (9) Eligibility for delayed publication. (2) Rules for categorizing natures of
(6) Form of payment or transfer of Applicable manufacturers must indicate payment. An applicable manufacturer
value. The form of each payment or whether a payment or other transfer of must categorize each payment or other
other transfer of value, as described in value is eligible for delayed publication, transfer of value, or separable part of
paragraph (d) of this section. as described in § 403.910. that payment or transfer of value, with
(7) Nature of payment or transfer of (10) Payments to third parties. (i) If one of the categories listed in
value. The nature of each payment or the payment or other transfer of value paragraphs (e)(2)(i) through (xvii) of this
section, using the designation that best the physician maintains a license) and (ii) The applicable manufacturer does
describes the nature of the payment or State(s) in which the license is held. not pay the covered recipient speaker
other transfer of value, or separable part (4) Specialty. directly.
of that payment or other transfer of (5) Primary business address of the (iii) The applicable manufacturer does
value. If a payment or other transfer of physician(s). not select the covered recipient speaker
value could reasonably be considered as (B) If paid to a teaching hospital or provide the third party (such as a
falling within more than one category, covered recipient, list the name and continuing education vendor) with a
the applicable manufacturer should primary business address of teaching distinct, identifiable set of individuals
select one category that it deems to most hospital. to be considered as speakers for the
accurately describe the nature of the (C) If paid to a non-covered recipient continuing education program.
payment or transfer of value. (such as a non-teaching hospital or (2) Payments or other transfers of
(i) Consulting fee. clinic), list the name and primary value that do not meet all of the
(ii) Compensation for services other business address of the entity. requirements in paragraph (g)(1) must
than consulting, including serving as (ii) Total amount of the research be reported as required by this section.
faculty or as a speaker at an event other payment, including all research-related (i) Payments or other transfers of
than a continuing education program. costs for activities outlined in a written value that meet the requirements in
(iii) Honoraria. agreement, research protocol, or both. paragraph (g)(1)(i) of this section, but
(iv) Gift. (iii) Name of the research study. not also (g)(1)(ii) or (g)(1)(iii) of this
(v) Entertainment. (iv) Name(s) of any related covered section or both, must be reported under
(vi) Food and beverage. drugs, devices, biologicals, or medical the nature of payment category
(vii) Travel and lodging (including the supplies (subject to the requirements ‘‘Compensation for serving as faculty or
specified destinations). specified in paragraph (c)(8) of this as a speaker for an accredited or
(viii) Education. section) and for drugs and biologicals, certified continuing education
(ix) Research. the relevant National Drug Code(s), if program.’’
(x) Charitable contribution. any.
(xii) Royalty or license. (ii) Payments or other transfers of
(v) Information about each physician value that do not meet the requirements
(xiii) Current or prospective covered recipient principal investigator
ownership or investment interest. in paragraph (g)(1)(i) of this section
(if applicable) set forth in paragraph should be reported under the nature of
(xiv) Compensation for serving as (f)(1)(i)(A) of this section.
faculty or as a speaker for an payment category ‘‘Compensation for
(vi) Contextual information for
unaccredited and non-certified serving as a faculty or as a speaker for
research (optional).
continuing education program. a unaccredited and non-certified
(vii) ClinicalTrials.gov identifier
(xv) Compensation for serving as continuing education program.’’
(optional).
faculty or as a speaker for an accredited (2) For pre-clinical studies (before any (iii) Payments or other transfers of
or certified continuing education human studies have begun), only report value for speaking engagements not
program. the following information: related to medical education should be
(xvi) Grant. (i) Research entity name (as required reported under the nature of payment
(xvii) Space rental or facility fees in paragraph (f)(1)(i) of this section). category ‘‘Compensation for services
(teaching hospital only). (ii) Total amount of payment (as other than consulting, including serving
(f) Special rules for research required in paragraph (f)(1)(ii) of this as a speaker at an event other than a
payments. All payments or other section). continuing education program.’’
transfers of value made in connection (ii) Principal investigator(s) (as (h) Special rules for reporting food
with an activity that meets the required in paragraph (f)(1)(v) of this and beverage. (1) When allocating the
definition of research in this section and section). cost of food and beverage among
that are subject to a written agreement, (g) Special rules for payments or other covered recipients in a group setting
a research protocol, or both, must be transfers of value related to continuing where the cost of each individual
reported under these special rules. education programs. (1) Payments or covered recipient’s meal is not
(1) Research-related payments or other transfers of value provided as separately identifiable, such as a platter
other transfers of value to covered compensation for speaking at a provided to physicians in a group
