78742 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 402 and 403 

[CMS–5060–P] 

RIN 0938–AR33 

Medicare, Medicaid, Children’s Health 

Insurance Programs; Transparency 

Reports and Reporting of Physician 

Ownership or Investment Interests 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

require applicable manufacturers of 

drugs, devices, biologicals, or medical 

supplies covered by Medicare, Medicaid 

or the Children’s Health Insurance 

Program (CHIP) to report annually to the 

Secretary certain payments or transfers 

of value provided to physicians or 

teaching hospitals (‘‘covered 

recipients’’). In addition, applicable 

manufacturers and applicable group 

purchasing organizations (GPOs) are 

required to report annually certain 

physician ownership or investment 

interests. The Secretary is required to 

publish applicable manufacturers’ and 

applicable GPOs’ submitted payment 

and ownership information on a public 

Web site. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. Eastern Standard Time on 

February 17, 2012. 

ADDRESSES: In commenting, please refer 

to file code CMS–5060–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address only: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–5060–P, P.O. Box 8013, Baltimore, 

MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–5060–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments only to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–1066 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Erica Breese (202) 260–6079. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–(800) 743–3951. 

I. Background 

A. Statutory Background 

Section 6002 of the Affordable Care 

Act added section 1128G to the Social 

Security Act (the Act), which requires 

applicable manufacturers of drugs, 

devices, biologicals, or medical supplies 

covered under title XVIII of the Act 

(Medicare) or a State plan under title 

XIX (Medicaid) or XXI of the Act (the 

Children’s Health Insurance Program, or 

CHIP) to report annually to the 

Secretary certain payments or other 

transfers of value to physicians and 

teaching hospitals. Section 1128G of the 

Act also requires applicable 

manufacturers and applicable group 

purchasing organizations (GPOs) to 

report certain information regarding the 

ownership or investment interests held 

by physicians or the immediate family 

members of physicians in such entities. 

Specifically, manufacturers of covered 

drugs, devices, biologicals, and medical 

supplies (applicable manufacturers) are 

required to submit on an annual basis 

the information required in section 

1128G(a)(1) of the Act for certain 

payments or other transfers of value 

made to physicians and teaching 

hospitals (collectively called covered 

recipients) during the course of the 

preceding calendar year. Similarly, 

section 1128G(a)(2) of the Act requires 

applicable manufacturers and 

applicable GPOs to disclose any 

ownership or investment interests in 

such entities held by physicians or their 

immediate family members, as well as 

information on any payments or other 

transfers of value provided to such 

physicians. Applicable manufacturers 

must report the required payment and 

other transfer of value information to 

CMS in an electronic format by March 

31, 2013, and on the 90th day of each 

calendar year thereafter. Applicable 

manufacturers and applicable GPOs 

must report the required information 

about physician ownership and 

investment interests, including those 

held by immediate family members, as 

well as information on any payments or 

other transfers of value to such 

physician owners or investors in the 

same format, by the same date. 

Applicable manufacturers and 

applicable GPOs are subject to civil 

monetary penalties (CMPs) for failing to 

comply with the reporting requirements 

of the statute. We are required by statute 


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to publish the reported data on a public 

Web site. The data must be 

downloadable, searchable, and easily 

aggregated. In addition, we must submit 

annual reports to the Congress and each 

State summarizing the data reported. 

Finally, section 1128G of the Act 

generally preempts State laws that 

require disclosure of the same type of 

information by manufacturers. 

2. Transparency Overview 

Collaboration among physicians, 

teaching hospitals, and industry 

manufacturers may contribute to the 

design and delivery of life-saving drugs 

and devices. However, while some 

collaboration is beneficial to the 

continued innovation and improvement 

of our health care system, payments 

from manufacturers to physicians and 

teaching hospitals can also introduce 

conflicts of interests that may influence 

research, education, and clinical 

decision-making in ways that 

compromise clinical integrity and 

patient care, and may lead to increased 

health care costs. 

We recognize that disclosure alone is 

not sufficient to differentiate beneficial, 

legitimate financial relationships from 

those that create conflict of interests or 

are otherwise improper. Moreover, 

financial ties alone do not signify an 

inappropriate relationship. However, 

transparency can shed light on the 

nature and extent of relationships, and 

may dissuade inappropriate conflicts of 

interest from developing. Given the 

intricacies of disclosure and the 

importance of discouraging 

inappropriate relationships without 

harming beneficial ones, we sought to 

better understand the current scope of 

the interactions among physicians, 

teaching hospitals, and industry 

manufacturers. We solicited stakeholder 

feedback through a CMS Open Door 

Forum on March 24, 2011 in order to 

guide our implementation of section 

1128G of the Act. The transcript of this 

Open Door Forum can be found on the 

regulatory docket on Regulations.gov. In 

addition to this feedback, we consulted 

with the Inspector General of the 

Department of Health and Human 

Services (HHS), as required by the 

statute. 

II. Provisions of the Proposed 

Regulations 

The following sections outline the 

agency’s proposals concerning 

implementation of section 1128G of the 

Act, including clarification of the terms 

and definitions used in the statute, as 

well as proposed procedures for the 

submission, review, and publication of 

the reported data. For terms undefined 

by the statute, we sought to provide, 

where necessary, appropriate 

definitions, and explanations of how we 

propose to interpret them. Due to the 

timing of the publication of this notice 

of proposed rulemaking, a final rule will 

not be published in time for applicable 

manufacturers and applicable GPOs to 

begin collecting the information 

required in section 1128G of the Act on 

January 1, 2012, as indicated in the 

statute. We will not require applicable 

manufacturers and applicable GPOs to 

begin collecting the required 

information until after the publication 

of the final rule; however, we recognize 

that some manufacturers and GPOs may 

begin to collect certain data voluntarily. 

We seek comment on the amount of 

time applicable manufacturers and 

applicable GPOs will need following 

publication of the final rule in order to 

begin complying with the data 

collection requirements of section 

1128G of the Act. We are considering a 

preparation period of 90 days, since we 

believe that was the time period 

intended by Congress based on the 

timeline indicated in the statute and are 

requesting comments on whether that is 

a sufficient amount of time. Finally, we 

also seek input on specific challenges 

that applicable manufacturers and 

applicable GPOs may face when setting 

up the necessary data collection and 

reporting systems. 

We hope to finalize this rule as soon 

as possible during calendar year (CY) 

2012 and, depending on the publication 

date of the final rule, we are considering 

requiring the collection of data for part 

of 2012, to be reported to CMS by the 

statutory date of March 31, 2013. We 

seek comments on the feasibility of 

submitting the required information for 

part of CY 2012 by March 31, 2013. 

A. Transparency Reports 

Section 1128G(a) of the Act outlines 

the transparency reporting requirements 

and consists of two parts. The first part, 

section 1128G(a)(1) of the Act, outlines 

the required reports from applicable 

manufacturers on payments or other 

transfers of value to covered recipients. 

The second part, section 1128G(a)(2) of 

the Act, outlines the reporting 

requirements for applicable 

manufacturers and applicable GPOs 

concerning ownership and investment 

interests of physicians, and their 

immediate family members, as well as 

information on any payments or other 

transfers of value provided to such 

physician owners or investors. While 

there is some overlap between these 

submissions, we propose that these two 

types of information be reported 

separately to ensure that the relevant 

reporting obligations of applicable 

manufacturers and applicable GPOs are 

clearly distinguished. We seek 

comments on this general approach. We 

want to emphasize that compliance with 

the reporting requirements of section 

1128G of the Act does not exempt 

applicable manufacturers, applicable 

GPOs, covered recipients, physician 

owners or investors, or anyone else from 

any potential liability associated with 

payments or other transfers of value, or 

ownership or investment interests (for 

example, potential liability under the 

Federal Anti-Kickback statute or False 

Claims Act). 

1. Reports on Payments and Other 

Transfers of Value Under Section 

1128G(a)(1) of the Act 

a. Applicable Manufacturers 

(1) Manufacturers 

Section 1128G(a) of the Act requires 

that applicable manufacturers disclose 

certain payments or other transfers of 

value to covered recipients. In defining 

applicable manufacturer, we sought a 

comprehensive definition to ensure the 

full transparency and complete 

reporting envisioned by the statute. 

Section 1128G(e)(9) of the Act defines a 

‘‘manufacturer of a covered drug, 

device, biological, or medical supply’’ 

as—: 

Any entity which is engaged in the 

production, preparation, propagation, 

compounding, or conversion of a covered 

drug, device, biological, or medical supply 

(or any entity under common ownership with 

such entity which provides assistance or 

support to such entity with respect to the 

production, preparation, propagation, 

compounding, conversion, marketing, 

promotion, sale, or distribution of a covered 

drug, device, biological, or medical supply). 

Section 1128G(e)(2) of the Act clarifies 

that an ‘‘applicable manufacturer’’ of a 

covered drug, device, biological, or 

medical supply, is one which is 

‘‘operating in the United States, or in a 

territory, possession, or commonwealth 

of the United States.’’ 

Given these statutory definitions and 

relevant considerations, we propose to 

interpret ‘‘applicable manufacturer’’ for 

the purposes of this regulation as an 

entity that is: 

(1) Engaged in the production, preparation, 

propagation, compounding, or conversion of 

a covered drug, device, biological, or medical 

supply for sale or distribution in the United 

States, or in a territory, possession, or 

commonwealth of the United States; or 

(2) Under common ownership with an 

entity in paragraph (1) of this definition, 

which provides assistance or support to such 

entity with respect to the production, 

preparation, propagation, compounding, 

conversion, marketing, promotion, sale, or 


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distribution of a covered drug, device, 

biological, or medical supply for sale or 

distribution in the United States, or in a 

territory, possession, or commonwealth of 

the United States. 

We recognize that there are other 

definitions of ‘‘manufacture,’’ 

‘‘manufacturer’’ and ‘‘manufacturing’’ 

with which industry may be familiar 

(such as those in 21 CFR 207.3, 21 CFR 

210.3(b)(12), 21 CFR 820.3(o), and 42 

USC 1396r–8(k)(5)). We note that this 

proposed definition, which generally 

tracks the statute, is somewhat more 

limited than those definitions. 

Under this definition, manufacturers 

of a covered drug, device, biological, or 

medical supply (under either paragraph 

(1) or paragraph (2) of the definition) are 

deemed to be an ‘‘applicable 

manufacturer’’ if their products are sold 

or distributed in the United States 

(U.S.), regardless of where the covered 

drug, device, biological, or medical 

supply is actually produced or where 

the entity is actually located or 

incorporated. Given the global nature of 

these industries, we believe that any 

entity manufacturing covered drugs, 

devices, biologicals, or medical supplies 

for sale or distribution in the U.S. (or 

any entity under common ownership 

which provides assistance or support in 

the production, preparation, 

propagation, compounding, conversion, 

marketing, promotion, sale, or 

distribution of such items) should be 

subject to the requirements of section 

1128G of the Act. The opportunity for 

undue influence or inappropriate 

relationships caused by payments or 

transfers of value to covered recipients 

is the same for manufacturers of drugs, 

devices, biologicals, or medical supplies 

sold or distributed in the United States 

regardless of where the product is 

actually manufactured, and we, 

therefore, propose to treat them the 

same. 

We also seek to clarify that any 

manufacturer that meets the definition 

of applicable manufacturer by selling or 

distributing in the United States at least 

one covered drug, device, biological, or 

medical supply is considered an 

applicable manufacturer, even though it 

may also manufacturer products that do 

not fall within that category (as defined 

later in this section). We propose that all 

payments or transfers of value made by 

an applicable manufacturer to a covered 

recipient must be reported as required 

under section 1128G of the Act 

regardless of whether the particular 

payment or other transfer of value is 

associated with a covered drug, device, 

biological, or medical supply. 

Additionally, we seek to clarify that the 

proposed definition includes entities 

that hold Food and Drug Administration 

(FDA) approval, licensure, or clearance 

for a covered drug, device, biological, or 

medical supply, even if they contract 

out the actual physical manufacturing of 

the product to another entity. We 

interpret these entities as being 

‘‘engaged in the production, 

preparation, propagation, compounding, 

or conversion of a covered drug, device, 

biological, or medical supply.’’ We seek 

comment on this interpretation. 

As noted previously, section 

1128G(e)(9) of the Act states that certain 

companies which are under ‘‘common 

ownership’’ with an entity that 

produces, prepares, propagates, 

compounds, or converts a covered drug, 

device, biological, or medical supply are 

also subject to the reporting 

requirements under this provision, even 

though they themselves may not be 

involved in the ‘‘manufacturing’’ 

process. Specifically, this applies to 

entities under ‘‘common ownership’’ 

with an applicable manufacturer which 

provide assistance or support to the 

applicable manufacturer with respect to 

the production, preparation, 

propagation, compounding, conversion, 

marketing, promotion, sale, or 

distribution of a covered drug, device, 

biological, or medical supply for sale or 

distribution in the U.S., or in a territory, 

possession, or commonwealth of the 

U.S. We propose to define ‘‘common 

ownership’’ as when the same 

individual, individuals, entity, or 

entities, directly or indirectly, own any 

portion of two or more entities. The 

common ownership definition would 

apply to a range of corporate 

arrangements, including, but not limited 

to, parent companies and subsidiaries 

and brother/sister corporations. 

We are also considering an alternate 

interpretation that would limit the 

common ownership definition to 

circumstances where the same 

individual, individuals, entity, or 

entities own 5 percent or more of total 

ownership in two or more entities. This 

would be subject to the same 

requirements as the proposed definition 

described previously, but would only 

apply to interests of 5 percent of more. 

We seek comments on our proposed 

definition of ‘‘common ownership,’’ 

including, whether a more specific 

definition is needed and, if a minimum 

percentage threshold is adopted, 

whether 5 percent is appropriate. We 

intend to finalize the agency’s position 

on this in the final rule based on 

comments received. 

If two entities are under common 

ownership with one another, and both 

individually meet the definition of an 

applicable manufacturer under 

paragraph (1) of the definition, then we 

propose that the entities should report 

separately under section 1128G of the 

Act. For example, if company A and 

company B are both owned by company 

C, and companies A, B and C all meet 

the definition of applicable 

manufacturer under paragraph (1), then 

all three have to report separately. 

However, if only one company under 

common ownership meets the definition 

of applicable manufacturer under 

paragraph (1), and the other company is 

required to report under paragraph (2) of 

the definition, then we propose that the 

affected entities can choose whether or 

not to report together. For example, if 

only company C meets the definition of 

applicable manufacturer under 

paragraph (1) and companies A and B 

meet the definition of applicable 

manufacturer under paragraph (2), then 

the companies can decide whether to 

report together. If an applicable 

manufacturer under paragraph (1) 

reports for itself as well as for entities 

under common ownership that are 

required to report under paragraph (2), 

the report should clearly name all of the 

entities that are included in the report. 

