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CMS Finalizes Proposal to Remove Continuing Medical Education Exclusion from Sunshine Act Regulations

On October 31, 2014, the Centers for Medicare & Medicaid Services (CMS) issued its final Medicare physician fee schedule rule for CY 2015 (the Final Rule), which also includes certain changes to the Sunshine Regulations.  Notably, CMS finalized its proposal to eliminate a reporting exclusion that applies to certain payments or other transfers of value made by a manufacturer or group purchasing organization (Applicable Manufacturer or Applicable GPO, respectively) to a speaker at a CME program (the CME Exclusion).  The eliminated exclusion had provided that payments or other transfers of value made by an Applicable Manufacturer to a physician or teaching hospital (Covered Recipient), or by an Applicable GPO to a physician owner/investor, for speaking at a CME program need not be reported if the following conditions were met:

  1. The CME program meets the accreditation or certification standards of one of the following: (i) the Accreditation Council for Continuing Medical Education, (ii) the American Academy of Family Physicians, (iii) the American Dental Association’s Continuing Education Recognition Program, (iv) the American Medical Association or (v) the American Osteopathic Association.

  2. The Applicable Manufacturer or Applicable GPO does not pay the speaker directly.

  3. The Applicable Manufacturer or Applicable GPO does not select the speaker or provide the third party, such as the CME vendor, with a distinct, identifiable set of individuals to be considered as speakers for the CME program.  42 C.F.R. § 403.904(g).

In the proposed CY 2015 Medicare physician fee schedule update (Proposed Rule), CMS reasoned that the CME Exclusion was “redundant with” another exclusion that applies to indirect payments or other transfers of value where the Applicable Manufacturer or Applicable GPO is “unaware of” the identity of the Covered Recipient and/or physician owner/investor during the reporting year or by the end of the second quarter of the following reporting year (the Indirect Exclusion).  42 C.F.R. § 403.904(i).  An indirect payment or other transfer of value, which is otherwise reportable under the Sunshine Regulations, is one made “through a third party, where the applicable manufacturer (or applicable group purchasing organization) requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value, in whole or in part, to a covered recipient(s) (or a physician owner or investor).”  42 C.F.R. § 403.902.

CMS indicated in the Final Rule that many stakeholders objected to the amendment as proposed.  Some commenters asserted that the realities of CME speaker payments are such that an Applicable Manufacturer would likely learn the identity of the physician speaker who received the payment during the time frame applicable to the Indirect Exclusion.  Some urged CMS to revise the Indirect Exclusion to provide that an indirect payment should be excluded if the Applicable Manufacturer did not know the Covered Recipient’s identity before providing the payment to a third party, such as a CME organization. 

Although CMS finalized its proposal to eliminate the CME Exclusion, it sought to clarify its reasoning in the preamble to the Final Rule.  CMS indicated that, even where an Applicable Manufacturer or Applicable GPO learns the identity of the CME speaker during the time frame under the Indirect Exclusion, the payment would not be reportable if the Applicable Manufacturer or Applicable GPO did not “require, instruct, direct, or otherwise cause the [CME] provider to provide the payment or other transfer of value in whole or in part to a covered recipient … .”  Stated differently, in such scenarios, the payment or other transfer of value does not constitute an “indirect payment or other transfer of value” in the first instance.  CMS cautioned that insofar as an Applicable Manufacturer makes a payment through a CME organization that meets the definition of an indirect payment and the Applicable Manufacturer learns the Covered Recipient’s identity in the applicable time period, the Indirect Exclusion would not apply and the payment must be reported.  CMS asserts that this approach aligns with the following illustrative example from the preamble to the Sunshine Regulations: “if an applicable manufacturer provided an unrestricted donation to a physician professional organization to use at the organization’s discretion, and the organization chose to use the donation to make grants to physicians, those grants would not constitute ‘indirect payments’ because the applicable manufacturer did not require, instruct, or direct the organization to use the donation for grants to physicians.”