recipients (either physicians or teaching continuing education program are not practice setting, applicable
hospitals), including research-related required to be reported, if all of the manufacturers must calculate the value
payments or other transfers of value following conditions are met: per person by dividing the entire cost of
made indirectly to a covered recipient (i) The event at which the covered the food or beverage by the total number
through a third party, must be reported recipient is speaking meets the of individuals who partook in the meal
to CMS separately from other payments accreditation or certification (including both covered recipients and
or transfers of value, and must include requirements and standards for non-covered recipients, such as office
the following information (in lieu of the continuing education of one of the staff). The per person value of the meal
information required by § 403.904(c)): following: must be reported as a payment or other
(i) Name of the research institution, (A) The Accreditation Council for transfer of value only for covered
individual or entity receiving the Continuing Medical Education. recipients who actually partook in the
payment or other transfer of value. (B) The American Academy of Family food or beverage.
(A) If paid to a physician covered Physicians. (2) Applicable manufacturers are not
recipient, all of the following must be (C) The American Dental required to report or track buffet meals,
provided: Association’s Continuing Education snacks, soft drinks, or coffee made
(1) The physician’s name as listed in Recognition Program. generally available to all participants of
the NPPES (if applicable). (D) The American Medical a large-scale conference or similar large-
(2) National Provider Identifier. Association. scale event.
(3) State professional license (E) The American Osteopathic (i) Exclusions from reporting. The
number(s) (for at least one State where Association. following are excluded from the
reporting requirements specified in this are not intended to be sold and are § 403.906 Reports of physician ownership
section: intended for patient use. and investment interests.
(1) Indirect payments or other (4) Educational materials and items (a) General rule. (1) Each applicable
transfers of value (as defined in that directly benefit patients or are manufacturer and applicable group
§ 403.902), where the applicable intended to be used by or with patients, purchasing organization must report to
manufacturer is unaware of the identity including the value of an applicable CMS on an annual basis all ownership
of the covered recipient. An applicable manufacturer’s services to educate and investment interests in the
manufacturer is unaware of the identity patients regarding a covered drug, applicable manufacturer or applicable
of a covered recipient if the applicable device, biological, or medical supply. group purchasing organization that were
manufacturer does not know (as defined (5) The loan of a covered device or a held by a physician or an immediate
in § 403.902) the identity of the covered device under development, or the family member of a physician during
recipient during the reporting year or by provision of a limited quantity of the preceding calendar year.
the end of the second quarter of the medical supplies for a short-term trial (2) For CY 2013, only ownership or
following reporting year. period, not to exceed a loan period of investment interests held on or after
(2)(i) For CY 2013, payments or other 90 days or a quantity of 90 days of August 1, 2013 must be reported to
transfers of value less than $10, unless average daily use, to permit evaluation CMS.
the aggregate amount transferred to, of the device or medical supply by the (b) Identifying information. Reports
requested by, or designated on behalf of covered recipient. on physician ownership and investment
the covered recipient exceeds $100 in a (6) Items or services provided under interests must include the following
calendar year. a contractual warranty (including identifying information:
(ii) For CY 2014 and subsequent service or maintenance agreements), (1) Name of the physician (as listed in
calendar years, to determine if transfers whether or not the warranty period has the National Plan & Provider
of value are excluded under this section, expired, including the replacement of a Enumeration System (if applicable),
the dollar amounts specified in covered device, where the terms of the including first and last name, middle
paragraph (i)(2)(i) of this section must warranty are set forth in the purchase or initial, and suffix (for all that apply),
be increased by the same percentage as lease agreement for the covered device. and an indication of whether the
the percentage increase in the consumer (7) A transfer of anything of value to ownership or investment interest was
price index for all urban consumers (all a physician covered recipient when the held by the physician or an immediate
items; U.S. city average) for the 12- covered recipient is a patient, research family member of the physician.
month period ending with June of the subject or participant in data collection (2) Primary business address of the
previous year. CMS will publish the for research, and not acting in the physician, including the following:
values for the next reporting year 90 professional capacity of a covered (i) Street address.
recipient. (ii) Suite or office number (if
days before the beginning of the
(8) Discounts, including rebates. applicable).
reporting year.
(iii) City.