Given the various relationships between 

entities under common ownership, we 

propose that if an applicable 

manufacturer under paragraph (1) 

reports for at least one additional entity 

under common ownership, the 

applicable manufacturer may decide 

whether to identify the payments as 

those from the entity under common 

ownership, or whether to combine them 

with their payments or other transfers of 

value. 

In addition to payments or other 

transfers of value to covered recipients 

made by applicable manufacturers 

themselves, applicable manufacturers 

(under both paragraphs (1) and (2) of the 

definition) are also required by statute 

to report payments and other transfers 

of value provided indirectly to covered 

recipients through third parties, if the 

applicable manufacturer is aware of the 

identity of the covered recipient. This is 

addressed in more detail in the 

discussion of third party payments 

found later in this preamble. 

(2) Covered Drug, Device, Biological, or 

Medical Supply 

The reporting requirements are 

limited to applicable manufacturers of a 

‘‘covered drug, device, biological, or 

medical supply.’’ The phrase ‘‘covered 

drug, device, biological, or medical 

supply’’ is defined in section 

1128G(e)(5) of the Act as any drug, 

biological product, device, or medical 

supply for which payment is 

‘‘available’’ under Medicare, Medicaid, 


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or CHIP. Many drugs, devices, 

biological, and medical supplies are 

reimbursed separately under these 

programs, making payment availability 

clear. However, others are paid for as a 

part of a composite rate payment, such 

as the Medicare hospital inpatient 

prospective payment system (IPPS), the 

outpatient prospective payment system 

(OPPS), or the end-stage renal disease 

(ESRD) prospective payment system. 

Since payment, while indirect, is still 

being provided for the bundled drug, 

device, biological or medical supply, we 

propose that payment is considered 

‘‘available’’ under Medicare, Medicaid 

or CHIP for items included in a 

composite payment rate. Therefore, we 

propose that drugs, devices, biologicals, 

or medical supplies included in a 

composite payment rate, as well as 

those reimbursed separately, are 

considered to be covered drugs, devices, 

biologicals, or medical supplies under 

section 1128G of the Act. 

Given these proposals, we propose to 

define ‘‘covered drug, device, biological, 

or medical supply’’ as: 

Any drug, device, biological, or medical 

supply for which payment is available under 

Title XVIII of the Act or under a State plan 

under Title XIX or XXI (or a waiver of such 

plan), either separately, as part of a fee 

schedule payment, or as part of a composite 

payment rate (for example, the hospital 

inpatient prospective payment system or the 

hospital outpatient prospective payment 

system). With respect to a drug or biological, 

this definition is limited to those drug and 

biological products that, by law, require a 

prescription to be dispensed. With respect to 

a device or medical supply, this definition is 

limited to those devices (including medical 

supplies) that, by law, require premarket 

approval by or premarket notification to the 

Food and Drug Administration. 

We are proposing to limit drugs and 

biologicals in the definition of ‘‘covered 

drug, device, biological, and medical 

supply,’’ to drugs and biologicals that, 

by law, require a prescription to be 

dispensed, thus excluding drugs and 

biologicals that are considered ‘‘overthe-counter’’ (OTC). We believe this 

limitation will reduce the number of 

manufacturers subject to the reporting 

requirements by excluding those that 

only manufacturer OTC drugs or 

biologicals. We believe that this 

exclusion may be appropriate for 

manufacturers that manufacture only 

these products (and not also products 

which fall within the proposed 

definition of ‘‘covered drug, device, 

biological, or medical supply’’), since 

physicians and teaching hospitals have 

less influence over patients’ choice of 

OTC products. We seek comments on 

the proposal to limit covered drugs and 

biologicals to those that require a 

prescription to be dispensed. In the 

event we adopt this interpretation, 

applicable manufacturers who 

manufacturer only OTC drugs or 

biologicals (and not also products which 

fall within the proposed definition of 

‘‘covered drug, device, biological, or 

medical supply’’), would not be 

required to report at all under section 

1128G of the Act. However, 

manufacturers who manufacture both 

OTC drugs or biologicals and at least 

one product that falls within the 

definition of a covered drug, device, 

biological or medical supply would be 

required to report all payments or 

transfers of value to covered recipients 

required by section 1128G of the Act 

(whether or not associated with a 

covered drug, device, biological, or 

medical supply), as previously 

explained. 

Similarly, we are also proposing an 

additional limitation to the definition as 

it pertains to devices and medical 

supplies, which would limit them to 

those devices (including medical 

supplies) that, by law, require premarket 

approval by or notification to FDA. This 

would exclude many Class I devices and 

certain Class II devices, which are 

exempt from premarket notification 

requirements under 21 U.S.C. 360(l) or 

(m), such as tongue depressors and 

elastic bandages. Some of these devices 

and medical supplies are so routinely 

provided in the course of medical care 

that the Congress may not have 

intended to capture manufacturers of 

such items under these reporting 

requirements. We believe this limitation 

may be appropriate for applicable 

manufacturers, because manufacturers 

that solely produce these exempt 

products have not been shown to have 

extensive relationships with covered 

recipients. Additionally, we believe this 

limitation might be appropriate because 

these financial relationships (to the 

extent they exist) are less likely to 

influence patient care. However, we are 

also concerned that this would be overly 

limiting for the definition of applicable 

GPOs, which also incorporates the 

phrase ‘‘covered drug, device, 

biological, or medical supply.’’ We 

discuss this more in the applicable GPO 

definition section. We seek comment on 

this additional limitation that we are 

proposing. We note that in the event 

this interpretation is adopted, 

applicable manufacturers who 

manufacture only devices or medical 

supplies that are exempt from premarket 

notification requirements (and not also 

products which fall within the proposed 

definition of ‘‘covered drug, device, 

biological, or medical supply’’), would 

not be required to report at all under 

section 1128G of the Act. However, 

manufacturers who manufacture both 

devices or medical supplies that are 

exempt from premarket notification 

requirements and at least one product 

that falls within the definition of a 

covered drug, device, biological or 

medical supply would be required to 

report all payments or transfers of value 

to covered recipients required by 

section 1128G of the Act (whether or not 

associated with a covered drug, device, 

biological, or medical supply), as 

previously explained. 

b. Covered Recipients 

Under section 1128G(a)(1) of the Act, 

applicable manufacturers are required to 

disclose certain payments or other 

transfers of value made to covered 

recipients, or to entities or individuals 

at the request of, or designated on behalf 

of, a covered recipient. Section 

1128G(e)(6) of the Act defines ‘‘covered 

recipient’’ as: (1) A physician, other 

than a physician who is an employee of 

an applicable manufacturer; or (2) a 

teaching hospital. Section 1128G(e)(11) 

of the Act defines ‘‘physician’’ to have 

the meaning set forth in section 1861(r) 

of the Act, which includes doctors of 

medicine and osteopathy, dentists, 

podiatrists, optometrists and licensed 

chiropractors. ‘‘Employee’’ is also 

defined in section 1128G(e)(7) of the Act 

to have the meaning set forth in section 

1877(h)(2) of the Act, which is defined 

as follows: ‘‘An individual who is 

considered to be ‘‘employed by’’ or an 

‘‘employee’’ of an entity if the 

individual would be considered to be an 

employee of the entity under the usual 

common law rules applicable in 

determining the employer-employee 

relationship (as applied for purposes of 

section 3121(d)(2) of the Internal 

Revenue Code of 1986).’’ We note that 

these common law rules are discussed 

in 20 CFR 404.1007 and 26 CFR 

31.3121(d) through 1(c). 

The term ‘‘teaching hospital’’ is not 

explicitly defined in section 1128G of 

the Act or elsewhere in the Act. One 

possible way to define the term 

‘‘teaching hospital’’ is by linking it to 

Medicare graduate medical education 

(GME). We believe this is an appropriate 

way to identify teaching hospitals 

because GME payments are provided to 

support the training of medical 

residents, and hospitals that receive 

such payments are easily identifiable. 

Therefore, we propose to define a 

teaching hospital as any institution that 

received payments under section 

1886(d)(5)(B) of the Act (IPPS Indirect 

Medical Education (IME)), section 

1886(h) of the Act (direct GME), or 


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1NPI Registry can be found at https:// 

nppes.cms.hhs.gov/NPPES/NPIRegistryHome.do. 

2 Database can be downloaded at http:// 

nppes.viva-it.com/NPI_Files.html. 

section 1886(s) of the Act (psychiatric 

hospitals IME) during the most recent 

year for which such information is 

available. While we recognize that this 

definition may not capture hospitals 

with accredited resident programs that 

do not receive IME or GME payments, 

we are unable to include these hospitals 

since we cannot readily identify them 

based on Medicare payment data. We 

seek comment on this proposed 

definition. 

c. Identification of Covered Recipients 

In order to accurately distinguish 

covered recipients, section 1128G of the 

Act requires that applicable 

manufacturers report the covered 

recipient’s name and business address, 

and for physician covered recipients, 

report the physician’s National Provider 

Identifier (NPI), and specialty. The 

collection of this information is 

necessary for applicable manufacturers, 

in order to distinguish individual 

covered recipients when reporting to 

CMS. Similarly, it is also important for 

CMS when aggregating the data. 

However, it is not simple given the 

number of covered recipients. In order 

to identify physicians covered 

recipients, we suggest that applicable 

manufacturers use the National Plan & 

Provider Enumeration System (NPPES), 

which CMS currently maintains and 

updates on its public Web site. The 

NPPES Web site includes a database of 

physician NPIs and has an NPI Registry 

function which allows applicable 

manufacturers to look up individual 

physician’s NPIs.1 Similarly, the full 

database can be downloaded from the 

CMS Web site.2 The NPPES system is 

updated frequently and NPIs do not 

generally change over time, so we 

believe this is the best source of 

information for applicable 

manufacturers to obtain physician NPIs. 

We realize that the NPPES system may 

not contain NPI information for every 

physician covered recipient as defined 

in this provision. However, we believe 

that NPPES represents the most 

comprehensive listing of physicians 

available. If a physician is not listed in 

the NPPES NPI registry, the applicable 

manufacturer will be responsible for 

obtaining the physician’s individual NPI 

directly from the physician, to the 

extent that the physician has an NPI. 

We are also considering whether we 

should require, under the authority 

granted in section 1128G(a)(1)(A)(viii) of 

the Act, that applicable manufacturers 

report another unique identifier, such as 

State license number, for physicians 

who are identified, but do not have an 

NPI. We seek comments on what other 

unique identifiers could be used, 

including whether these unique 

identifiers are readily obtainable by 

applicable manufacturers. 

With respect to teaching hospitals, we 

propose to publish a list of hospital 

covered recipients (that is, those 

hospitals that received Medicare direct 

or indirect GME) on the CMS Web site 

once per year. We believe publication of 

this list is necessary because it may not 

be immediately apparent to applicable 

manufacturers whether a particular 

hospital meets our proposed definition 

of a teaching hospital, and there is no 

currently published database that 

includes this information. The list for 

the reporting year would include the 

most recent data available. We propose 

that the list of teaching hospital covered 

recipients should include the name and 

address of each teaching hospital. We 

seek comments on this proposal. 

d. Payments or Other Transfers of Value 

‘‘Payment or other transfer of value’’ 

is defined broadly in section 

1128G(e)(10)(A) of the Act as ‘‘a transfer 

of anything of value.’’ This includes all 

payments or other transfers of value 

given to a covered recipient, regardless 

of whether the covered recipient 

specifically requested the payment or 

other transfer of value. In addition, 

payments or transfers of value made to 

an individual or entity at the request of 

or designated on behalf of a covered 

recipient must be reported under the 

name of the covered recipient. We 

propose that this includes payments or 

other transfers of value provided to a 

physician (or physicians) through a 

physician group or practice. We propose 

that payments or other transfers of value 

provided through a group or practice 

should be reported individually under 

the name(s) of the physician covered 

recipient(s). 

In addition, there may be other 

situations when a covered recipient may 

request that a payment or other transfer 

of value be transferred by the applicable 

manufacturer to another individual or 

entity instead of being provided directly 

to himself/herself or the hospital itself. 

As required in section 1128G(a)(1)(A) of 

the Act, these payments should be 

reported under the name of the covered 

recipient since they are made at the 

request of, or designated on behalf of, a 

covered recipient. Additionally, we 

propose that applicable manufacturers 

report the name of the entity or 

individual that received the payment at 

the request of or designated on behalf of 

the covered recipient. Reporting the 

entity or individual paid will maximize 

transparency about the details of the 

payment or other transfer of value, by 

allowing end users to discern whether a 

covered recipient actually received the 

payment, and if not, where the payment 

went. We do not believe it is feasible to 

provide a review period for these 

entities or individuals before the data is 

made publicly available on the CMS 

Web site. Instead, we believe that 

review by the covered recipient is 

sufficient. We welcome comment on 

this approach. We believe that the 

collection of this information is within 

the discretion provided in section 

1128G(a)(1)(A)(viii) of the Act to require 

reporting of additional categories of 

information regarding a payment or 

other transfer of value. 

e. Payment and Other Transfer of Value 

Report Content 

The specific categories of information 

required to be reported for each 

payment or transfer of value provided to 

a covered recipient are set forth in 

section 1128G(a)(1)(A) of the Act. We 

have provided the following 

explanations and details on how we 

propose that applicable manufacturers 

report some of this information to CMS. 

(1) Name 

When reporting the name of physician 

covered recipients, we propose 

reporting the first name, last name, and 

middle initial for physician covered 

recipients. 

(2) Business Address 

We propose that applicable 

manufacturers report the full street 

address. For teaching hospital covered 

recipients, we propose using only the 

address included in the CMS-published 

list of teaching hospitals. For physician 

covered recipients, we propose that 

applicable manufacturers report the 

physician’s primary practice location 

address since this is more easily 

recognizable to end users of the data. 

The practice location can be found in 

NPPES as the ‘‘provider business 

practice location.’’ 

