Medicare’s Payment Transparency Program Not So Transparent

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By James Swann

Tracking how much money drug companies give to doctors seems simple in theory, but in practice it’s opened up a host of complications, concerns, and potential enforcement actions.

The federal government’s Open Payments program, which requires drug and device manufacturers to report payments made to doctors and teaching hospitals, will release its payment data for 2017 on June 30.

Trimming wasteful spending and ensuring physician independence were the main goals of the transparency program, but critics argue the data lacks any context and isn’t usable by the average patient.

The Centers for Medicare & Medicaid Services program needs more clarity to help patients evaluate what can often be confusing data, a spokesman for the Advanced Medical Technology Association (AdvaMed) told Bloomberg Law Jan. 30.

Drug and Device Company Payments to Physicians, 2014-2016

For example, there should be more descriptive payment disclosure categories and better background information on the importance of physician-industry interactions, which would give patients the context to understand the reported data, AdvaMed’s Mark Brager said.

AdvaMed represents roughly 300 companies that produce medical devices.

The program groups payments into four categories: general, research, associated research, and ownership.

Drug and device manufacturers made $8.19 billion in payments to doctors and teaching hospitals in 2016, up slightly from 2015’s $8.07 billion.

Questions persist over whether the Open Payments data is accurate or detailed enough to offer any insights to patients or the government, Andrew Furlow, a health-care attorney with Hogan Lovells LLP in New York, told Bloomberg Law Jan. 31.

“There’s a persistent misconception in some circles that all payments being reported are inherently improper,” Furlow said.

A recent example was a press release that accompanied new restrictions on drug manufacturer payments to New Jersey doctors that cited the total amount paid by companies to New Jersey doctors as the reason for the limits, Furlow said.

“This kind of inference is troubling and may call for education at the state level to ensure policy makers understand the data and what it represents,” Furlow said.

The December 2017 New Jersey rule sets a $10,000 cap on payments from pharmaceutical manufacturers to New Jersey prescribers.

Enforcement on the Horizon?

Enforcement actions by the Health and Human Services Office of Inspector General also loom as potential threats to the drug and device industry, Katie Pawlitz, a health-care attorney with Reed Smith in Washington, told Bloomberg Law Jan. 30.

“I continue to expect that we will start to see some movement with respect to enforcement actions for not reporting, or failing to timely or accurately report,” Pawlitz said, noting that, at the least, the OIG will begin auditing the Open Payments program.

The OIG’s work plan includes two items related to the Open Payments program, and the audits could identify problems and lead to program changes, William T. Mathias, a health-care attorney with Baker, Donelson, Bearman, Caldwell & Berkowitz in Baltimore, Md., told Bloomberg Law Jan. 31.

“I think one of the fears of industry in connection with the Open Payments program is that it would become a tool for enforcement agencies, though to date, we haven’t seen much evidence of this,” Mathias said.

The Open Payments work plan items include a review of how a drug or device company’s ownership stake in a physician practice is being reported and a review of much Medicare paid for drugs and devices prescribed by physicians who had financial relationships with manufacturers. The OIG expects to issue reports on both reviews in 2018.

Pawlitz acknowledged the CMS has made great strides in improving the Open Payments website and making it easier for the public to view the data. “The current state of the website and its searching capabilities are night and day from where we started,” Pawlitz said.

Success or Failure?

The Open Payments program survived the Trump administration’s initial attempt to repeal the Affordable Care Act, and isn’t likely to be dismantled this year, Colin Zick, a health-care attorney with Foley Hoag LLP in Boston, told Bloomberg Law Jan. 31.

However, the program hasn’t been a success, Zick said. Its goal was to eliminate any improper influence on doctors from the industry and drive down health-care costs from unnecessary prescriptions, Zick said, but all it really has accomplished is to require industry and doctors to hire additional staff to handle reporting issues.

The bad behavior that prompted the Open Payments program was declining when the program began, Zick said, and there were and remain plenty of federal and state level tools to address problems that arise, such as the anti-kickback statute.

The program has been a success from a regulatory compliance perspective, Catherine Hess, a health-care attorney at McGuireWoods LLP in Washington, told Bloomberg Law Jan. 31.

“The website gives provider organizations with decentralized or evolving contracting processes additional data with which to monitor compliance with fraud and abuse laws,” Hess said.

Open Payments has also caused some drug and device manufacturers to reconsider the types or volume of physician arrangements they enter into, Hess said.

HHS Secretary Alex Azar’s public support for the program during his confirmation hearing signals the program is here to stay, Hess said, although the CMS may be able to leverage Azar’s pharmaceutical industry background to identify opportunities to streamline the reporting process for manufacturers.

Power of Collaboration

Collaborations between physicians and biopharmaceutical professionals on new products and treatments are critical for improving the health and quality of life for patients, and it’s important the public understands the relationship, Nicole Longo, a senior manager in public affairs at the Pharmaceutical Researchers and Manufacturers of America (PhRMA), told Bloomberg Law Jan. 30.

Drug companies often pay doctors for work on new drugs and treatment options.

Longo said PhRMA supports the payment transparency laid out by the Open Payment program, and said educating the public about the relationship between doctors and industry can help patients understand how it benefits their health.

To contact the reporter on this story: James Swann in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bloomberglaw,com

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