The proposed changes, which are outlined below, are intended to clarify Open Payments Program definitions and requirements. If implemented, the changes will result in an increase in the amount of information reported to Open Payments by manufacturers and thereafter published on the Open Payments website by the government. The updates would become effective for data collection beginning in calendar year 2023 (reporting in March 2024). The Proposed Rule is open for comments until September 13, 2021.
Proposed Changes to the Open Payments Program
The Centers for Medicare & Medicaid Services (“CMS”) issued a Proposed Rule on July 13, 2021. It includes several proposed modifications to the Open Payments Program. The majority of the proposed changes are administrative in nature. However, privately-held drug and device makers that provide any type of compensation to a physician owner should pay close attention to the proposed definition of a physician-owned distributorship (or “POD”). Failure to comply can result in fines. As we have seen, the government is currently ramping up U.S. Federal Physician Payments Sunshine Act (a.k.a., “Open Payments”) prosecutions.
Proposed POD Definition
The proposed POD definition is quite broad (See 86 Fed. Reg. 39568, i.e., page 465). It would require some companies to publicly identify as a POD for Open Payment purposes even if a company does not operate or identify as a traditional POD per the current OIG definition. The government writes in the Proposed Rule:
Physician-owned distributorship, for the purposes of determining the existence of a reportable ownership or investment interest under this subpart, means an entity that:
(1) Meets the definition of an applicable manufacturer or applicable group purchasing organization (GPO) as defined in this section, and
(2) Meets at least one of the following two conditions:
- (i) Has a minimum of 5 percent direct or indirect ownership or investment interest in the applicable manufacturer or applicable group purchasing organization held by a physician or a physician’s immediate family member, or
- ii) A physician or a physician’s immediate family member receives compensation from the applicable manufacturer or group purchasing organization in the form of a commission, return on investment, profit sharing, profit distribution, or other remuneration directly or indirectly derived from the sale or distribution of devices by the applicable manufacturer or group purchasing organization in which the physician or physician’s immediate family member has ownership.
In the Proposed Rule, CMS notes that there is confusion as to whether PODs have Open Payments reporting obligations. The proposed update is designed to “clear up confusion” by defining PODs and confirming that PODs must report. Any entity meeting the proposed definition of a POD would be required to identify itself as a POD when submitting and attesting to records.
PODs receive heightened scrutiny from the government because of perceived risks for abuse, fraud, and conflicts of interest. Recall the March 2013 OIG Special Fraud Alert on physician-owned entities where the OIG defined PODs as:
…[a]ny physician-owned entity that derives revenue from selling, or arranging for the sale of, implantable medical devices and includes physician-owned entities that purport to design or manufacture, typically under contractual arrangements, their own medical devices or instrumentation.
The OIG also outlined “suspect characteristics” of PODs and concluded that “PODs are inherently suspect under the anti-kickback statute.” [Emphasis added.]
While CMS has clearly attempted to narrow the scope of its POD definition to the Open Payments Program only, it is unclear whether and how this new definition could impact the OIG’s position on PODs and U.S. Federal Anti-Kickback Statute enforcement. If the proposed definition sticks, some drug and device makers may be forced to categorize themselves as an “inherently suspect” POD with the Open Payments Program.
Summary of Key Proposed Changes
- Adding a mandatory payment context field for records to Teaching Hospitals, e.g., the check number or wire number for the payment, related department of the hospital, or other relevant pieces of information;
- Adding the option to re-certify and attest annually even when no records are being reported;
- Disallowing record deletions without a substantiated reason;
- Adding a definition for a Physician-Owned Distributorship as a subset of Applicable Manufacturers and Group Purchasing Organizations, for the purposes of Open Payments Program reporting only;
- Requiring companies that have not had reportable payments within the last two years to keep contact information updated in Open Payments;
- Disallowing publication delays for General Payment records;
- Clarifying that the exception for short-term loans of equipment applies for 90 total days in a calendar year, regardless of whether the 90 days were consecutive; and
- Removing the option to submit and attest to General Payment records with an ‘‘Ownership’’ Nature of Payment category.