(3) Specialty and NPI 

Applicable manufacturers are also 

required to report specialty and NPI for 

physician covered recipients. If using 

NPPES, we suggest using the ‘‘provider 

taxonomy’’ field when reporting the 

physician specialty. We propose that 

applicable manufacturers only report a 

single specialty for each physician 

covered recipient. We propose that 

applicable manufacturers use only the 

specialties available for the ‘‘provider 


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3Health care provider taxonomy codes are 

available through a link on the NPPES Web site: 

https://nppes.cms.hhs.gov/NPPES/ 

StaticForward.do?forward=static.instructions. 

taxonomy’’ field in NPPES; details on 

these terms are available online.3 As 

explained previously, for NPI, we 

propose that applicable manufacturers 

report the physician’s individual NPI, 

rather than any group NPI, with which 

the physician may be associated. 

(4) Date of Payment 

Applicable manufacturers must 

provide the date upon which a payment 

or transfer of value was provided to the 

covered recipient. Some payments or 

transfers of value may be provided over 

multiple dates, such as a consulting 

agreement with monthly payments. We 

propose that applicable manufacturers 

use their discretion over whether to 

report the total payment on the date of 

the first payment as a single line item, 

or to report each individual payment as 

a separate line item. Under this 

proposal, either approach would 

comply with these regulations. We are 

also considering requiring 

manufacturers to report multiple 

payments in a single consistent manner. 

We seek comments on these proposals. 

(5) Associated Covered Drug, Device, 

Biological, or Medical Supply 

Section 1128G(a)(1)(A)(vii) of the Act 

requires applicable manufacturers to 

report the name of the covered drug, 

device, biological, or medical supply 

associated with that payment, if the 

payment is related to ‘‘marketing, 

education, or research’’ of a particular 

covered drug, device, biological, or 

medical supply. We realize that not 

every financial relationship between an 

applicable manufacturer and a covered 

recipient is explicitly linked to a 

particular covered drug, device, 

biological, or medical supply. However, 

in cases when a payment or other 

transfer of value is reasonably 

associated with a specific drug, device, 

biological, or medical supply, the name 

of the specific product must be reported. 

For example, if a sales representative 

takes a physician to dinner to explain 

the benefits of the applicable 

manufacturer’s new product, the name 

of the product must be included since 

it was associated with the dinner. We 

propose that the applicable 

manufacturer should report a related 

covered drug, device, biological, or 

medical supply (if there is one) using 

the name under which the product is 

marketed, since this name is probably 

most recognizable to the consumer. In 

the event that a covered drug, device, 

biological or medical supply does not 

yet have a market name, the applicable 

manufacturer should report the 

scientific name. Additionally, we 

propose that applicable manufacturers 

report only one covered drug, device, 

biological, or medical supply as related 

to a payment or other transfer of value, 

even though there arguably may be 

multiple products related to the 

payment. We are considering, as an 

alternative, allowing applicable 

manufacturers to report multiple 

covered drugs, devices, biologicals, or 

medical supplies as related to a single 

payment or other transfer of value. 

Allowing the reporting of multiple 

covered drugs, devices, biologicals and 

medical supplies may be easier for 

applicable manufacturers since many 

financial relationships are not specific 

to one product only, but would make 

aggregating payments by product 

difficult. We seek comment on this 

approach. Finally, if an applicable 

manufacturer is not reporting the name 

of the drug, device, biological, or 

medical supply as appropriate, then the 

applicable manufacturer may be subject 

to penalties under section 1128G(b) of 

the Act. 

(6) Form of Payment and Nature of 

Payment 

The statute requires reporting on both 

the form of payment and the nature of 

payment for each payment or transfer of 

value made by an applicable 

manufacturer to a covered recipient. 

The statute provides a list of categories 

for both the form of payment and nature 

of payment and gives the Secretary 

discretion to define additional 

categories, if necessary. These categories 

are described in more detail later in this 

section. 

We propose that the categories within 

both the form of payment and the nature 

of payment should be defined as 

distinct from one another. We believe 

that any overlap among the categories 

will decrease the overall utility of the 

information submitted to CMS. For 

example, a payment for activities under 

the nature of payment category 

‘‘education’’ should be separate from 

activities under the nature of payment 

category ‘‘research.’’ If a payment or 

other transfer of value for an activity is 

associated with multiple categories, 

such as travel to a meeting under a 

consulting contract, we propose that the 

travel expenses should remain distinct 

from the consulting fee expenses and 

both categories would need to be 

reported to accurately describe the 

relationship. However, we believe that 

reporting multiple categories to describe 

a single payment or transfer of value 

may be confusing for end users, so we 

propose that for each payment or other 

transfer of value reported, applicable 

manufacturers may only report a single 

nature of payment and a single form of 

payment. For example, if a physician 

received meals and travel in association 

with a consulting fee, we propose that 

each segregable payment be reported 

separately in the appropriate category. 

The applicable manufacturer would 

have to report three separate line items, 

one for consulting fees, one for meals 

and one for travel. The amount of the 

payment would be based on the amount 

of the consulting fee, and the payments 

for the meals and travel. For these lump 

sum payments or other transfers of 

value, we propose that the applicable 

manufacturer break out the disparate 

aspects of the payment that fall into 

multiple categories for both form of 

payment and nature of payment. This 

approach should be easier for users to 

understand since they will know the 

totals for each form of payment, and 

each nature of payment, rather than 

totals for various combinations of 

categories, which may differ across 

applicable manufacturers. In addition, 

this should lead to greater consistency 

within the database because applicable 

manufacturers will separate all 

payments, rather than each applicable 

manufacturer combining payments 

differently. We seek comment on the 

proposal to require reporting payments 

under a single form of payment and 

nature of payment. We welcome 

comments about the usefulness of this 

data as well as any operational issues 

that applicable manufacturers might 

face in reporting it. 

We also solicit comment on an 

alternative approach of allowing a 

payment or other transfer of value for an 

activity that is associated with multiple 

segregable categories to be reported as a 

single lump sum, rather than separately 

by each segregable category. This 

approach may be more compatible with 

existing business processes, but it might 

also make the public disclosure 

database more confusing for end users. 

We welcome comment on the costs and 

relative advantages and disadvantages of 

this approach. 

f. Forms of Payments 

Section 1128G(a)(1)(A)(v) of the Act 

lists the following forms of payment that 

applicable manufacturers must use to 

describe payments or other transfers of 

value: 

• Cash or a cash equivalent. 

• In-kind items or services. 

• Stock, a stock option, or any other 

ownership interest, dividend, profit, or 

other return on investment. 


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• Any other form of payment 

determined by the Secretary. 

We do not propose to add any forms 

of payment beyond those outlined in the 

statute because we believe what is 

provided in the statute is sufficient to 

describe payments and other transfers of 

value. We seek comments on whether 

other categories are necessary or would 

be helpful. Additionally, we believe that 

these terms are understandable as 

written and propose that each form of 

payment be defined by the term’s 

dictionary definition. Applicable 

manufacturers must assign each 

individual payment or other transfer of 

value, or separate parts of a payment, to 

one and only one of these categories. 

g. Nature of Payment 

Section 1128G(a)(1)(A)(vi) of the Act 

lists the categories for the nature of 

payment or other transfer of value that 

applicable manufacturers must use to 

describe each payment. As explained 

previously, we propose that each of 

these categories should be distinct and 

that only one nature of payment can be 

indicated for each individual payment 

or other transfer of value reported. 

When selecting natures of payment, we 

encourage applicable manufacturers to 

consider the purpose and the manner of 

the payment or other transfer of value. 

If a payment could conceivably fall into 

more than one category, we ask 

applicable manufacturers to make 

reasonable determinations about the 

nature of payment reported for the 

payment or transfer of value. Section 

1128G(a)(1)(A)(vi) of the Act lists the 

following categories for nature of 

payment: 

• Consulting fees. 

• Compensation for services other 

than consulting. 

• Honoraria. 

• Gift. 

• Entertainment. 

• Food. 

• Travel (including the specified 

destinations). 

• Education. 

• Research. 

• Charitable contribution. 

• Royalty or license. 

• Current or prospective ownership 

or investment interest. 

• Direct compensation for serving as 

faculty or as a speaker for a medical 

education program. 

• Grant. 

• Any other nature of the payment or 

other transfer of value (as defined by the 

Secretary). 

We believe that these terms have 

meanings to the general public that are 

familiar to the industry and propose 

defining each nature of payment 

category by its dictionary definition. To 

ensure consistency in the reporting and 

selection of categories, we will allow 

applicable manufacturers to submit with 

their data a document describing the 

assumptions used when categorizing the 

natures of payments. Submission of the 

assumptions document will not be 

mandatory, but we believe that 

applicable manufacturers may want to 

explain the reasoning behind their 

categories. Additionally, we believe that 

the information may be useful for CMS 

to monitor how applicable 

manufacturers are reporting data and 

whether significant differences among 

applicable manufacturers exist. The 

assumptions documents will not be 

posted on the public Web site because 

they may contain information 

applicable manufacturers would 

consider proprietary. However, based on 

our review and assessment of these 

assumptions, we may choose to offer 

further guidance to applicable 

manufacturers regarding how natures of 

payment should be classified. We 

recognize that many of these categories 

are similar, so the assumptions 

document can also help us understand 

the assumptions made by applicable 

manufacturers when classifying 

payments or other transfers of value. We 

seek comment on this proposal, 

including whether we should make 

submission of the assumptions 

document mandatory instead of 

voluntary. 

We are providing some explanation of 

the following categories to provide 

additional context: Charitable 

contribution, food, research, and direct 

compensation for serving as faculty or 

as a speaker for a medical education 

program. These explanations are not 

exhaustive (unless specified as such), 

but rather are intended to provide 

guidance to applicable manufacturers 

when they are categorizing payments. 

(1) Charitable Contributions 

Charitable contributions to, at the 

request of, or on behalf of covered 

recipients by applicable manufacturers 

must be reported. For purposes of the 

reporting requirement, a charitable 

contribution is any payment or transfer 

of value made to an organization with 

tax-exempt status under the Internal 

Revenue Code of 1986 that is not more 

specifically described by one of the 

other nature or payment categories. 

Payments that do not meet this 

requirement made to, at the request of, 

or designated on behalf of a covered 

recipient must be reported in another 

appropriate category. 

(2) Food and Beverage 

We propose that applicable 

manufacturers should report the value 

of any food or beverage items provided 

to covered recipients, subject to the 

minimum threshold as discussed in 

more detail in section II.A.1.h.(1). of this 

proposed rule. This would be more 

straightforward in circumstances where 

covered recipients who partake in the 

meal are easily identifiable (for 

example, when a sales representative 

takes a specific number of physician 

covered recipients to a restaurant). 

However, we recognize that in instances 

where group meals are being provided 

in group settings (for example, buffetstyle food in a physician’s office), it may 

be more difficult to keep track of which 

covered recipients are partaking in the 

food and beverage. We propose that in 

this type of scenario, applicable 

manufacturers should report the cost 

per covered recipient receiving the meal 

(even if the covered recipient does not 

actually partake of the meal). For 

example, if once during the calendar 

year, a sales representative from an 

applicable manufacturer brings $25 

worth of bagels and coffee to a solo 

physician’s office for a morning 

meeting, regardless of the number of 

individuals who partake (such as noncovered recipient staff members), the 

per covered recipient cost is $25. Since 

this falls above the $10 minimum 

threshold for reporting a payment or 

other transfer of value, which is 

statutorily required and discussed in 

detail in section II.A.1.h.(1). of this 

proposed rule, this meal must be 

reported. However, if the practice group 

includes five physicians, then the percovered recipient cost is $5 (regardless 

of whether all five physicians actually 

consumed any of the food provided), so 

the payment would not need to be 

reported. We recognize that this may be 

difficult for large group practices or 

hospital-based physicians, where an 

applicable manufacturer may be 

bringing bagels for a meeting with two 

specialists. We are considering whether 

to adopt a different approach for these 

situations, such as counting the number 

of physicians by department. We seek 

comment on these proposals and 

whether there is a more equitable, but 

not overly burdensome, way to report 

these payments or other transfers of 

value. Additionally, we propose that 

applicable manufacturers do not need to 

report any offerings of buffet meals, 

snacks or coffee at booths at conferences 

or other similar events where it would 

be difficult for applicable manufacturers 

to definitively establish the identities of 


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the individuals who accept the 

offerings. 

(3) Research 

We seek to limit the research category 

to bona fide research activities, 

including clinical investigations that are 

subject to both a written agreement or 

contract between the applicable 

manufacturer and the organization 

conducting the research, as well as a 

research protocol. We propose to use 

this method to distinguish the research 

nature of payment category from other 

natures of payment categories because 

this method is also used to identify 

payments or other transfers of value 

eligible for delayed publication to 

protect the proprietary interests of 

applicable manufacturers. More details 

and an explanation of the written 

agreement and research protocol, as 

well as a definition of clinical 

investigation, are discussed more fully 

in the section of this preamble regarding 

delayed publication. 

We recognize that reporting payments 

or other transfers of value for research 

activities may be complicated, since 

many research activities include large 

payment amounts which are spread 

across numerous activities and parties. 

Additionally, the payments are often not 

provided directly to a covered recipient, 

but to a clinic, hospital, or institution 

administering the research that is often 

led by a physician-covered recipient(s) 

as the principal investigator(s). This 

situation is further complicated because 

many applicable manufacturers use 

contract research organizations (CROs), 

as defined in 21 CFR 312.3(b), or other 

similar entities, such as site 

management organizations (SMOs) to 

manage their clinical research activities. 

Due to the complexities in the flow of 

research payments, we have outlined a 

proposed method for reporting research 

payments. However, we request 

comment on whether our proposed 

method is viable and not overly 

burdensome, and whether an alternative 

method would be preferable. 

We propose to separate the 

classification of research payments to 

clarify whether the payment or other 

transfer of value went indirectly or 

directly to the covered recipient. 

Indirect research would be used when a 

research payment is made to a clinic, 

hospital (other than a teaching hospital), 

or institution conducting the research 

(either by an applicable manufacturer or 

a CRO entity) and that organization in 

turn pays the physician covered 

recipient (or multiple physician covered 

recipients) serving as a principal 

investigator(s). Conversely, direct 

research would be used when a research 

payment or other transfer of value was 

provided directly to a physician covered 

recipient or teaching hospital covered 

recipient by an applicable manufacturer 

or CRO entity. When reporting 

payments or other transfers of value 

designated as research, we propose that 

applicable manufacturers must report 

the payment or other transfer of value as 

either ‘‘indirect research’’ or ‘‘direct 

research.’’ 

