MedPAC Adds Health Plans, PBMS to Financial Relationship Reporting Mix

October 16, 2008
Inside CMS

MedPAC commissioners are pushing a handful of broad recommendations to expand reporting of physician-industry financial ties and would include health plans and pharmacy benefit managers in the mix. The proposals, agreed on at an early October meeting and to be formally voted on in November, would include new rules for reporting physi-cian receipt of drug samples and would set a hard limit of $100 annually for exclusion from a mandatory declaration of gifts and payments.

This move comes amidst heightened scrutiny of gifts to physicians, especially from the pharmaceutical industry.

The draft recommendations on public reporting follow a June analysis by MedPAC that financial relationships be-tween doctors and drug and device manufacturers, hospitals and ambulatory surgical centers (ASCs) are "pervasive," with physicians grabbing drug samples, meals, gifts, speakers' fees, consulting arrangements and research grants that all run the appropriateness gamut. Though the back-and-forth has been seen to lead to technological advances and in-creased use of beneficial products, a growing concern among stakeholders focuses on doctors' objectivity.

Giving the public -- including payers and plans -- data to examine whether physicians' practices nationwide are in-fluenced by these arrangements has long been discussed. For example, hospitals could check to see if purchasing physi-cians who sit on formulary committees have ties to manufacturers.

In response, MedPAC staff pitched to commissioners a national reporting system that would apply to a broad set of manufacturers and recipients of payments including companies regardless of size -- and their subsidiaries -- that make drugs, biologicals, devices and supplies. Staff said recipients of payments would include physicians; other prescribers such as physician assistants and nurse practitioners; hospitals and medical schools because academic medical centers receive significant industry support for research and education; professional organizations and patient advocacy groups due to manufacturer-given grants for research, fellowships, and public education; and organizations that sponsor con-tinuing medical education (CME). Continuing education was included because commercial support accounts for half of total CME dollars, staff said.

Specifically, staff recommended -- and commissioners concurred, after much debate -- to force manufacturers to report payments only if the total annual value to a single recipient exceeds $100. (This figure would be adjusted yearly for inflation.) Once that threshold is reached, all payments or transfers of value to a recipient would have to be dis-closed.

"We think this strikes a balance between reducing the reporting burden and maximizing public transparency," staff said.

But initially commissioners weren't so sure. Ronald Castellanos, of Southwest Florida Urologic Associates, said he thought $100 was too low, adding that he thought a $100 trigger wouldn't accomplish the commission's goal of getting the big-scale abusers. Conversely, Rush University's Peter Butler was the first to say he preferred a threshold of zero. Butler said the administrative-burden rationale for setting a threshold was moot because physicians will have to track everything anyway, so there's no greater burden with reporting everything.

"I think the only way one can pick a threshold would be to say at what level is it likely to affect behavior?" asked Robert Reischauer of The Urban Institute. "And whatever behavior research we have on this suggests that even a friendly phone call or a pen does seem to affect behavior, although the individual doesn't quite realize it."

William Scanlon, a Virginia-based health policy consultant, disagreed: "It may be true that the research says that a pen matters, but that's not going to have a lot of resonance when people come up and say they're making me report that I gave somebody a pen. It just doesn't pass the laugh test. And that, I think, is the critical thing to think about in this."

Ultimately the $100 level was seen as a compromise, with a majority of commissioners seeing smaller gifts as es-sentially inconsequential.

This decision, still informal until MedPAC's November vote, runs against legislation from Sens. Herb Kohl (D-WI) and Charles Grassley (R-IA) that has been revised but never introduced, and no formal legislative language has been released. The outline of the newest version, however, puts forward a $500 threshold, followed by a $25 threshold per payment once the $500 is surpassed. The other main difference is that the Kohl/Grassley bill would completely preempt state laws, whereas MedPAC proposed a partial preemption.

The partial preemption comes from the proposed national reporting law preempting equally or less stringent state laws but letting states still collect information on other forms of payments. In acknowledging some administrative costs in the reporting, staff said that compliance costs should be reduced if the federal system even partially replaces state laws.

There's currently no mechanism to track compliance with voluntary ethical guidelines. Five states and the District of Columbia require manufacturers to publicly report their payments to doctors, but the data collected by these laws are often incomplete and the laws themselves often have weaknesses. For instance, only the Massachusetts law covers de-vice manufacturers.

Bill Maruca, a partner in the Pittsburgh office of Fox Rothschild, said he worried that expanding the disclosure re-quirement to drug companies would "add a lot of noise to the process but not necessarily a lot of light." He said past disclosures have shown large payments to be in fact royalties on patents developed by doctors and not payments for consulting or speaking engagements. Plus, he said, the drug industry through PhRMA has already voluntarily and dras-tically reduced the acceptable level of free gifts that can be provided to physicians. The worry is that the MedPAC rec-ommendation would focus more on legitimate consulting arrangements, not giveaways like trips, meals, sporting tick-ets, etc, which already violate PhRMA guidelines, he said.