(iii) Payments or other transfers of (9) In-kind items used for the (iv) State.
value of less than $10 in CY 2013 (or provision of charity care. (v) ZIP code.
less than the amount described in (10) A dividend or other profit (3) The following information for the
paragraph (i)(2)(ii) of this section for CY distribution from, or ownership or physician (regardless of whether the
2014 and subsequent calendar years) investment interest in, a publicly traded ownership or investment interest is held
provided at large-scale conferences and security or mutual fund. by an immediate family member of the
similar large-scale events, as well as (11) In the case of an applicable physician):
events open to the public, do not need manufacturer who offers a self-insured (i) The specialty.
to be reported nor included for purposes plan or directly reimburses for (ii) National Provider Identifier (if
of the $100 aggregate threshold in CY healthcare expenses, payments for the applicable and as listed in NPPES).
2013 (or the aggregate threshold provision of health care to employees (iii) State professional license
calculated in accordance paragraph and their families. number(s) (for at least one State where
(i)(2)(ii) of this section for CY 2014 and (12) In the case of a covered recipient the physician maintains a license), and
subsequent calendar years), even if the who is a licensed non-medical the State(s) in which the license is held.
aggregate total for a covered recipient professional, a transfer of anything of (4) Dollar amount invested by each
exceeds the aggregate threshold for the value to the covered recipient if the physician or immediate family member
calendar year. transfer is payment solely for the non- of the physician.
(iv) When reporting payments or other medical professional services of the (5) Value and terms of each
transfers of value under the $10 licensed non-medical professional. ownership or investment interest.
threshold for CY 2013 (or under the (13) In the case of a covered recipient (6) Direct and indirect payments or
amount described in paragraph (i)(2)(ii) who is a physician, a transfer of other transfers of value provided to a
of this section for CY 2014 and anything of value to the covered physician holding an ownership or
subsequent calendar years) for covered recipient if the transfer is payment investment interest, and direct and
recipients that exceed the aggregate solely for the services of the covered indirect payments or other transfers of
threshold for the reporting year, recipient with respect to an value provided to a third party at the
applicable manufacturers may (but are administrative proceeding, legal request of or designated by the
not required to) report all small defense, prosecution, or settlement or applicable manufacturer or applicable
payments to a particular covered judgment of a civil or criminal action group purchasing organization on behalf
recipient that fall within the same and arbitration. of a physician owner or investor, must
nature of payment category as a single (14) A payment or transfer of value to be reported by the applicable
payment or other transfer of value. a covered recipient if the payment or manufacturer or applicable group
(3) Product samples, including transfer of value is made solely in the purchasing organization in accordance
coupons and vouchers that can be used context of a personal, non-business- with the requirements for reporting
by a patient to obtain samples, which related relationship. payments or other transfers of value in
§ 403.904(c) through (i). The terms (ii) An applicable manufacturer under information reported is timely, accurate,
‘‘applicable manufacturer and paragraph (1) of the definition of and complete to the best of his or her
applicable group purchasing applicable manufacturer and an entity knowledge and belief. For applicable
organization’’ must be substituted for (or entities) under common ownership manufacturers choosing to submit a
‘‘applicable manufacturer,’’ and with the applicable manufacturer under consolidated report in accordance with
‘‘physician owner or investor’’ must be paragraph (2) of the definition of paragraph (d)(1) of this section, the
substituted for ‘‘covered recipient’’ in applicable manufacturer may, but are applicable manufacturer submitting the
each place they appear. not required to, file a consolidated consolidated report must attest on
report of all the payments or other behalf of itself, in addition to each of the
§ 403.908 Procedures for electronic transfers of value to covered recipients, other applicable manufacturers
submission of reports. and physician ownership or investment included in the consolidated report.
(a) File format. Reports required interests. (f) Assumptions document.
under this subpart must be (iii) If multiple applicable Applicable manufacturers and
electronically submitted to CMS by manufacturers (under paragraph (1) or applicable group purchasing
March 31, 2014, and by the 90th day of (2) of the definition or both paragraphs organizations may submit an
each subsequent calendar year. of the definition) submit a consolidated assumptions document, explaining the
(b) General rules. (1) If an applicable report, the report must provide the reasonable assumptions made and
manufacturer made no reportable names of each applicable manufacturer methodologies used when reporting
payments or transfers of value in the and entity (or entities) under common payments or other transfers of value, or
previous calendar year, nor had any ownership that the report covers, and ownership or investment interests. The