When reporting indirect or direct 

research, we propose that the payment 

or other transfer of value should be 

reported individually under the names 

and NPIs of physician covered 

recipients serving as principal 

investigators. For indirect payments, 

this includes the physician covered 

recipient(s) serving as principal 

investigator(s) who would ultimately 

receive payments from the clinic, 

hospital, or other research institution, 

assuming the applicable manufacturer is 

aware of the identity of the principal 

investigator(s). This is consistent with 

section 1128G(a)(1)(B) of the Act, which 

requires payments to an entity or 

individual at the request of or 

designated on behalf of a covered 

recipient to be disclosed under the 

name of the covered recipient. Payments 

or other transfers of value reported as 

indirect research should also include 

the name of the entity or individual that 

received the payment or other transfer 

of value. 

Teaching hospitals are also defined as 

covered recipients, and may conduct 

research led by a physician covered 

recipient(s) acting as (a) principal 

investigator(s). While these payments 

could be reported as direct research to 

the teaching hospital covered recipient, 

we do not want to establish different 

reporting requirements for physician 

covered recipients acting as principal 

investigators at teaching hospitals 

versus other research institutions. To 

maintain consistency, we propose that 

research payments provided to teaching 

hospitals and ultimately to physician 

covered recipients must be reported for 

both the teaching hospital covered 

recipient, and the physician covered 

recipient(s). The payment or other 

transfer of value to the teaching hospital 

covered recipient should be reported as 

a direct research payment; whereas the 

payment or other transfer of value for 

the principal investigator(s) (physician 

covered recipient(s)) should be reported 

as indirect research. 

We understand that reporting the 

amount of the payment or other transfer 

of value may be difficult because neither 

the applicable manufacturer nor the 

CRO generally know how the research 

payment is distributed because the 

payment includes all items and 

activities associated with the research 

project, not only the physician’s time 

and services. This is particularly 

important for indirect research, since a 

principal investigator(s) may be 

receiving his/her usual salary from the 

institution for conducting the study. 

Additionally, we do not believe the total 

costs should be attributed personally to 

the principal investigator(s). However, 

we do believe it would be burdensome 

for applicable manufacturers to 

accurately determine the exact amount 

a physician covered recipient received. 

Finally, we also believe that reporting 

the total research payment amount 

provides additional transparency to end 

users about the applicable 

manufacturers’ total research payments. 

Based on these considerations, we 

propose that for both direct and indirect 

research, applicable manufacturers must 

report the entire payment amount for 

each research payment (whether to the 

covered recipient or research 

institution), rather than the specific 

amount that was provided to the 

covered recipient. However, we propose 

that on the public Web site, we would 

report the payment amount separately 

and would not aggregate it into the total 

for physician covered recipients. For 

teaching hospitals, we believe end users 

would understand that the research 

payment covered all aspects of the 

research, so we believe it is appropriate 

to aggregate this into the teaching 

hospital’s total payment amount. 

However, for physician covered 

recipients we believe attributing the full 

research payment to the physician could 

be misleading, due to the nature of 

research payments as described. We 

seek comment on these proposals. 

We are also considering attributing 

the total payment to the covered 

recipient for direct research. We believe 

this may be necessary because in direct 

research, the covered recipient is 

individually receiving the payment, so 

the specific amount the covered 

recipient is receiving is clearly defined 

and available to the applicable 

manufacturer. 

We recognize that the proposed 

reporting requirements for research 

payments and transfers of value may not 

cover all circumstances in which 

applicable manufacturers make 

payments or other transfers of value to 

covered recipients for research-related 

activities (for example, post-marketing 

research or other research or studies not 

conducted pursuant to a written 

contract between the applicable 

manufacturer and the organization 

conducting the research, and those 

studies without a research protocol). We 


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78750 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 

solicit comments about which existing 

nature of payment category (previously 

described) would apply to these other 

types of research, whether the scope of 

the ‘‘research’’ nature of payment 

should be broadened, and/or whether 

another nature of payment category 

should be added to address such 

research. Finally, we note that some of 

the reporting requirement will duplicate 

requirements already required under 

FDA regulations at 21 CFR part 54. 

(4) Direct Compensation for Serving as 

a Faculty or as a Speaker for a Medical 

Education Program 

We propose that this category be 

interpreted broadly to encompass all 

instances in which applicable 

manufacturers pay physicians to serve 

as speakers, and not just those situations 

involving ‘‘medical education 

programs.’’ We believe that this 

interpretation is consistent with the 

authority granted in section 

1128G(a)(1)(A)(vi)(XV) of the Act to add 

additional nature of payment categories. 

Alternatively, we are considering 

adding another nature of payment 

category to describe situations when a 

covered recipient provides speaking 

services that are outside of medical 

education programs; however we 

believe that fewer categories for nature 

of payment is preferable. Additionally, 

it is simpler to only have one category 

for speaker fees to minimize potential 

inconsistencies in how applicable 

manufacturers categorize payments. We 

welcome comment on this proposal and 

the appropriate distinction between this 

nature of payment category and other 

categories, such as honoraria. 

We realize that this interpretation 

does not allow for differentiation 

between continuing medical education 

(CME) accredited speaking 

engagements, and all other speaking 

engagements. We are considering, and 

welcome comments on, whether to limit 

this category to CME-accredited 

speaking engagements and report other 

speaking engagements in another 

category, such as compensation for 

services other than consulting, or 

additional category. 

(5) Other 

Under the Act, all payments or 

transfers of value from applicable 

manufacturers to covered recipients 

(other than those excluded under 

section 1128G(e)(10)(B) of the Act) must 

be reported. For simplicity, and under 

the discretion provided in section 

1128G(a)(1)(A)(vi)(XV) of the Act, we 

propose the addition of a nature of 

payment category to serve as a catch all 

for all payments or other transfers of 

value that do not fit into one of the 

listed natures of payment. Any 

payments or transfers of value that are 

not specifically excluded, and do not fit 

into another category should be reported 

with a nature of payment of ‘‘other.’’ 

h. Exclusions 

Section 1128G(e)(10)(B) of the Act 

excludes the following types of 

payments and other transfers of value 

from the reporting requirements: 

• Transfers of value less than $10, 

unless the aggregate amount transferred 

to, requested by, or designated on behalf 

of the covered recipient exceeds $100 in 

a calendar year. 

• Product samples that are not 

intended to be sold and are intended for 

patient use. 

• Educational materials that directly 

benefit patients or are intended for 

patient use. 

• The loan of a covered device for a 

short-term trial period, not to exceed 90 

days, to permit evaluation of the 

covered device by the covered recipient. 

• Items or services provided under a 

contractual warranty, including the 

replacement of a covered device, where 

the terms of the warranty are set forth 

in the purchase or lease agreement for 

the covered device. 

• A transfer of anything of value to a 

covered recipient when the covered 

recipient is a patient and not acting in 

the professional capacity of a covered 

recipient. 

• Discounts, including rebates. 

• In-kind items used for the provision 

of charity care. 

• A dividend or other profit 

distribution from, or ownership or 

investment interest in, a publicly traded 

security or mutual fund. 

• In the case of an applicable 

manufacturer who offers a self-insured 

plan, payments for the provision of 

health care to employees under the 

plan. 

• In the case of a covered recipient 

who is a licensed non-medical 

professional, a transfer of anything of 

value to the covered recipient if the 

transfer is payment solely for the nonmedical professional services of the 

licensed non-medical professional. 

• In the case of a covered recipient 

who is a physician, a transfer of 

anything of value to the covered 

recipient if the transfer is payment 

solely for the services of the covered 

recipient with respect to a civil or 

criminal action or an administrative 

proceeding. 

• Transfers of value made indirectly 

to a covered recipient through a third 

party in cases when the applicable 

manufacturer is unaware of the identity 

of the covered recipient. 

We anticipate that the public may 

inquire about the treatment of payments 

or other transfers of value between 

individuals who happen to have 

existing personal relationships. It is not 

our intent to capture purely personal 

transfers of value (for example, if one 

spouse, who works for an applicable 

manufacturer, gives a present to the 

other spouse who is a covered 

recipient). We welcome suggestions on 

how to incorporate this into the codified 

language of the final rule. 

We propose that applicable 

manufacturers use the dictionary 

definitions for the exclusions. However, 

we are providing some clarification on 

how we propose applying the following 

types of exclusions: 

(1) Transfers of Value Less Than $10 

Small payments, which the statute 

defines as payments or other transfers of 

value less than $10, do not need to be 

reported, except when the total annual 

value of payments or other transfers of 

value provided to a covered recipient 

exceeds $100. As defined in section 

1128G of the Act for subsequent 

calendar years the dollar amounts 

specified will be increased by the same 

percentage as the percentage increase in 

the consumer price index for all urban 

consumers (all items; U.S. city average) 

for the 12-month period ending with 

June of the previous year. We propose 

to publish the updated threshold 

amounts annually on the CMS Web site. 

We propose that applicable 

manufacturers should not report to CMS 

any payments or other transfers of value 

less than $10 individually and all small 

payments or transfers of value in the 

same nature of payment category should 

be reported as one total amount for that 

category. This would simplify reporting 

for applicable manufacturers and 

prevent the reporting of payments less 

than $10 individually. We have 

provided a few examples to ensure that 

this exclusion is applied consistently. 

• Example 1: An applicable manufacturer 

takes a physician out to lunch four times 

during the year and each lunch costs $9. The 

applicable manufacturer has no other 

relationships with the physician. Since the 

aggregate cost of the four meals is $36 for the 

year, these payments would not need to be 

reported. 

• Example 2: An applicable manufacturer 

provides a physician with five meals, each 

worth $9, a speaker fee of $150, and pens 

worth $5. The aggregate amount is greater 

than $100 so all the payments need to be 

reported. The speaker fee should be reported 

as $150 under ‘‘direct compensation for 

serving as faculty or as a speaker for a 

medical education programs,’’ the meals 


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would be reported together as food for $45, 

and the pens would be reported as gifts for 

$5. 

(2) Educational Materials That Directly 

Benefit Patients or Are Intended for 

Patient Use 

Educational materials must consist of 

materials (such as pamphlets) that 

directly benefit patients or are intended 

for patient use. We want to clarify that 

this exclusion is limited to ‘‘materials’’ 

(including, but not limited to, written or 

electronic materials) and does not 

include services or other items. We are 

considering whether certain materials 

provided by applicable manufacturers to 

covered recipients to educate the 

covered recipients themselves, but 

which are not actually given to patients 

(for example, medical textbooks), 

should be interpreted as educational 

materials that ‘‘directly benefit 

patients.’’ We seek comments on 

whether such materials should be 

included in this exclusion and, if so, 

which types of educational materials 

provided to covered recipients should 

be deemed to ‘‘directly benefit 

patients.’’ We intend to finalize the 

agency’s position on this in the final 

rule based on comments received. 

(3) Discounts and Rebates 

Discounts and rebates for covered 

drugs, devices, biologicals, and medical 

supplies provided by applicable 

manufacturers to covered recipients are 

excluded from reporting under section 

1128G(e)(10)(B)(vii) of the Act. 

Discounts and rebates are common in 

the industry and may be beneficial to 

payers (including Federal health care 

programs) and beneficiaries. We remind 

manufacturers of their obligations to 

appropriately report discounts and 

rebates for purposes of the Medicare and 

Medicaid programs and to comply with 

fraud and abuse laws, including the 

Federal Anti-Kickback statute. 

(4) In-Kind Items for the Provision of 

Charity Care 

We recognize the extensive 

philanthropic activities of many 

applicable manufacturers, such as the 

provision of supplies (both in the U.S. 

and abroad) to provide care for those 

who are unable to pay. We propose 

defining ‘‘charity care’’ as items 

provided to a covered recipient for one 

or more patients who cannot pay, where 

the covered recipient neither receives, 

nor expects to receive, payment because 

of the patient’s inability to pay. Any 

items provided by the applicable 

manufacturer to a covered recipient that 

meet the definition of charity care, are 

excluded from reporting. This does not 

include the provision of in-kind items to 

a covered recipient, even if the covered 

recipient is a charitable organization, for 

the care of all of the covered recipient’s 

patients (both those who can and cannot 

pay). For example, the donation of an 

imaging machine to a covered recipient 

that would be for the use of both paying 

and non-paying patients would not be 

excluded under this category, even if 

the covered recipient is a charitable 

organization. If a payment or other 

transfer of value is not an in-kind item 

and/or not for the provision of charity 

care, as defined, then the payment must 

be reported as required under section 

1128G of the Act. 

(5) Indirect Payments Through a Third 

Party 

Section 1128G(e)(10)(A) of the Act 

also excludes the reporting of payments 

or other transfers of value that an 

applicable manufacturer makes 

indirectly to a covered recipient through 

a third party when the applicable 

manufacturer is unaware of the identity 

of the covered recipient. However, any 

payment or other transfer of value 

provided to a covered recipient through 

a third party, whether or not the third 

party is under common ownership with 

an applicable manufacturer or operating 

in the U.S., must be reported, if the 

applicable manufacturer is aware of the 

covered recipient’s identity. 

This exclusion hinges on whether an 

applicable manufacturer is ‘‘unaware’’ 

of the identity of the covered recipient. 

To ensure that payments via third 

parties are reported, where appropriate, 

we propose that an applicable 

manufacturer is aware of the identity of 

a covered recipient if the applicable 

manufacturer has actual knowledge of, 

or acts in deliberate ignorance or 

reckless disregard of, the identity of the 

covered recipient. For example, if an 

applicable manufacturer provides a 

payment through a third party to the 

department chairs at a specific hospital, 

this payment would need to be reported 

because even though the applicable 

manufacturer did not name the 

recipients, their identities are publicly 

available. This standard is consistent 

with the knowledge standard set forth in 

many fraud and abuse laws, including 

the False Claims Act, and we believe it 

is one with which applicable 

manufacturers are already familiar. In 

addition, we propose that awareness of 

the identity of the covered recipient by 

an agent of the applicable manufacturer 

will be attributed to the applicable 

manufacturer. 

2. Reports on Physician Ownership and 

Investment Interests Under Section 

1128G(a)(2) of the Act 

Section 1128G(a)(2) of the Act 

requires applicable manufacturers, as 

well as applicable GPOs, to report to the 

Secretary, in electronic form, certain 

information concerning ownership and 

investment interests held by physicians 

or their immediate family members in 

such applicable manufacturers and 

applicable GPOs, and payments or other 

transfers of value to such physician 

owners or investors. There is significant 

overlap between the requirements under 

section 1128G(a)(1) and (a)(2) of the Act. 

We note the areas of overlap and, when 

necessary, refer to the sections of this 

proposed rule that apply. 

a. Reporting Entities 

(1) Applicable Manufacturers 

Section 1128G(a)(2) of the Act 

includes applicable manufacturers as 

defined for section 1128G(a)(1) of the 

Act, as entities subject to the reporting 

requirements in section 1128G(a)(2) of 

the Act. 