The comprehensive reporting relationship list includes: gifts, food, entertainment, honoraria, research, funding for education and conferences, consulting fees, investment interests and product royalties. Discounts and rebates were ex-cluded because otherwise price negotiations would be made more difficult, staff said.

Though initially staff suggested to commissioners not to include drug samples, members decided in a separate rec-ommendation the freebies should be reported somehow. Though federal law requires companies to internally track drug samples they distribute, including details about the drugs and the recipients, that information is not reported to the gov-ernment. Under the recommendation, companies would report the value, type and date of each payment and the name, specialty, Medicare billing number and address of each recipient. (The billing number is used to link payment informa-tion to claims data.)

Whether to include samples pitted a few of the commissioners against each other. Many quickly decided that the samples should be reported, with Butler calling them "a big driver potentially of utilization and costs."

"It's like getting shelf space, so to speak," Butler said. "Once you get shelf space it tends to be used more, I think -- maybe appropriately in some places, but not in others." Commission Vice-chair Jack Ebeler called samples "the largest volume of transactions between the industry and the profession."

Thomas Dean, a commissioner who works for Horizon Health Care, Inc. in South Dakota, said there was too much value in samples.

"If I have patients that are very needy and need samples to support them, all I have to do is call the drug rep and they'll send me a whole box of stuff," Dean said. "And so that would get reported as a large amount of money even though it's going, I think, to a legitimate concern." Dean noted that though one doctor will sign for it, many doctors will use the samples making it tough to track.

But once it became clear that the samples would not be part of the recommendation on relationships between drug company and physician, but instead a separate recommendation dealing specifically with samples, Dean came on board.

Still, stakeholders such as Maruca, said many patients rely deeply on samples.

"Tighter controls over samples and analysis of their impact is appropriate, but patients' needs should be kept in mind," Maruca said."Many people do not have drug coverage (despite Medicare Part D) or cannot afford the copays for multiple prescriptions, and samples remain their best access to such drugs."

Critics suggest samples create artificial patient demand for the most expensive, latest drugs where cheaper -- and less profitable -- generics are just as good.

Another recommendation that found consensus would put all the submitted information on a publicly available da-tabase searchable by manufacturer and the recipient physician's name, location, Medicare billing number, specialty, type of payment and year. CMS requires hospitals and ASCs to disclose who owns, directly or indirectly, at least 5 percent of the facilities. Or if it's structured with a partnership, all owners must be disclosed.

"The main point here is that most of the information that researchers and payers need is available. It's just not pub-licly available," said staff, adding that this would lessen the costs.

Commissioners ultimately elected to go a step further. Nancy Kane, of Harvard School of Public Health, pushed to include health plans and PBMs as they're "also the targets of the kind of entertaining and education marketing that phy-sicians and other groups are targets of."

"Why don't we have in there the other types of freestanding diagnostic and treatment centers such as diagnostic im-aging centers and gastroenterology clinics that do the scopes?" Kane asked. "I worry that if you don't have everybody in there that will increase the flow that way instead of to the surgery centers. They'll just start opening up other ways to make up for their income." The commission later moved to include health plans, PBMs and pharmacists in the reporting database.

Maruca added that adding health plans and PBMs was smart because "that's where the decisions are made and more financial incentives are given, compared to doctors."

And when members expressed concern that including billing numbers could lead to problems with medical identi-ties, the commission agreed to recommend collecting billing numbers for legitimate researchers in a data use agreement (DUA) but not in an informational site for the public.

MedPAC also plans to recommend the HHS secretary submit a report to Congress on financial relationships like leases with up to 500 hospitals. This survey is already being conducted, staff said, but it was unclear if CMS would make its findings public. With the reporting database recommendation limited only to direct or indirect ownership, the information in the CMS report could lead to other recommendations on other types of financial interest relationships, members said.

The commission also concurred with some guidelines for reporting of payments related to new product develop-ment. Companies would be allowed to delay reporting of payments related to clinical trials until the trial is registered on the NIH Web site. Registration of clinical trials is currently required for Phase 2 and Phase 3 trials. MedPAC also dis-cussed letting companies delay reporting of other payments related to development of a new product until FDA ap-proves it, but no later than two years after a payment is made. This, staff said, would ensure payments related to prod-ucts that are never approved by FDA are eventually disclosed.

Commissioners also discussed giving government authority to assess civil penalties on manufacturers for noncom-pliance. The law should require manufacturers to investigate and correct errors reported by recipients from annually reported information. And companies should be allowed to report additional clarifying information about a payment, such as explaining that it was for training for example, commissioners said.