reportable ownership or investment the report must identify the specific assumptions documents will not be
interests held by a physician or a entity that provided each payment. made available to covered recipients,
physician’s immediate family member (iv) A single payment or other transfer physician owners or investors, or the
(as defined in § 403.902) during the of value reported in a consolidated public.
previous calendar year, the applicable report must only be reported once by (g) 45-day review period for review
manufacturer is not required to file a one applicable manufacturer. and error correction. (1) General rule.
report. (v) The applicable manufacturer Applicable manufacturers, applicable
(2) If an applicable group purchasing submitting a consolidated report on group purchasing organizations, covered
organization had no reportable behalf of itself and other applicable recipients, and physician owners or
ownership or investment interests held manufacturers under common investors must have an opportunity to
by a physician or physician’s immediate ownership, as permitted under this review and submit corrections to the
family member during the previous paragraph, is liable for civil monetary information submitted for a period of
calendar year, the applicable group penalties imposed on each of the not less than 45-days before CMS makes
purchasing organization is not required applicable manufacturers whose the information available to the public.
to file a report. reportable payments or other transfers of In no case may this 45-day period for
value were included in the consolidated review and submission of corrections
(c) Registration. (1) Applicable
report, up to the annual maximum prevent the information from being
manufacturers that have reportable
amount specified in § 403.912(c) for made available to the public.
payments or other transfers of value,
each individual applicable (2) Notification. CMS notifies the
ownership or investment interests, or
manufacturer included in the report. applicable manufacturers, applicable
both, are required to report under this (2) Joint ventures. If a payment or
subpart and must register with CMS group purchasing organizations, covered
other transfer of value is provided in recipients, and physician owners or
within 90 days of the end of the accordance with a joint venture or other
calendar year for which a report is investors when the reported information
cooperative agreement between two or is ready for review.
required. more applicable manufacturers, the
(2) Applicable group purchasing (i) Applicable manufacturers and
payment or other transfer of value must applicable group purchasing
organizations that have reportable be reported—
ownership or investment interests are organizations are notified through the
(i) In the name of the applicable points of contact they identified during
required to report under this subpart manufacturer that actually furnished the
and must register with CMS within 90 registration.
payment or other transfer of value to the (ii) Physicians and teaching
days of the end of the calendar year for covered recipient, unless the terms of a hospitals—
which a report is required. written agreement between the (A) Are notified using an online
(3) During registration, applicable applicable manufacturers specifically posting and notifications on CMS’s
manufacturers and applicable group require otherwise, so long as the listserves.
purchasing organizations must name agreement requires that all payments or (B) May also register with CMS to
two points of contact with appropriate other transfers of value in accordance receive notification about the review
contact information. with the arrangement are reported by processes.
(d) Other rules. (1) Consolidated one of the applicable manufacturers; (iii) The 45-day review period begins
reports. (i) An applicable manufacturer and on the date specified in the online
under paragraph (1) of the definition (ii) Only once by one applicable notification.
that is under common ownership with manufacturer. (3) Process. (i) An applicable
separate entities that are also applicable (e) Attestation. Each report, including manufacturer, applicable group
manufacturers under paragraph (1) of any subsequent corrections to a filed purchasing organization, covered
the definition may, but is not required report, must include an attestation by recipient or a physician owner or
to, file a consolidated report of all the the Chief Executive Officer, Chief investor may log into a secure Web site
payments or other transfers of value to Financial Officer, Chief Compliance to view only the information reported
covered recipients, and physician Officer, or other Officer of the specifically about itself.
ownership or investment interests, for applicable manufacturer or applicable (ii) Covered recipients and physician
all of the entities. group purchasing organization that the owners or investors are able to review
data submitted about them for the Web site at least once annually with application of the existing drug, device,
previous reporting year. corrected information. biological, or medical supply), is
(iii) If the applicable manufacturer, approved by the FDA.
§ 403.910 Delayed publication for (4) Failure to notify CMS when FDA
applicable group purchasing
payments made under product research or approval occurs may be considered
organization, covered recipient, or development agreements and clinical
physician owner or investor agrees with investigations.
failure to report, and the applicable
the information reported, the applicable manufacturer may be subject to civil