(2) Applicable Group Purchasing 

Organizations 

Section 1128G(a)(2) of the Act also 

includes applicable GPOs as entities 

required to submit reports on physician 

ownership or investment interests; these 

reports are required to include any 

payments or other transfers of value 

provided to the applicable GPO’s 

physician owners or investors. Section 

1128G(e)(1) of the Act defines 

‘‘applicable group purchasing 

organization’’ as ‘‘a group purchasing 

organization (as defined by the 

Secretary) that purchases, arranges for 

or negotiates the purchase of a covered 

drug, device, biological, or medical 

supply, which is operating in the United 

States, or in a territory, commonwealth 

or possession of the United States.’’ 

Many hospitals and other types of 

health care providers rely on GPOs to 

lower their acquisition costs for 

supplies, devices, and services. We note 

that Congress gave the Secretary 

authority to define a GPO for purposes 

of reporting under section 1128G of the 

Act, and also specified that such 

organizations would include 

organizations that purchase covered 

drugs, devices, biologicals, and medical 

supplies, as well as organizations that 

arrange for or negotiate the purchase of 

covered drugs, devices, biologicals, and 

medical supplies. We thus interpret the 

statute to encompass not only more 

traditional GPOs that negotiate contracts 

for their members, but also entities that 

purchase covered drugs, devices, 


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biologicals, and medical supplies for 

resale or distribution to groups of 

individuals or entities. This would 

include, for example, physician owned 

distributors (PODs) of covered drugs, 

devices, biologicals, and medical 

supplies. We propose to define 

‘‘applicable GPOs’’ as— 

An entity that (1) operates in the United 

States, or in a territory, possession or 

commonwealth of the United States, and (2) 

purchases, arranges for or negotiates the 

purchase of a covered drug, device, 

biological, or medical supply for a group of 

individuals or entities, and not solely for use 

by the entity itself. 

We propose that the definition will 

not include entities that buy covered 

drugs, devices, biologicals, or medical 

supplies solely for their own use, such 

as some large practices or hospitals 

(including those owned by physicians). 

Rather, it is our intent to capture entities 

(including physician-owned entities) 

that purchase covered drugs, devices, 

biologicals, or medical supplies for 

resale or distribution to others. We 

solicit comments on this proposal. 

As discussed in the section on 

covered drug, device, biological, and 

medical supply, we are proposing 

limiting the definition to only those 

drugs and biologicals that, by law, 

require a prescription to be dispensed 

and to only those devices (including 

medical supplies) that require 

premarket approval by or notification to 

FDA. We believe the device limitation 

may be appropriate for defining the 

universe of applicable manufacturers, 

but are considering that it may be overly 

limiting for the definition of applicable 

GPOs, since GPOs often purchase, 

arrange for, or negotiate the purchase of 

routine devices and medical supplies. 

We seek comment on whether to 

include the proposed limitation on 

devices and medical supplies in the 

definition of covered drug, device, 

biological, or medical supply. 

b. Physicians 

Section 1128G(a)(2) of the Act differs 

from section 1128G(a)(1) of the Act in 

that section 1128G(a)(2) of the Act does 

not use the term ‘‘covered recipient’’ as 

defined in 1128G(e)(6) of the Act, which 

explicitly excludes payments or other 

transfers of value to employees of an 

applicable manufacturer from the 

reporting requirements. Instead, section 

1128G(a)(2) of the Act uses the term 

‘‘physician’’ as defined in section 

1861(r) of the Act. Based on this 

definition of ‘‘physician,’’ the 

requirement to report physician 

ownership and investment interests 

includes any physician, regardless of 

whether the physician is an employee of 

the applicable manufacturer or 

applicable GPO. Similarly, ownership 

and investment interests of immediate 

family members of physicians must also 

be reported under this provision. As 

required by section 1128G(a)(2) of the 

Act, we propose to define ‘‘immediate 

family member’’ as it relates to a person 

as one of the following (as defined for 

purposes of section 1877(a) of the Act at 

42 CFR 411.351): 

• Spouse. 

• Natural or adoptive parent, child, or 

sibling. 

• Stepparent, stepchild, stepbrother, 

or stepsister. 

• Father-, mother-, daughter-, son-, 

brother-, or sister-in-law. 

• Grandparent or grandchild. 

• Spouse of a grandparent or 

grandchild. 

c. Ownership or Investment Interests 

We propose to define an ownership or 

investment interest in an applicable 

manufacturer or applicable GPO in a 

similar manner as in the physician selfreferral regulation (42 CFR 411.354(b)). 

Specifically, we propose to define an 

ownership or investment interest as one 

that may be direct or indirect, and 

through debt, equity, or other means. 

Ownership or investment interest 

includes, but is not limited to, stock, 

stock options (other than those received 

as compensation, until they are 

exercised), partnership shares, limited 

liability company memberships, as well 

as loans, bonds, or other financial 

instruments that are secured with an 

entity’s property or revenue or a portion 

of that property or revenue. As required 

by statute, an ownership or investment 

interest shall not include an ownership 

or investment interest in a publicly 

traded security or mutual fund, as 

described in section 1877(c) of the Act. 

Additionally, ownership or investment 

interest shall not include the following: 

(i) An interest in an applicable 

manufacturer or applicable GPO that arises 

from a retirement plan offered by that 

applicable manufacturer or applicable GPO 

to the physician (or a member of his or her 

immediate family) through the physician’s 

(or immediate family member’s) employment 

with that applicable manufacturer or 

applicable GPO; 

(ii) Stock options and convertible securities 

received as compensation, until the stock 

options are exercised or the convertible 

securities are converted to equity; 

(iii) An unsecured loan subordinated to a 

credit facility. 

We also note that ‘‘ownership and 

investment interests’’ is listed in section 

1128G(a)(1)(A)(vi)(XII) of the Act as a 

nature of payment for transparency 

reports on payments and other transfers 

of value. We would like to clarify that 

any payments or other transfers of value 

of an ownership or investment interest 

made to a covered recipient (as defined) 

must be reported under section 

1128G(a)(1) of the Act. Additionally, all 

ownership and investment interests 

held by a physician must also be 

reported under section 1128G(a)(2) of 

the Act, which also requires reporting of 

payments or other transfers of value to 

physician owners or investors. In order 

to prevent the duplicative reporting, we 

propose that if an ownership or 

investment interest is required to be 

reported under section 1128G(a)(1) of 

the Act and under section 1128G(a)(2) of 

the Act, then the applicable 

manufacturer need only to report under 

section 1128G(a)(1) and should not rereport the provision of the ownership or 

investment interest under the reporting 

requirements in section 1128G(a)(2)(C) 

of the Act. 

d. Physician Ownership or Investment 

Report Content 

Under section 1128G(a)(2) of the Act, 

applicable manufacturers and 

applicable GPOs are required to report 

information about each ownership or 

investment interest held by physician 

owners or investors (or their immediate 

family member(s)). We propose that the 

applicable manufacturer or applicable 

GPOs should report the name, address, 

NPI, and specialty of the physician 

owner or investor, as required in section 

1128G(a)(2) of the Act. In cases when 

the ownership or investment interest is 

held by an immediate family member of 

a physician, we propose that applicable 

manufactures and applicable GPOs 

should report not only the required 

information for the physician, but also 

that the ownership or investment 

interest is held by an immediate family 

member of the physician. We are 

considering whether to require the 

reporting of the immediate family 

member’s relationship to the physician, 

as well as the immediate family 

member’s name, in order to bring 

additional transparency to the nature of 

the relationship. We believe this would 

provide additional details on the nature 

of the relationship; however, we wonder 

whether this information is worth the 

additional collection of information, 

particularly since we believe, due to 

privacy concerns, that the name of the 

immediate family member should not be 

made public. We seek comment on 

whether to report the relationship and/ 

or the name of the immediate family 

member holding the ownership and 

investment interest. 

Section 1128G(a)(2)(C) of the Act 

requires the reporting of ‘‘[a]ny payment 


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or other transfer of value provided to a 

physician holding such an ownership or 

investment interest (or to an entity or 

individual at the request of or 

designated on behalf of a physician 

holding such an ownership interest)...’’ 

Applicable manufacturers and 

applicable GPOs must report all the 

information required in section 

1128G(a)(1)(A) of the Act for those 

physicians who hold ownership or 

investment interests in such entity. 

With regard to reporting payments and 

transfers of value to physician owners or 

investors, we propose that applicable 

manufacturers and applicable GPOs 

follow the procedures outlined in this 

preamble for reporting payments and 

other transfers of value. Given this 

overlap, we are concerned about 

duplicative reporting, since applicable 

manufacturers must submit both reports 

and there may be overlap between 

physicians holding an ownership or 

investment interest and physicians 

being considered covered recipients for 

the purposes of reporting payments or 

transfers of value. We propose that 

applicable manufacturers submit one 

file for all their payments and other 

transfers of value and another for all 

their physician ownership or 

investment interests. To comply with 

section 1128G(a)(2)(C) of the Act, we 

propose that applicable manufacturers 

report the payments or other transfers of 

value to physician owners or investors 

(regardless of whether the physician 

owner is a covered recipient) in the 

section for all payments and other 

transfers of value, but should note that 

the covered recipient receiving the 

payment or other transfers of value is a 

physician owner or investor. This 

would prevent double counting of 

payments or other transfers of value to 

physicians that meet the definition of a 

covered recipient and are a physician 

owner or investor of the applicable 

manufacturer. 

Since applicable GPOs are not subject 

to the reporting requirements in section 

1128G(a)(1) of the Act, we propose that 

applicable GPOs are only required to 

submit a report on physician ownership 

or investment interests. However, in the 

event that an applicable GPO has 

payments or other transfers of value to 

report for their physician owners or 

investors, we propose that applicable 

GPOs use the data elements outlined in 

the preamble section on payments and 

other transfers of value report contents 

for payments or other transfers of value, 

but that they would only be required to 

report payments to physician owners or 

investors. 

B. Report Submission and Correction 

The statute requires the Secretary to 

establish procedures for applicable 

manufacturers and applicable GPOs to 

submit the required information. We 

recognize that these regulations would 

require applicable manufacturers and 

applicable GPOs to collect and submit 

large amounts of new data, so we strive 

to be as flexible as possible about the 

data collection and submission 

methods. However, we believe that we 

also need standardization to ensure that 

we can aggregate the data correctly and 

efficiently to make it publicly available. 

Given these considerations, we plan to 

work with applicable manufacturers and 

applicable GPOs to create the best 

system for all parties involved. Based on 

our stakeholder outreach and analysis of 

the data systems available, we are 

proposing a potential system for the 

submission of data to CMS. We seek 

comments on the proposed approach 

and whether an alternative system 

would be preferable. 

1. Prior to Submission 

We are considering ways to ease the 

post-submission review process of this 

information and facilitate early 

resolution of conflicts between 

applicable manufacturers, applicable 

GPOs, covered recipients and physician 

owners or investors. We seek comments 

on a way for applicable manufacturers 

and applicable GPOs to make necessary 

corrections prior to submission to CMS, 

thus lessening potential changes during 

the statutory review and correction 

period, and thereby strengthening the 

accuracy of the data. One way to 

achieve this is for applicable 

manufacturers, prior to submitting data 

to CMS, to provide each covered 

recipient with information regarding the 

payments or other transfers of value that 

the applicable manufacturer plans to 

report to CMS as having made to the 

covered recipient. Similarly, applicable 

manufacturers and applicable GPOs 

could provide to each physician owner 

or investor the information they plan to 

report regarding the ownership and 

investment interests held by the 

physician owner or investor. While 

CMS is not proposing to require this 

type of pre-review, we recommend that 

applicable manufacturers and 

applicable GPOs provide for a ‘‘presubmission review,’’ and we seek 

comment on whether a pre-review of 

this nature would be useful. 

2. Report Submission 

Applicable manufacturers and 

applicable GPOs are statutorily required 

to submit their reports electronically to 

CMS on March 31, 2013 and on the 

90th-day of each calendar year 

thereafter. We propose to interpret ‘‘on’’ 

March 31, 2013 or the 90th of the each 

year thereafter as ‘‘by’’ March 31, 2013 

or the 90th of each year thereafter and 

intend to allow applicable 

manufacturers and applicable GPOs to 

submit data prior to this date to provide 

applicable manufacturers and 

applicable GPOs with more flexibility 

for submission. We propose that only 

applicable manufacturers that have 

payments or other transfers of value 

and/or physician ownership or 

investment interests to disclose for the 

previous calendar year must register and 

submit reports. If an applicable 

manufacturer neither made any 

payments or other transfers of value 

required to be reported nor had any 

physician owners or investors in the 

previous calendar year, it need not 

submit a report to CMS. Similarly, only 

applicable GPOs with physician owners 

or investors are required to submit 

information. 

For applicable manufacturers and 

applicable GPOs that do have 

information to disclose, we propose that 

applicable manufacturers and 

applicable GPOs register with us prior 

to submission to facilitate 

communication. This registration 

process would require the applicable 

manufacturer or applicable GPO to 

designate a point of contact, which we 

would use for communications related 

to the submitted data. We propose that 

applicable manufacturers or applicable 

GPOs must register prior to the 

submission of data for the current 

reporting cycle. We do not limit the 

time prior to the submission of data, so 

an applicable manufacturer or 

applicable GPO could choose to submit 

the data immediately after registration. 

We are proposing to open the 

registration process at the beginning of 

the calendar year, giving applicable 

manufacturers and applicable GPOs 

time to register and submit their data. 

The first opportunity for registration 

and the data submission would be 

January 1, 2013. We seek comment on 

the proposed timing of the registration 

and submission process. 

Alternatively, we are considering 

requiring that all applicable 

manufacturers and applicable GPOs 

register with CMS, regardless of whether 

they have information to report. If an 

applicable manufacturer or applicable 

GPO had no payments or transfers of 

value and/or ownership or investment 

interests to report, the chief executive 

officer, chief financial officer or chief 

compliance officer would be required to 

submit an attestation that, to the best of 


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his or her knowledge and belief, there 

were no reportable payments or 

transfers and value and/or ownership or 

investment interests during the previous 

calendar year. We believe this may help 

us better understand the extent of these 

relationships (including which types of 

entities have financial relationships 

with covered recipients and physician 

owners and investors and which do 

not). Additionally, we believe such a 

requirement would ensure that 

applicable manufacturers and 

applicable GPOs perform a more 

thorough evaluation to determine 

whether they have any reportable 

information. However, we are seeking 

input on whether requiring registration 

for all entities and an attestation from 

entities with no reportable information 

would be more burdensome than 

beneficial. We seek comment on both 

the benefits and burdens of this 

consideration and intend to finalize the 

agency’s position on this in the final 

rule based on comments received. We 

propose that applicable manufacturers 

and applicable GPOs submit their data 

electronically in a comma-separated 

value (CSV) format. Each line item in 

the dataset should represent a unique 

payment or other transfer of value, or a 

unique ownership or investment 

interest. In the event that a single file 

does not have sufficient volume for all 

the data required, then the applicable 

manufacturer or applicable GPO may 

submit as many files as necessary to 

provide the entirety of its data. We seek 

comments on the appropriateness of the 

CSV format for data submission, and 

suggestions for alternative formats. 