In addition to eliminating the CME Exclusion, CMS finalized a number of other changes to the Sunshine Regulations.  Notably, Applicable Manufacturers are now required to report the marketed name and therapeutic area or product category for all related covered drugs, devices, biologicals or medical supplies (and not only related covered drugs and biologicals, as previously required).  Applicable Manufacturers must also specifically indicate if a related drug, device, biological or medical supply is covered or non-covered, and if a payment or other transfer of value is not related to any covered or non-covered product.  Additionally, CMS has finalized its proposal to revise the Sunshine Regulations to require the reporting of stock, stock option or any other ownership interest as distinct categories of payments to enable CMS to “collect more specific data regarding the forms of payment made by applicable manufacturers.”  Finally, CMS finalized its proposal to remove the definition of “covered device,” explaining that it is duplicative with the definition of “covered drug, device, biological or medical supply.”

Effect of Eliminating CME Exclusion

By finalizing its proposal to remove the CME Exclusion without further changes to the Indirect Exclusion, CMS’s approach results in an ambiguity regarding the reportability of payments or transfers of value that would have fallen within the scope of the CME Exclusion, where the Applicable Manufacturer or Applicable GPO funds a physician speaker for a CME event and learns the identity of the physician speaker by the end of the second quarter of the following reporting year. 

Unlike the “illustrative example” referenced by CMS where an unrestricted grant is provided, grants are often made to support CME programs with the knowledge that the funds will ultimately be used to pay for unidentified speakers.  Even if the Applicable Manufacturer did “not select the covered recipient speaker or provide the [CME vendor] with a distinct, identifiable set of individuals to be considered as speakers” (per the now-eliminated CME Exclusion) the Applicable Manufacturer could be deemed to have “instructed” the CME vendor to use the payment to compensate a physician speaker without specifying which specific physician should be selected as the speaker, i.e., it may be an indirect payment.  Consequently, it remains to be seen how narrowly CMS will interpret the scope of the Indirect Exclusion for purposes of payments made to compensate CME speakers, but stakeholders should remain cognizant of the apparent gap left by CMS’s elimination of the CME Exclusion.

Applicable Manufacturers and Applicable GPOs must begin collecting data pursuant to the Final Rule beginning January 1, 2016.

© 2019 McDermott Will & Emery

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About this Author

Jason B. Caron, health care attorney with McDermott Will & Emery law firm
Partner

Jason B. Caron is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office. 

202-756-8243
Jiayan Chen, McDermott Will Emery Law Firm, Health Care attorney
Partner

    Jiayan Chen is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  She focuses her practice on counseling clients on a range of regulatory issues, including compliance and strategic considerations for data sharing and research initiatives, as well as on transactions relating to pharmaceutical and medical device companies.

    Jiayan’s regulatory practice includes advising clients on research compliance and data privacy and security laws, including the Common Rule, FDA good clinical practices, HIPAA, the Privacy Act of 1974, as well as similar state laws and regulations.  In that regard, Jiayan helps clients assess the range of legal, regulatory, and other strategic considerations attendant to the development of data sharing platforms and to data and biospecimen collection and repositories, including in the context of personalized medicine and future, unspecified use.  She also has experience preparing data privacy policies and programs and counseling clients on other various legal and compliance issues arising from the use and disclosure of protected health information.  Additionally, Jiayan’s work for life sciences clients includes advising on compliance with, and implementation of, the “Sunshine” provisions of the Patient Protection and Affordable Care Act.

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    Jennifer S. Geetter, McDermott Will & Emery LLP, Attorney
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    Jennifer S. Geetter is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C., office.  She focuses her practice on emerging biotechnology and safety issues, advising hospital, industry, insurance and provider clients on matters relating to research, drug and device development, off-label use, personalized medicine, formulary compliance, privacy and security, electronic health records and data strategy initiatives, patient safety, conflicts of interest, scientific review and research misconduct, internal hospital disciplinary proceedings,...

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    Joan Polacheck, Health Care industry Lawyer, McDermott Will Emery, Chicago Law Firm
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    Joan Polacheck is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. She represents a broad range of health care industry clients, including hospitals, suppliers, and drug and device companies.

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