(a) General rule. Certain research monetary penalties.
manufacturer, applicable group payments or other transfers of value
purchasing organization, covered (5) If, after 4 years from the date of a
made to a covered recipient by an payment first appearing in a report to
recipient, or physician owner or applicable manufacturer under a
investor may electronically certify that CMS, there is an indication in a report
product research or development that the payment is subject to delayed
the information reported is accurate. agreement may be delayed from
(iv) If a covered recipient or physician reporting, it is reported regardless of the
publication on the Web site. Publication indication.
owner or investor disagrees with the of a payment or other transfer of value
information reported, the covered (e) Confidentiality. Information
is delayed when made in connection submitted and eligible for delayed
recipient or physician owner or investor with the following instances:
can initiate a dispute, which is sent to publication is considered confidential
(1) Research on or development of a and will not be subject to disclosure
the appropriate applicable manufacturer new drug, device, biological, or medical
or applicable group purchasing under 5 U.S.C. 552, or any similar
supply, or a new application of an Federal, State, or local law, until on or
organization to be resolved between the existing drug, device, biological, or
parties. after the date on which the information
medical supply. made available to the public as required
(v) Covered recipients and physician (2) Clinical investigations regarding a
owners or investors may initiate in this section.
new drug, device, biological, or medical
disputes at any time after the 45-day supply. § 403.912 Penalties for failure to report.
period begins, but before the end of the (b) Research or development (a) Failure to report. (1) Any
calendar year, but any changes resulting agreement. The research or applicable manufacturer or applicable
from disputes initiated outside the 45- development agreement must include a group purchasing organization that fails
day period, may not be made until the written agreement, a research protocol, to timely, accurately or completely
next time the data is refreshed. or both between the applicable report the information required in
(4) Data disputes. (i) In order to be manufacturer and covered recipient. accordance with the rules established
corrected prior to the publication of the (c) Date of publication. Payments or under this subpart is subject to a civil
data, applicable manufacturers and other transfers of value eligible for monetary penalty of not less than
applicable group purchasing delayed publication must be reported to $1,000, but not more than $10,000, for
organizations must notify CMS of CMS (in the manner required in each payment or other transfer of value
resolved disputes and changes to the § 403.904(f)) on the first reporting date or ownership or investment interest not
information submitted by no later than following the year in which they occur, reported timely, accurately, or
15 days after the end of the 45-day but CMS does not publicly post the completely.
period (that is, 60 days after the 45-day payment until the first annual (2) The total amount of civil monetary
review period begins). publication date after the earlier of the penalties imposed on each applicable
(ii) Disputes which are not resolved following: manufacturer or applicable group
by 15 days after the end of the review (1) The date of the approval, licensure purchasing organization (regardless of
and correction period, may still be or clearance of the covered drug, device, whether the applicable manufacturer
resolved, but any changes resulting from biological, or medical supply by FDA. was a part of a consolidated report) with
the disputes may be made until the next (2) Four calendar years after the date respect to failures to report in an annual
time the data is refreshed. the payment or other transfer of value submission of information will not
(iii) If the dispute is not resolved by was made. exceed $150,000.
15 days after the end of the 45-day (d) Notification of delayed (b) Knowing failure to report. (1) Any
review and correction period, CMS publication. (1) An applicable applicable manufacturer or applicable
publicly reports and aggregates the manufacturer must indicate on its group purchasing organization that
applicable manufacturer’s or applicable research report to CMS whether a knowingly fails to timely, accurately or
group purchasing organization’s version payment or other transfer of value is completely report the information
of the payment or other transfer of eligible for a delay in publication. The required in accordance with the rules
value, or ownership or investment absence of this indication in the report established under this subpart is subject
interest data, but marks the payment or will result in CMS posting all payments to a civil monetary penalty of not less
other transfer of value or ownership or publicly in the first year of public than $10,000, but not more than
investment interest as disputed. reporting. $100,000, for each payment or other
(h) Errors or omissions. (1) If an (2) An applicable manufacturer must transfer of value or ownership or
applicable manufacturer or applicable continue to indicate annually in its investment interest not reported timely,
group purchasing organization discovers report that FDA approval, licensure, or accurately, or completely.
an error or omission in its annual report, clearance of the new drug, device, (2) The total amount of civil monetary