Additionally, we propose that annually, 

following the submission of data, an 

authorized representative from each 

applicable manufacturer and applicable 

GPO will be required to submit a signed 

attestation certifying the truth, 

correctness, and completeness of the 

data submitted to the best of the signer’s 

knowledge and belief. Such attestations 

must be signed by the chief executive 

officer, chief financial officer or chief 

compliance officer. 

3. Report Format 

We have outlined the fields of 

information to be included when 

reporting payments or other transfers of 

value and physician ownership and 

investment interests . The asterisks 

indicate the additional information, 

which we propose to require under the 

discretion provided by the statute. The 

justification for the submission of these 

additional data requirements is 

provided throughout the preamble. In 

the Addendum to this proposed rule, we 

have provided a sample of the reporting 

template, and we will place a 

spreadsheet in the regulatory docket on 

Regulations.gov. We note that this is a 

mock up table (not in CSV format) to 

demonstrate how we expect this data to 

be reported. This is not an official 

reporting document, but only an 

example for the purposes of the 

proposed rule. 

For each payment and other transfer 

of value, we are proposing that the 

following information is required: 

• Applicable manufacturer or 

applicable GPO name. 

• Covered recipient’s or physician 

owner’s (as applicable)— 

++ Name (for physicians include first 

and last name, and middle initial); 

++ Specialty (physician only); 

++ Business street address (practice 

location); 

++ NPI (physician only); 

• Amount of payment or other 

transfer of value in U.S. dollars. 

• Date of payment or other transfer of 

value. 

• Form of payment or other transfer 

of value. 

• Nature of payment or other transfer 

of value. 

• Name of the associated covered 

drug, device, biological, or medical 

supply, as applicable. 

• Name of entity that received the 

payment or other transfer of value, if not 

provided to the covered recipient 

directly.* 

• Whether the payment or other 

transfer of value was provided to a 

physician holding ownership or 

investment interests in the applicable 

manufacturer. (Yes or No response) 

• Whether the payment or other 

transfer of value should be granted a 

delay in publication because it was 

made pursuant to a product research 

agreement, development agreement, or 

clinical investigation. (Yes or No 

response) 

For each physician ownership or 

investment interest, the following 

information is required: 

• Applicable manufacturer or 

applicable GPO name. 

• Ownership or investment 

physicians’— 

++ Name (for physicians include first 

and last name, and middle initial) 

++ Specialty; 

++ Business street address (practice 

location); 

++ NPI; 

• Whether the ownership or 

investment interest is held by the 

physician, or an immediate family 

member of the physician. 

• Dollar amount invested. 

• Value and terms of each ownership 

or investment interest. 

• For applicable GPOs only: Any 

payments or other transfers of value 

provided to the physician owner or 

investor, including the following 

(applicable manufacturers should report 

this information with their other 

payments or other transfers of value, 

and indicate that the covered recipient 

is a physician investor or owner): 

++ Amount of payment or other 

transfer of value in U.S. dollars. 

++ Date of payment or other transfer 

of value. 

++ Form of payment or other transfer 

of value. 

++ Nature of payment or other 

transfer of value. 

++ Name of the associated covered 

drug, device, biological, or medical 

supply, as applicable. 

We seek comment on our proposed 

requirements regarding the data 

elements that should be submitted and 

plan to finalize them in the final rule 

based on comments received. 

4. 45-Day Review Period for Applicable 

Manufacturers, Applicable GPOs, and 

Covered Recipients 

Section 1128G(c)(1)(C)(ix) of the Act 

requires that the Secretary allow 

applicable manufacturers, applicable 

GPOs, covered recipients, and physician 

owners or investors the opportunity to 

review the data submitted for a period 

of at least 45-days prior to the data being 

made available to the public. After the 

due date has passed, and we have 

received the data from the applicable 

manufactures and applicable GPOs, we 

will aggregate the data by individual 

covered recipient and physician owner 

or investor, across applicable 

manufacturers and applicable GPOs. 

Once the data aggregation is complete, 

we plan to notify all applicable 

manufacturers, applicable GPOs, 

covered recipients, and physician 

owners or investors about the 

procedures for the review. We recognize 

it may be difficult for CMS to contact 

covered recipients and physician 

owners or investors, since they do not 

actively participate in the data 

submission process with CMS prior to 

their review, so we propose to notify 

covered recipients and physician 

owners or investors in a few ways. We 

propose to allow, but not require, 

covered recipients, and physician 

owners or investors to register with 

CMS to ensure they receive 

communication about the processes for 

review. Additionally, we propose to 

notify physicians and hospitals through 

CMS’ list serves and posting the 

information publicly. We are 

considering a posting either on the CMS 

Web site or on the Federal Register, and 


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seek comment on which would be most 

useful to physicians and teaching 

hospitals. We propose that these 

notifications would be provided 

annually to announce the covered 

recipient and physician owner and 

investor review and correction period, 

and would include the specific 

instructions for performing this review. 

For example, we are considering that 

covered recipients and physician 

owners and investors would sign in to 

a secure Web site to see the information 

reported about them. We are also 

considering an alternative method, in 

which we would require applicable 

manufacturers and applicable GPOs to 

collect and report whether the covered 

recipient, or physician owner or 

investor would like to be notified by 

USPS or email of the processes for their 

review, as well as the individual’s email 

address, if indicated. We seek comment 

on our proposed method of notification, 

as well as the alternative method 

provided. We solicit comments on other 

ways that CMS, applicable 

manufacturers, or applicable GPOs can 

provide timely, adequate, and costeffective notice to covered recipients 

and physician owners or investors of 

their opportunity to review the collected 

data. 

In addition, we believe that we should 

not be actively involved in arbitrating 

disputes between applicable 

manufacturers or applicable GPOs, and 

covered recipients, or physician owners 

or investors regarding the receipt, 

classification or amount of any payment 

or other transfer of value, or ownership 

or investment interest. However, we are 

working on identifying a streamlined 

and automated process for reporting 

disputes and changes to ensure that the 

review and correct process is as smooth 

as possible. We plan to provide more 

information on the details of this 

process once it has been fully 

developed, but provide general 

guidelines for comment at this time. We 

propose that covered recipients, and 

physician owners or investors may 

request from CMS the contact 

information for a specific applicable 

manufacturer or applicable GPO, in the 

event of a potential dispute over the 

reported data. However, it would be the 

responsibility of the covered recipient, 

or physician owner or investor to 

contact and try to resolve the dispute 

with the applicable manufacturer or 

applicable GPO. We propose that at 

least one of any entity involved 

(applicable manufacturer, applicable 

GPO, covered recipient, or physician 

owner or investor) must report to CMS 

that a payment or other transfer of 

value, or ownership or investment 

interest is disputed and the results of 

that dispute at the end of the 45-day 

review period. 

If an applicable manufacturer or 

applicable GPO, and covered recipient, 

or physician owner or investor have 

contradicting information that cannot be 

resolved by the parties involved, then 

we propose that the data would be 

identified as contradictory and both the 

original submission from the applicable 

manufacturer or applicable GPO, and 

the modified information provided by 

the covered recipient, or physician 

owner or investor would appear in the 

final publicly available Web site. We 

recognize that publishing disagreements 

in this manner may make it difficult to 

aggregate the data and report it in a 

meaningful way to the public and are 

considering how to best aggregate 

reports that note contested information 

but do not double count payments or 

other transfers of value or ownership 

and investment interests. Given these 

concerns, we are considering that in 

these cases (when a dispute over the 

data cannot be resolved by the parties), 

the individual payment would be 

flagged as contested, but the 

contradictory data, as corrected by the 

covered recipient or physician owner or 

investor, would be used for aggregated 

totals for the physician, as necessary. 

We believe that this is preferable since 

the covered recipient and physician 

owner or investor stakeholders have 

expressed concern about the accuracy of 

information submitted by the applicable 

manufacturer or applicable GPO. 

However, we are also considering 

aggregating the original information, as 

submitted by the applicable 

manufacturer and applicable GPO. We 

seek comment on this proposal and 

suggestions for how best to handle 

instances where there are outstanding 

disagreements. 

Finally, we propose that the 45-day 

review period is the primary 

opportunity to correct errors or contest 

the data submitted by applicable 

manufacturers and applicable GPOs to 

CMS. Once the 45-day review period 

has passed and the parties have 

identified all changes or disputes and 

CMS has made or noted them all, we 

propose that neither applicable 

manufacturers, applicable GPOs, 

covered recipients, nor physician 

owners or investors would be permitted 

to amend the data for that calendar year. 

We believe that allowing continual 

changes would be operationally difficult 

for CMS to handle and would reduce 

the utility of the data set. We propose 

that applicable manufacturers, 

applicable GPOs, covered recipient, or 

physician owners or investors alert CMS 

as soon as possible regarding any errors 

or omissions, but these changes may not 

be made until the data is refreshed for 

the following reporting year. At that 

time, all parties would once again have 

an opportunity to review and amend the 

data. However, we propose that we 

would have the option to make changes 

to the data at any time (for example, to 

correct mathematical mistakes). We also 

propose that only the current and 

previous year would be available for 

review and correction. For example, 

during the 45-day review period in 

2014, applicable manufacturers, 

applicable GPOs, covered recipients, 

and physician owners or investors 

would be able to review and amend the 

data submitted for 2012 and 2013. 

However, during the 2015 review, only 

2013 and 2014 would be available for 

changes. We seek comments on the 

procedures outlined for data submission 

and the 45-day review period, 

particularly the best way to contact 

covered recipients and physician 

owners or investors to ensure they 

receive notification of the review 

period. 

C. Public Availability 

Under the statute, we are required to 

publish on a publicly available Web site 

the data reported by applicable 

manufacturers and applicable GPOs for 

CY 2012 by September 30, 2013. For 

each year thereafter, we must publish 

the data for the preceding calendar year 

by June 30th. The public Web site must 

be searchable, understandable, 

downloadable, and easily aggregated on 

various levels, as stated in the statute. 

In addition, section 4 of Executive Order 

13563 calls upon agencies to consider 

approaches that ‘‘maintain flexibility 

and freedom of choice for the public,’’ 

including the ‘‘provision of information 

to the public in a form that is clear and 

intelligible.’’ We request comments on 

how to structure this Web site for 

ultimate usability. 

As required in section 

1128G(c)(1)(C)(ii) of the Act, we propose 

that the following information on 

payments and other transfers of value 

would be included on the public Web 

site in a format that is searchable, 

downloadable, understandable and able 

to be aggregated: 

• Applicable manufacturer name. 

• Covered recipient’s— 

++ Name; 

++ Specialty (physician only); and 

++ Business street address (practice 

location). 

• Amount of payment or other 

transfer of value in U.S. dollars. 


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• Date of payment or other transfer of 

value. 

• Form of payment or other transfer 

of value. 

• Nature of payment or other transfer 

of value. 

• Name of the covered drug, device, 

biological, or medical supply, when 

applicable. 

• Name of entity that received the 

payment or other transfer of value, if not 

provided to the covered recipient 

directly. 

For physician ownership and 

investment interests, the following 

information would be included on the 

public Web site in a format that is 

searchable, downloadable, 

understandable and able to be 

aggregated: 

• Applicable manufacturer or 

applicable GPO name. 

• Physician owner’s— 

++ Name; 

++ Specialty; and 

++ Business street address. 

• Whether the ownership or 

investment interest is held by the 

physician or an immediate family 

member of the physician. 

• Dollar amount invested. 

• Value and terms of each ownership 

or investment interest. 

• Any payment or other transfer of 

value provided to the physician owner, 

including: 

++ Amount of payment or other 

transfer of value in U.S. dollars. 

++ Date of payment or other transfer 

of value. 

++ Form of payment or other transfer 

of value. 

++ Nature of payment or other 

transfer of value. 

++ Name of the covered drug, device, 

biological, or medical supply, as 

applicable. 

In addition, as required by statute, we 

propose that the Web site will include 

information on any enforcement 

activities taken under section 1128G of 

the Act for the previous year, 

background or other helpful information 

on relationships between the drug and 

device industry and physicians and 

teaching hospitals, and publication of 

information on payments or other 

transfers of value that were granted 

delayed reporting, as required under 

section 1128G(c)(1)(C) of the Act. 

Beyond the information required by 

statute, we propose that the Web site 

clearly state that disclosure of a 

payment or other transfer of value on 

the Web site does not indicate that the 

payment was legitimate nor does it 

necessarily indicate a conflict of interest 

or any wrongdoing. We welcome 

comment regarding the details and 

format for how this information should 

be displayed on the Web site. 

D. Delayed Publication for Payments 

Made Pursuant to Product Research or 

Development Agreements and Clinical 

Investigations 

Section 1128G(c)(1)(E) of the Act 

provides for delayed publication of 

payments or other transfers of value 

from applicable manufacturers to 

covered recipients made pursuant to 

product research or development 

agreements or clinical investigations. 

The granting of delayed publication 

aims to maintain confidentiality for 

proprietary information relating to 

development of new drugs, devices, 

biologicals, and medical supplies. The 

statute outlines several statutorily 

required instances when publication of 

a payment or transfer of value should be 

delayed in the context of a product 

research or development agreement or 

clinical investigation. 

The statute requires that information 

about payments and other transfers of 

value that are delayed from publication 

must be made publicly available on the 

first publication date after the earlier of 

either: (1) The approval, licensure or 

clearance by the FDA of the covered 

drug, device, biological or medical 

supply; or (2) 4-calendar years after the 

date of payment. For example, if in 

April of 2013 an applicable 

manufacturer provides a research grant 

to a teaching hospital for an initial trial 

of a new product under a product 

research or development agreement, the 

applicable manufacturer would be 

required to report this payment to us 

under section 1128G(a)(1) of the Act by 

March 31, 2014. However, the payment 

would not be published on the public 

Web site in 2014 since the product had 

not yet been granted FDA approval, 

licensure or clearance. If the product is 

granted FDA approval, licensure or 

clearance in October of 2015, then we 

would publish the payment by the 

applicable manufacturer to the covered 

recipient as part of the public release of 

CY 2015 data in 2016. If the product had 

not been approved or cleared by the 

FDA by the beginning of 2018 (4- 

calendar years after the payment date in 

2013), we would publish the 2013 

payment during the data release in 

2018. 

