The “Physician Payments Sunshine Act” (S. 301), which would require drug and device companies to report financial payments and gifts made to doctors, will be passed in 2009, Kathleen Meriwether, principal at Ernst & Young, said March 5 at the National Summit on Sales and Marketing Disclosure for Drug, Device and Biotech Companies.

“There is a lot of money changing hands between industry and physicians that is not visible to patients,” Meriwether said. “Transparency is a good thing because it prevents corruption.”

In January, Sens. Herb Kohl (D-Wis.) and Chuck Grassley (R-Iowa) introduced the S. 301, which would require companies to report to the Department of Health and Human Services all gifts and payments to doctors that total more than $100 annually (13 DER A-2, 1/23/09). The bill, which is intended to improve transparency in how federal programs like Medicare and Medicaid pay for drugs and devices, is similar to legislation they introduced in 2007 (S. 2029) but which was never taken up by the full Senate.

The major benefit of transparency is that “it causes a re-examination of these relationships” between industry and doctors, Meriwether said. “All drug and device companies should start thinking about disclosure,” Mary E. Riordan, senior counsel, Office of Inspector General, Department of Health and Human Services, said. “This is inevitable pending federal legislation.”

Riordan recommended that companies start by examining their relationships with health care practitioners and by establishing systems and processes to collect and aggregate payment information.

State Legislation

Several states have already enacted this kind of payment disclosure legislation, Craig Smith, an attorney Hogan & Hartson, Miami, said. There also are 22 pending bills in 13 different states on disclosure.

Smith said that the state bills are often poorly designed and some state laws that have been passed “are not accomplishing their stated objectives.” “State laws require voluminous reports but [the states] don't have sufficient resources to file and analyze these reports,” Smith said, noting that state governments do not have experts that can translate these reports to patients and health care practitioners.

Smith also said that state laws “implicitly attack the integrity of the medical profession” and “fail to provide any meaningful tools to physicians to enhance the quality of care or to promote cost effectiveness.”

“These disclosure programs are not an assault on the integrity of physicians,” David Hart, assistant attorney general from the Oregon Department of Justice, said. “State laws are written to protect consumers from unfair marketing practices.”

Benefits of Transparency Versus Costs

William A. Sarraille, an attorney with Sidley Austin, Washington, said the benefits of transparency should be weighed against the costs. “The focus of some transparency obligations on the trivial breeds cynicism about compliance,” Sarraille said. For instance, he said that some transparency requirements focus on very small payments to physicians.

The Congressional Budget Office was unable to estimate cost savings if the Sunshine Act passed, Sarraille said. CBO stated it believes there would be cost savings but could not calculate them, he said. Information about payments made by companies to doctors “has no value to the average patient,” Sarraille said. “The government should be able to explain the value of transparency to patients and this argument has not been made.”

Sarraille said federal preemption over state laws should be a core element of the Sunshine Act. “What is the value of asking for the same information over and over again,” he said. “State disclosure laws vary widely in scope, contain significant ambiguities, and leave many implementation questions unanswered,” Sarraille said.