it must submit corrected information to biological or medical supply to which penalties imposed on each applicable
CMS immediately upon confirmation of the payment or other transfer of value is manufacturer or group purchasing
the error or omission. related, is pending. organization (regardless of whether the
(2) Upon receipt, CMS notifies the (3) An applicable manufacturer must applicable manufacturer was a part of a
affected covered recipient or physician notify CMS during subsequent annual consolidated report) with respect to
owner or investor that the additional submissions, if the new drug, device, knowing failures to report in an annual
information has been submitted and is biological or medical supply, to which submission of information will not
available for review. CMS updates the the payment is related (or the new exceed $1,000,000.
(c) Total annual civil monetary accordance with the rules established that requires an applicable manufacturer
penalties. The amount of civil monetary under this subpart. to disclose or report, in any format, the
penalties imposed on each applicable (ii) The items described in paragraph type of information regarding the
manufacturer or applicable group (e)(1)(i) of this section must be payment or other transfer of value
purchasing organization under maintained for a period of at least 5 required to be reported under this
paragraphs (a)(1) and (b)(1) of this years from the date the payment or other subpart.
section are— transfer of value, or ownership or (b) Information collected for public
(1) Aggregated separately; investment interest is published health purposes. (1) Information
(2) Subject to separate aggregate totals publicly on the Web site. required to be reported to a Federal,
under paragraphs (a)(2) and (b)(2) of this (2) Audit. HHS, CMS, OIG or their
State, or local governmental agency for
section, with a maximum combined designees may audit, inspect,
public health surveillance,
annual total of $1,150,000. investigate and evaluate any books,
investigation, or other public health
(d) Determinations regarding the contracts, records, documents, and other
purposes or health oversight purposes
amount of civil monetary penalties. In evidence of applicable manufacturers
must still be reported to appropriate
determining the amount of the civil and applicable group purchasing
Federal, State, or local governmental
monetary penalty, factors to be organizations that pertain to their
agencies, regardless of whether the same
considered include, but are not limited compliance with the requirement to
information is required to be reported
to, the following: timely, accurately or completely submit
information in accordance with the under this subpart.
(1) The length of time the applicable
rules established under this subpart. (2) Governmental agencies include,
manufacturer or applicable group
(3) The requirements in this subpart but are not limited to, the following:
purchasing organization failed to report,
including the length of time the are in addition to, and do not limit, any (i) Agencies that are charged with
applicable manufacturer or applicable other applicable requirements that may preventing or controlling disease,
group purchasing organization knew of obligate applicable manufacturers or injury, disability.
the payment or other transfer of value, applicable group purchasing (ii) Agencies that conduct oversight
or ownership or investment interest. organizations to retain and allow access activities authorized by law, including
(2) Amount of the payment the to records. audits, investigations, inspections,
(f) Use of funds. Funds collected by
applicable manufacturer or applicable licensure or disciplinary actions, or
the Secretary as a result of the
group purchasing organization failed to other activities necessary for oversight
imposition of a civil monetary penalty
report. of the health care system.
under this section must be used to carry
(3) Level of culpability. (Catalog of Federal Domestic Assistance
out the operation of this subpart.
(4) Nature and amount of information (g) Notice, hearings, appeals, and Program No. 93.778, Medical Assistance
reported in error. collection. Civil monetary penalties Program; Program No. 93.773, Medicare—
(5) Degree of diligence exercised in imposed under this section are subject Hospital Insurance; and Program No. 93.774,
correcting information reported in error. Medicare—Supplementary Medical
to the provisions set forth in subparts A Insurance Program)
(e) Record retention and audits. (1) and B of part 402 of this chapter,
Maintenance of records. (i) Applicable including those pertaining to notice, Dated: July 2, 2012.
manufacturers and applicable group opportunity for a hearing, appeals
purchasing organizations must maintain Marilyn Tavenner,
procedures, and collection of penalties. Acting Administrator, Centers for Medicare
all books, contracts, records, documents,
and other evidence sufficient to enable § 403.914 Preemption of State laws. & Medicaid Services.
the audit, evaluation, and inspection of (a) General rule. In the case of a Approved: January 23, 2013.
the applicable manufacturer’s or payment or other transfer of value Kathleen Sebelius,
applicable group purchasing provided by an applicable manufacturer Secretary, Department of Health and Human
organization’s compliance with the to a covered recipient, this subpart Services.
requirement to timely, accurately or preempts any statute or regulation of a [FR Doc. 2013–02572 Filed 2–1–13; 4:15 pm]
completely submit information in State or political subdivision of a State BILLING CODE 4120–01–P