We propose that applicable 

manufacturers should indicate on their 

reports whether or not a payment or 

other transfer of value should be granted 

a delay in publication on the public 

Web site. In the absence of notification 

by an applicable manufacturer that a 

payment or other transfer of value is 

subject to delayed publication, we 

would have no way of knowing that 

such a payment or other transfer of 

value should not be published. In 

addition, we propose that payments or 

other transfers of value subject to 

delayed reporting need to be reported 

each year with a continued indication 

that publication should remain delayed 

and any updated information on the 

payment or other transfer of value, as 

necessary. 

Further, we propose that following 

FDA approval, licensure or clearance, 

applicable manufacturers must indicate 

in their next annual submission that the 

payment should no longer be granted a 

delay and should be published in the 

current reporting cycle. Failure to 

indicate to CMS in a timely fashion that 

a payment or other transfer of value 

should no longer be granted a delay in 

publication, due to FDA approval, 

licensure or clearance, may be subject to 

penalties under section 1128G(b) of the 

Act. Finally, if a report includes a date 

of payment 4 years prior to the current 

year, then the payment or other transfer 

of value would be automatically 

published, regardless of whether the 

applicable manufacturer indicates that 

the payment should be delayed. For 

example, in 2019, all payments or 

transfers of value with a payment date 

in 2014 (which were initially submitted 

to CMS in 2015) would be published in 

the public database in 2019. With an 

annual publication, it is difficult to 

grant each payment an exactly 4-year 

delay and we recognize that payments 

made early in the year would be granted 

more than a full 4-year delay period 

under this proposal. We believe that this 

method is preferable because it allows 

all payments, even those made late in 

the year, a full 4 year delay. We seek 

comment on these proposals. 

We propose that payments or other 

transfers of value granted delayed 

publication are limited to relationships 

for bona fide research or investigation 

activities, which, if made public, would 

damage the manufacturers’ competitive 

and/or proprietary interests. In order to 

ensure that the payments or other 

transfers of value granted a delay are for 

bona fide research, we propose that the 

‘‘product research or development 

agreement’’ referenced in the statute 

include a written statement or contract 

between the applicable manufacturer 

and covered recipient, as well as a 

written research protocol. Additionally, 

the Act defines ‘‘clinical investigation’’ 

in section 1128G(e)(3) of the Act as 

‘‘[a]ny experiment involving 1 or more 

human subjects, or materials derived 

from human subjects, in which a drug 

or device is administered, dispensed, or 

used.’’ We propose that in the context 


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of this definition, a clinical 

investigation is limited to one which is 

memorialized in a written research 

protocol between the covered recipient 

and the applicable manufacturer. 

We realize that many applicable 

manufacturers contract with CROs, to 

facilitate their clinical research. In these 

cases, as long as the applicable 

manufacturer has a written agreement 

with the CRO, we propose that the CRO 

may have the written research 

agreement with the covered recipient, 

rather than the applicable manufacturer. 

The statute provides for delayed 

publication of payments for services 

furnished in connection with research 

on ‘‘medical technology’’ with regard to 

both research on potential new medical 

technologies and new applications of 

existing medical technologies. In 

contrast, the statute provides for 

delayed publication for services 

furnished in connection with the 

development of, or a clinical 

investigation for, a new drug, device, 

biological, or medical supply (as 

opposed to a new application of an 

existing drug, device, biological, or 

medical supply as well). However, given 

the close relationship and significant 

overlap among the phrases ‘‘medical 

technology’’ and ‘‘drug, device, 

biological, and medical supply,’’ we 

propose to consider ‘‘medical 

technology’’ broadly as any drug, 

device, biological, or medical supply. 

We propose this interpretation because 

we believe that the rationale underlying 

the statutory inclusion of the delayed 

publication provision—protecting an 

applicable manufacturer’s legitimate 

proprietary and competitive interests in 

research and development—should 

apply to all applicable manufacturers 

under this statute. Moreover, it is 

difficult to fairly carve out certain 

applicable manufacturers or certain 

products for differing standards of 

delayed publication. Alternatively, we 

are considering defining ‘‘medical 

technology’’ more narrowly as a subset 

of drugs, devices, biologicals, and 

medical supplies. We seek comments on 

both approaches, including suggestions 

for a narrower definition of ‘‘medical 

technology.’’ 

The statute also distinguishes 

between the scope of delayed 

publication permitted for payments 

related to ‘‘research’’ versus payments 

related to ‘‘development’’ or ‘‘clinical 

investigations.’’ Delayed publication is 

allowed for payments or other transfers 

of value for research-related services for 

both new medical technologies and new 

applications of existing medical 

technologies, whereas, delayed 

publication for development and 

clinical investigations are limited solely 

to new drugs, devices, biologicals, and 

medical supplies. It is difficult to 

meaningfully separate research and 

development due to the overlap in the 

activities associated with them, and the 

fact that they are commonly used 

synonymously. Given this close 

association between the terms, we 

propose to treat them similarly in this 

provision. However, we are also 

considering the possibility of assigning 

different meanings to ‘‘research’’ and 

‘‘development,’’ and we seek comments 

on this approach and suggestions for 

meaningful distinctions for the two 

terms. With regard to clinical 

investigations, we believe they have a 

distinct meaning as set forth in section 

1128G(e)(3) of the Act, which is separate 

from both ‘‘research’’ and 

‘‘development’’ for the purposes of the 

Act. Specifically, section 1128G(e)(3) 

provides that clinical investigations 

involve human subjects or materials 

derived from human subjects. We note 

that this definition may differ from 

those that applicable manufacturers may 

be familiar with in 21 CFR 312.3 and 

812.3. 

Given these interpretations, we 

propose that delayed publication should 

apply to payments to covered recipients 

for services in connection with research 

on, or development of new drugs, 

devices, biologicals, or medical 

supplies, as well as new applications of 

existing drugs, devices, biologicals, or 

medical supplies. Conversely, we 

propose limiting delayed publication for 

payments in connection with clinical 

investigations for new drugs, devices, 

biologicals, or medical supplies, and not 

new applications of existing drugs, 

devices, biologicals, or medical 

supplies. We seek comment on these 

proposals and solicit comment on 

whether there are better ways to 

distinguish among these categories for 

the purposes of delayed publication, 

including treating payments and 

transfers of values made in connection 

with clinical investigations the same as 

those made in connection with research 

and development. 

Pursuant to the statute, information 

reported by applicable manufacturers 

that is subject to delayed publication 

under section 1128G(c)(1)(E) of the Act 

shall be considered confidential and 

shall not be subject to disclosure under 

5 U.S.C. 552, or any other similar 

Federal, State or local law, until after 

the date on which the information is 

made available to the public via 

publication on the Web site. 

E. Penalties 

Section 1128G(b) of the Act 

authorizes the imposition of CMPs for 

failures to report required information 

on a timely basis in accordance with our 

regulations. If an applicable 

manufacturer or applicable GPO fails to 

submit the required information, then 

the applicable manufacturer or 

applicable GPO may be subject to a CMP 

of at least $1,000, but no more than 

$10,000, for each payment or other 

transfer of value, or ownership or 

investment interest not reported as 

required. The maximum CMP with 

respect to each annual submission for 

failure to report is $150,000. For 

knowing failure to submit required 

information in a timely manner, an 

applicable manufacturer or applicable 

GPO will be subject to a CMP of at least 

$10,000, but no more than $100,000, for 

each payment or other transfer of value, 

or ownership or investment interest not 

reported as required. The maximum 

CMP with respect to each annual 

submission for a knowing failure to 

report is $1,000,000. The term 

‘‘knowingly’’ is given the meaning from 

the False Claims Act, 31 U.S.C. 3729(b). 

All CMPs would be collected and 

imposed in the same manner as the 

CMPs collected and imposed under 

section 1128A of the Act. Additionally, 

we propose that the procedures in 42 

CFR part 402 subpart A would apply 

with regard to imposition and appeal of 

CMPs. 

As noted previously, applicable 

manufacturers and applicable GPOs 

may be subject to a CMP for a failure to 

report information timely in accordance 

with our regulations. This proposed rule 

interprets the statute to require the 

submission of information that is 

accurate and complete. Therefore, we 

propose that a CMP may be imposed for 

failure to report information in a timely, 

accurate, and complete manner. As set 

forth in section 1128G(c)(1)(C)(ix) of the 

Act, applicable manufacturers and 

applicable GPOs are allowed 45-days 

prior to publication to review their data. 

Outside this period, any additions or 

oversights would be considered late and 

subject to penalties. Together with the 

annual submission of data, an 

authorized representative from each 

applicable manufacturer and applicable 

GPO would be required to submit a 

signed attestation certifying the truth, 

correctness, and completeness of the 

data submitted to the best of the signer’s 

knowledge and belief. 

In determining the amount of the 

CMP, we propose that the factors to be 

considered include, but are not limited 

to, the following: 


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• The length of time the applicable 

manufacturer or applicable GPO failed 

to report, including the length of time 

the applicable manufacturer and 

applicable GPO knew of the payment or 

other transfer of value, or ownership or 

investment interest. 

• Amount of the payment or other 

transfer of value or the value of the 

ownership or investment interest the 

applicable manufacturer or applicable 

GPO failed to report. 

• Level of culpability. 

• Nature and amount of information 

reported in error. 

• Degree of diligence exercised in 

correcting information reported in error. 

We seek comments on these proposals. 

In addition, we also propose that the 

Secretary, CMS, OIG or their designees 

may audit, evaluate, or inspect 

applicable manufacturers and 

applicable GPOs for their compliance 

with timely, complete and accurate 

submission of information required in 

section 1128G of the Act and the 

implementing regulations. Access to 

this information is implicit in the 

statute in order to enforce the 

requirements outlined. To facilitate this 

review, applicable manufacturers and 

applicable GPOs must maintain all 

books, records, documents, and other 

materials sufficient to enable an audit, 

evaluation or inspection of the 

applicable manufacturer’s or applicable 

GPO’s compliance with the 

requirements in section 1128G of the 

Act and the implementing regulations. 

We propose that applicable 

manufacturers and applicable GPOs 

must maintain these books, records, 

documents, and other materials for a 

period of at least 5 years from the date 

the payment or other transfer of value, 

or ownership or investment interest is 

published publicly on the Web site. We 

believe that 5 years from the date of 

publication is sufficient for all audit, 

inspection, or evaluation activities. The 

requirements set forth in this proposed 

rule are in addition to, and do not limit, 

any other applicable requirements that 

may obligate applicable manufacturers 

or applicable GPOs to retain and allow 

access to records. We seek comments on 

these proposals. 

F. Annual Reports 

We are required to submit annual 

reports to Congress and the States. The 

Report to Congress is due annually on 

April 1st beginning in 2013 and shall 

include aggregated information on each 

applicable manufacturer and applicable 

GPO for the preceding calendar year, as 

well as any enforcement action taken 

and any penalties paid. Since we will 

not receive data for the prior year until 

the 90th day of each year, the data 

submitted that year will not be ready for 

the April 1st report. Instead, we propose 

that we report to Congress information 

submitted by applicable manufacturers 

and applicable GPOs during the 

preceding year. Similarly, we must 

report to States annually by September 

30, 2013 and June 30 for each year 

thereafter. The reports would be State 

specific and include summary 

information on the data submitted 

regarding covered recipients and 

physician owners or investors in that 

State. Since these reports are due later 

in the year than the Report to Congress, 

we propose that the reports would 

include data collected during the 

previous calendar year which was 

submitted in the current year. These 

reports would not include any payments 

or other transfers of value that were not 

published under the delayed 

publication requirements in section 

1128G(c)(1)(E) of the Act. 

G. Relation to State Laws 

Section 1128G(d)(3) of the Act 

preempts any State or local laws 

requiring reporting, in any format, of the 

same type of information concerning 

payments or other transfers of value 

made by applicable manufacturers to 

covered recipients. No State or local 

government may require the separate 

reporting of any information regarding a 

payment or other transfer of value that 

is required to be reported under section 

1128G(a) of the Act, unless such 

information is being collected by a 

Federal, State, or local governmental 

agency for public health surveillance, 

investigation, or other public health 

purposes or health oversight. Such 

agencies include those that are charged 

with preventing or controlling disease, 

injury, or disability and/or with 

conducting oversight activities 

authorized by law, including audits, 

investigations, inspections, licensure or 

disciplinary actions, or other activities 

necessary for oversight of the health 

care system. However, this exception 

does not apply to State or local 

reporting requirements related to 

information on payments or other 

transfers of value included in section 

1128G of the Act. 

In addition, State and local 

governments may require reporting of 

information other than that required 

under this provision, including the 

types of information excluded by 

section 1128G(e)(10)(B) of the Act, with 

the exception of payments that fall 

below the $10 individual or $100 

aggregate threshold in section 

1128G(e)(10)(B)(i). 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

the following requirements: 

A. ICRs Regarding Reports of Payments 

or Other Transfers of Value and 

Physician Ownership and Investment 

Interests (§ 403.904, § 403.906 and 

§ 403.908(a) Through (g)) 

Proposed § 403.904 would require 

applicable manufacturers of covered 

drugs, devices, biologicals, and medical 

supplies to report annually to CMS all 

payments and other transfers of value to 

physicians and teaching hospitals 

(collectively, covered recipients). 

Applicable manufacturers and 

applicable GPOs would also be required 

to report ownership and investment 

interests held by physicians or the 

immediate family members of 

physicians in such entities. This 

information is to be aggregated and 

posted publicly by CMS on a searchable 

Web site. Covered recipients and 

physician owners or investors must be 

provided with the opportunity to review 

and, if necessary, correct the 

information before it is posted publicly. 

When reporting the burden of this 

provision, we considered the impact in 

the first year of the program when 

applicable manufacturers and 

applicable GPOs must build reporting 

systems, and covered recipients and 

physician owners or investors are 

becoming accustomed with the review 

and correction requirements, as well as 

year 2 and annually thereafter. We 

anticipate that the burden will be 

reduced by roughly 25 percent in year 

2 and remain the same annually 

thereafter. 


