U.S. Centers for Medicare and Medicaid Services (CMS) has yet to release its final ruling regarding the implementation the Physician Payments Sunshine Act, which intends to shed light on the financial relationships between physicians and industry.

April 29, 2012

2 Min Read
It’s Not Just about the Money: The High Cost of the Sunshine Act

U.S. Centers for Medicare and Medicaid Services (CMS) has yet to release its final ruling regarding the implementation the Physician Payments Sunshine Act, which is intended to shed light on the financial relationships between physicians and industry. There is a good chance, however, that the legislation will be expensive for drug and medical device manufacturers—in more ways than one.

CMS estimates that the legislation could cost $224 million to implement in the first year alone. MedCity News reports that the cost of implementation per organization in the first year is estimated to be $195,288 per organization and require the equivalent of 1.74 full-time workers.

The effects of the legislation could be especially harsh on smaller firms that lack the deep pockets. “The legislation could accelerate the trend where you see companies, especially early-stage start ups, go outside of the United States to do their product development work and to bring their products to the market,” says Stefanos Zenios, PhD, a professor at Stanford University (Palo Alto, CA).

While everyone seems to agree that transparency is generally a good thing, the regulatory burden imposed in the current Sunshine legislation could be especially difficult for young device companies to bear.

Another consideration is that the law proposes that any payment $10 or higher made to a physician must be reported. In January, this prompted Thomas Stossel, MD to pen an op-ed in the Wall Street Journal titled “Who Paid for Your Doctor's Bagel?” which criticized the burden the legislation would impose and mocked the low threshold it prescribes for payment to be reported.

The principle behind the Sunshine Act is good, Zenios stresses. “Relationship between companies and physicians could, under certain circumstances, lead into undesirable outcomes for patients,” he acknowledges. “But, on the other hand, relationships [between the two parties] can also lead to very desirable outcomes for patients,” Zenios adds. Clinicians frequently work to develop or refine medical device technology in ways that improve patient outcomes. For instance, a physician might observe that a give procedure is performed in an unsatisfactory manner and either invent a new technology or collaborate with an engineer to help refine an existing device to improve its clinical utility.

“As the legislation is now written, there is an exclusive focus on the undesirable consequence on the patient without an emphasis on the potential for positive consequences for patients or for relationships between physicians and manufacturers,” Zenios says. “And the worry is whether the focus on too much of the undesirable consequences will eliminate some of the desirable consequences.”

Brian Buntz is the editor-at-large at UBM Canon's medical group. Follow him on Twitter at @brian_buntz.

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