Federal Register Vol 78 No 27 Friday February 8 2013 Rules and Regulations - Affordable-Care-Act-Section-6002-Final-Rule

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Federal Register Vol 78 No 27 Friday February 8 2013 Rules and Regulations - Affordable-Care-Act-Section-6002-Final-Rule

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Department of Health and Human Services

should be separated from all other (A) Consulting Fees

However, the commenters were divided requirements. However, applicable

resolution. However, we believe this the physician maintains a license, ++ Specialty;

Applicable Manufacturers and some assumptions and estimates that

Estimated hours Average total

Compliance officer in AM ................................. 1,150 1,040 $48 $49,452 $56,869,800

Supporting staffs in Applicable GPOs ............. 420 520 26 13,723 5,763,576

Total .......................................................... ............................ ............................ ............................ ............................ 193,037,104

Estimated hours Average total

Compliance officer in AM ................................. 1,150 780 $48 $37,089 $42,652,350

Total .......................................................... ............................ ............................ ............................ ............................ 144,777,828

Large Applicable Manufacturers ...................................................................................... 150 $50,000 $7,500,000

Total .......................................................................................................................... ............................ ............................ 12,340,000

Organizations Annual cost Total cost

Large Applicable Manufacturers ...................................................................................... 150 $5,000 $750,000

Total .......................................................................................................................... ............................ ............................ 1,234,000

TABLE 3—NUMBER OF PHYSICIANS BY TYPE

Doctor of Medicine/Doctor of Osteopathy ........................................................................................................................................... 660,000

Total .............................................................................................................................................................................................. 897,700

TABLE 4A—YEAR 1 ESTIMATED COSTS FOR PHYSICIANS AND TEACHING HOSPITALS

Physicians ........................................................ 224,425 1.00 $137 $137 $30,746,225

Total .......................................................... ............................ ............................ ............................ ............................ 58,978,244

Estimated num- Estimated hours Average total

Physicians ........................................................ 168,319 0.75 $137 $103 $17,294,751

Total .......................................................... ............................ ............................ ............................ ............................ 33,892,600

Physicians ........................................................................................................................ 224,425 ............................ $2,000,000

Total .......................................................................................................................... ............................ ............................ 4,200,000

Physicians ........................................................................................................................ 168,319 ............................ $200,000

Total .......................................................................................................................... ............................ ............................ 420,000

TABLE 6A—TOTAL YEAR 1 ESTIMATED COSTS

Applicable Manufacturers ................................................................................................ 183,119,560 11,500,000 194,619,560

Total .......................................................................................................................... 252,125,664 16,540,000 268,665,664

TABLE 6B—TOTAL COSTS, YEAR 2, AND SUBSEQUENT YEARS

Applicable Manufacturers ................................................................................................ 137,339,670 1,150,000 138,489,670

Total .......................................................................................................................... 178,753,165 1,654,000 180,407,165

TABLE 7—ACCOUNTING STATEMENT

Annualized Monetized Costs ........................................................... $192 2011 7 2013–2022

(d) * * * provided to covered recipients, as well expects to receive, payment because of

implement section 1128G of the Act. services. considered to be ‘‘employed by’’ or an

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