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Delay in Publication of Sunshine Act Regulations Persists Despite Bipartisan Pressure

Written by Kevin Kappel and Karen Lovitch

CMS has yet to issue regulations required under the federal Physician Payment Sunshine Act even though they were due on October 1, 2011.  As discussed in an earlier post on this blog, this lack of guidance is problematic for pharmaceutical and medical device manufacturers covered by the Sunshine Act (“Manufacturers”) because they must begin tracking certain required information on January 1, 2012 and reporting it soon thereafter.

In early October, Senators Chuck Grassley (R-IA) and Herb Kohl (D-WI) wrote a letter to CMS Administrator Donald Berwick expressing “severe disappointment” that CMS failed to meet its October 1st deadline.  They requested a response by October 14th, and specifically asked CMS to provide the proposed release date of the required regulations.

On October 28th, CMS responded by letter, but did not specify when Manufacturers can expect to receive more guidance.  Mr. Berwick implied that Executive Order 13563 may be part of the reason for the delay: “This January, the President issued Executive Order 13563, which directs all Federal agencies to take steps to reduce regulatory burden….In that vein, CMS is carefully reviewing this statutory requirement and working hard to ensure we meet these goals.”  CMS also explained that it “has been actively engaged in stakeholder outreach” in an effort to develop the regulations.

Senators Grassley and Kohl were not satisfied.  In a press release Senator Grassley noted that “[t]he administrator’s response doesn’t tell us anything new.  There’s no explanation for the delay and no indication of when to expect completion.”  Sen. Kohl emphasized that the delay would cause uncertainty for the companies that must comply:

Given how straightforward and detailed the Sunshine Act provisions were, it’s troubling that the response to our letter would come a month late without any indication on progress, a timeline or what caused the delay.  With medical device and pharmaceutical companies facing the January 1, 2012 deadline to begin collecting information about all payments to physicians, the lack of guidance leaves a great deal of uncertainty and I’m sure that’s why many of the affected companies have joined us in calling for swift implementation.”

The bottom line is that Manufacturers likely won't receive implementation guidance until the eleventh hour, which is significant given that the consequences of noncompliance are potentially severe: civil monetary penalties ranging from $1,000 to $10,000 (up to $150,000) for each transfer of value to a covered recipient that is not reported and from $10,000 to $100,000 (up to $1 million) for each knowing failure to report.   Although some large Manufacturers already track and publish this type of information, many companies are facing this challenge for the first time and thus have much work to do.

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Karen S. Lovitch

Chair, Health Law Practice & Co-Chair, Health Care Enforcement Defense Practice

Karen advises industry clients on regulatory, transactional, operational, and enforcement matters. She has deep experience handling FCA investigations and qui tam litigation for laboratories and diagnostics companies.