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The burden associated with these 

requirements is the time and effort spent 

by applicable manufacturers and 

applicable GPOs collecting the data, 

compiling reports to send to CMS, as 

well as the processes for registering and 

submitting the data, and any 

corrections, if necessary, to CMS. We 

estimate that approximately 1,150 

applicable manufacturers, (150 drug and 

biologic manufacturers, and 1,000 

device and medical supply 

manufacturers), and approximately 420 

applicable GPOs would submit reports. 

We based these estimates on the number 

of manufacturers reporting in States 

with similar transparency provisions, as 

well as the number of manufacturers 

registered with FDA. The number of 

drug manufacturers is based on 

reporting in Massachusetts, Minnesota, 

and Vermont, and the number of device 

manufacturers is based on reporting in 

Massachusetts, since Minnesota and 

Vermont do not require device 

manufacturers to report. Because the 

State laws have higher payment 

thresholds and are specific to the 

physicians in the State, we estimated 

that the number of manufacturers 

reporting would be greater under 

section 1128G of the Act. For device 

manufacturers, we used data from the 

FDA to identify the total number of 

manufacturers to use as a ceiling for our 

estimate. We seek comment on whether 

there are any other sources of data 

available. 

It is difficult to establish with 

precision the number of GPOs, as 

proposed, because the definition of GPO 

includes physician owned 

distributorships (PODs). However, we 

did rely on a recent report by the Senate 

Finance Committee which identified 20 

States with multiple PODs and more 

than 40 PODs in California. When we 

extrapolate these estimates to the 

national level, taking into account the 

disproportionately higher number in 

California, we estimate that there are 

approximately 260 PODs currently in 

the U.S. We further estimate that there 

are an additional 160 GPOs, which have 

some form of physician ownership or 

investment. This is based on judgmental 

estimates, from a review of what little 

literature exists, and discussions with 

knowledgeable persons. Our research 

found that there are approximately 800 

GPOs and that approximately 20 percent 

of GPOs have at least one physician 

owner or investor. 

We believe that larger companies that 

manufacture more products may have a 

greater number of financial 

relationships with a more diverse group 

of covered recipients. Coordinating the 

data collection will require ensuring 

that all payments and other transfers of 

value are attributed to the correct 

covered recipient and reported in the 

manner proposed in this proposed rule. 

These estimates include our aggregate 

estimate of the overall time required to 

build and maintain the reporting 

systems (including the development of 

new information technology systems), 

obtain NPI and other information from 

the NPPES system (and if necessary 

supplement that information), establish 

whether any owners or investors have 

physicians as immediate family 

members (if necessary), organize the 

data for submission to CMS (within the 

organization and with any third party 

vendors), register with CMS and submit 

the required data, review the aggregated 

data that CMS produces, respond to any 

physician or teaching hospital queries 

during the review process, and resubmit 

certain disputed information (if 

necessary). It allows for time applicable 

manufacturers and applicable GPOs 

may sometimes use for ‘‘presubmission’’ reviews but assumes that 

would be rarely used, and only for 

complex cases. It also includes the time 

that applicable manufacturers may elect 

to spend to submit with their data a 

document describing their assumptions 

and methodology for categorizing the 

nature of payments. The estimates also 

include the potentially substantial time 

savings that would accrue to them as 

registrants through the ability to query 

CMS, and receive informal guidance 

through a listserv or other methods of 

providing technical assistance and 

useful information on low cost methods 

of compliance. As a technical point, we 

note that we propose a 5-year records 

retention requirement. We believe the 

costs of this are negligible for electronic 

recordkeeping, but solicit comment on 

this approach. Additionally, the 

estimates also include the time of 

employees, such as sales 

representatives, who have direct 

relationships with covered recipients 

and physician owners or investors. 

These employees would have to record 

the details of each relationship with the 

covered recipient, or physician owner or 

investor for reporting purposes. 

This overall estimate is based 

primarily on the judgmental estimates of 

persons we have consulted that are 

expert in the overall cost of existing 

reporting systems. We welcome more 

detailed and disaggregated information 

that would help us improve the overall 

estimate or better craft the final rule to 

deal with specific problems or timesaving options. We are particularly 

interested in the burden of collecting 

and recording information for each 

payment or transfer of value by the staff 

and identifying whether individuals 

with ownership or investment interests 

have physicians as immediate family 

members. 

We estimate that on average, smaller 

applicable manufacturers will have to 

dedicate 50 percent of a full time 

equivalent (FTE) employee (mainly in 

the range of zero to one), whereas larger 

applicable manufacturers may have to 

dedicate 5 to 15 FTE employees to 

comply with the reporting requirements 

(we assume 10 on average). Large 

manufactures are often multinational 

enterprises that employ tens of 

thousands of people worldwide, 

whereas many small manufacturers only 

have a few products and employ 

significantly fewer people. Since there 

are many more small companies, we 

estimate that on average, 1.74 FTE 

employees would be needed for each 

applicable manufacturer in the first year 

(150 larger firms times 10 FTE and 1000 

smaller firms times 0.5 FTE). We 

appreciate that this is considerable 

simplification of a far more complex 

distribution of firms, but we think that 

it captures the skewness of the 

distribution in manufacturing sectors 

where a relative handful of firms have 

sales in the billions of dollars annually 

over a wide range of products, and a far 

larger number have annual sales in low 

millions of dollar annually for just a few 

products, with practices regarding 

financial relationships with physicians 

varying widely within each group and, 

in many cases by product or product 

class. 

The greater staff time for year 1 

represents time for applicable 

manufacturers to alter their systems to 

collect and report this data. We estimate 

that once procedures and systems are 

modified, costs would be 25 percent 

lower, which reduces this value to an 

average of 1.3 FTEs in year 2 and 

annually thereafter. We emphasize that 

these are very rough estimates. The 

actual burdens could easily average 25 

percent lower or higher, and would 

depend on manufacturers’ changes in 

practices after the regulations are made 

final. Some may welcome the new 

transparency; others may decide to 

change or eliminate their current 

practices. Our assumption that smaller 

firms could in some cases incur no new 

costs assumes that some do not now 

have any such financial relationships 

and that this proportion would grow as 

some firms decide that the benefits of 

such relationships are less than the 

costs of reporting. Other smaller firms 

with only a few products and only a few 

financial relationships might well 

already have systems in place that 


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essentially meet the proposed 

requirements or that could do so with 

minimal effort. We welcome comments 

that can provide empirical data on the 

costs to implement the requirements in 

firms of varying sizes and product 

portfolios, on the extent to which 

systems already in place meet the 

proposed requirements in firms of 

various kinds and sizes, and on the 

extent to which firms would modify 

their practices to avoid reporting costs. 

We anticipate it would be less 

burdensome for an applicable GPO to 

comply with these proposed reporting 

requirements, since we believe 

companies will have fewer relationships 

with physician owners or investors (or 

immediate family members). This will 

make it much easier for applicable GPOs 

to match ownership and investment 

interests to the appropriate physicians 

(or family members). Based on 

discussions with officials of some GPOs 

and industry observers, we estimate that 

it would take from 5 to 25 percent of a 

FTE staff member, depending on the 

size of the applicable GPO. Once again, 

this includes time of many individuals, 

particularly the ones who are in direct 

contact with the physician and are 

required to record the details of the 

interaction. We assume that applicable 

GPOs already know the ownership and 

investment interests of its major 

investors, so the burden of these 

requirements include any changes to 

internal procedures to record and report 

the information. Also again, we have not 

found any empirical studies to better 

inform this estimate. Accordingly, we 

estimate that on average, an applicable 

GPO would dedicate 10 percent of an 

FTE employee to reporting under this 

section for year 1, followed by 7.5 

percent for year 2 and annually 

thereafter. We welcome any comments 

or data that would improve this 

estimate. 

While many individuals within the 

applicable manufacturer or applicable 

GPO may contribute to the data 

collection and reporting, we believe that 

majority of the work will be performed 

by a compliance officer. According to 

the Bureau of Labor Statistics 

Occupational Employment Statistics, in 

2010, the annual compensation for a 

compliance officer in the 

pharmaceutical and medicine 

manufacturing field was $73,380. We 

applied a 33 percent increase to this 

amount to account for fringe benefits 

and overhead, making the total annual 

cost of a compliance officer $97,595. 

The total number of hours for applicable 

manufacturers during year 1 would be 

4,186,000 (1,150 applicable 

manufacturers × 70 hours (1.74 FTEs) × 

52 weeks). For year 2 and subsequent 

years, we estimate a total of 3,110,000 

hours (1,150 applicable manufacturers × 

52 hours (1.3 FTEs) × 52 weeks). On 

average, this equals 3,460,000 hours 

annually for all applicable 

manufacturers for the first 3 years. The 

total number of hours for applicable 

GPOs for year 1 would be 87,400 (420 

applicable GPOs × 4 hours (0.10 FTE) × 

52 weeks) and for year 2 would be 

65,500 hours (420 applicable GPOs × 3 

hours (0.075 FTE) × 52 weeks). For the 

first 3 years, in total applicable GPOs 

will spend on average 72,800 hours 

annually. 

The following tables provide our total 

cost estimates for applicable 

manufacturers and applicable GPOs to 

collect and submit the information 

required in section 1128G of the Act for 

year 1 and year 2. In total, we estimate 

that for applicable manufacturers and 

applicable GPOs required to report, it 

will cost $199,387,000 for year 1 and 

will cost $148,979,000 for year 2 and 

annually thereafter. For the first 3 years, 

this averages to a cost of $165,781,000 

annually. All estimates are in 2010 

dollars. 

TABLE 1—YEAR 1 ESTIMATED BURDEN FOR APPLICABLE MANUFACTURERS AND APPLICABLE GPOS

Estimated reporting organizations Average FTE per reporting 

organization 

Average annual 

rate (with 33% 

fringe/overhead) 

Average total 

cost per 

organization 

Total burden 

Applicable Manufacturers ......... 1,150 1.74 FTE (70 hrs × 52 wks) ..... $97,595 $169,815 $195,288,000 

Applicable GPOs ...................... 420 0.10 FTE (4 hrs × 52 wks) ....... 97,595 9,759.54 4,098,990 

TABLE 2—YEAR 2 AND SUBSEQUENT YEAR ESTIMATED COSTS FOR APPLICABLE MANUFACTURERS AND APPLICABLE

GPOS

Estimated reporting organizations Average FTE per reporting 

organization 

Average annual 

rate (with 33% 

fringe/overhead) 

Average total 

cost per 

organization 

Total cost 

Applicable Manufacturers ......... 1,150 1.3 FTE (52 hrs × 52 wks) ....... $97,595 $126,874 $145,905,000 

Applicable GPOs ...................... 420 0.075 FTE (3 hrs × 52 wks) ..... 97,595 7,320 3,074,000 

B. ICRs Regarding Review and 

Correction by Physicians and Teaching 

Hospitals (§ 403.908(h)) 

An additional burden associated with 

section 1128G of the Act is the time and 

effort spent by covered recipients, and 

physician owners or investors 

reviewing, and if necessary, correcting 

the data before it is reported publicly. 

Neither the statute, nor this proposed 

rule, contains a recordkeeping 

requirement for physicians or teaching 

hospitals. Therefore, while we evaluated 

the burden associated with the review 

and correction process, we do not 

include an estimate of the burden for 

keeping records. We seek comments on 

this assumption, and on the extent to 

which physicians and teaching 

hospitals will keep records in the 

absence of a requirement to do so. While 

this would not be considered an 

information collection under the 

Paperwork Reduction Act, this will be 

helpful information to consider at the 

final rule stage related to the overall 

costs of this regulatory action. 

The statute uses the definition of 

physician in section 1861(r) of the Act, 

which includes doctors of medicine and 

osteopathy, dentists, podiatrists, 

optometrists and licensed chiropractors. 

Using the Bureau of Labor Statistics 

Occupational Outlook Handbook, we 

estimate that information may be 

available for as many as 892,000 

physicians. However, we believe that 

not all physicians will have 

relationships with applicable 

manufacturers or applicable GPOs. 

Based on feedback we received from 

stakeholders, we estimate that 25 

percent of physicians have no 

relationships with applicable 


emcdonald on DSK5VPTVN1PROD with PROPOSALS2
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 78761 

manufacturers or applicable GPOs, 

which reduces our universe of affected 

physicians to approximately 669,000. 

Further, stakeholders have expressed 

that many physicians maintain 

relationships with applicable 

manufacturers that are relatively 

insignificant from a financial point of 

view, so we estimate that many 

physicians will not devote any time to 

reviewing and correct the aggregated 

reports from CMS. We estimate that 

only 50 percent of the remaining 

669,000 physicians will review the 

report, which reduces our universe of 

affected physicians to 334,500 for year 

1. For year 2, we anticipate that there 

would be a further reduction in the 

number of physicians reviewing the 

data because they would be familiar 

with the information, so we reduced the 

number of physicians reviewing by 

another 25 percent, to 250,875 

physicians. For teaching hospitals, we 

know that about 1,100 hospitals receive 

Medicare GME or IME payments, all of 

which are defined as teaching hospitals 

for this provision. We believe that the 

vast majority of teaching hospitals 

would have at least one financial 

relationship with an applicable 

manufacturer, so we did not apply any 

adjustments to this estimate. We also 

anticipate that there would not be a 

reduction in the number of teaching 

hospitals that review the information 

after the first year because teaching 

hospitals probably have more complex 

financial relationships. 

Each physician and teaching hospital 

would be only allowed to review the 

information attributed to them by all 

applicable manufacturers and 

applicable GPOs. We estimate that on 

average, physicians would need one 

hour to review the information reported. 

For physicians that choose to review the 

information, this would range from a 

few minutes for physicians with few 

relationships with applicable 

manufacturers, to at most 10 or 20 hours 

for the small number of physicians who 

have lengthy disputes over a payment or 

other transfer of value, or ownership or 

investment interest. We believe that 

teaching hospitals would have to review 

more payments or other transfers of 

value and have more complex 

relationships, so we estimate that, on 

average, it would take a representative 

from a teaching hospital 10 hours to 

review the submitted data, ranging from 

3 hours for small teaching hospitals that 

receive few payments or other transfer 

of value, to 60 hours for teaching 

hospitals that have lengthy disputes. We 

welcome comment and data on these 

estimates, and particularly welcome 

data from physicians and institutions in 

States that have required similar 

reporting in the past. 

The Bureau of Labor Statistics 

Occupational Employment Statistics 

publishes data on hourly compensation 

for Healthcare Practitioners and 

Technical Occupations in physicians’ 

offices. Although this category is 

broader than the provider types listed in 

the definition of physician in section 

1861(r) of the Act, we believe that many 

physicians would delegate their review 

responsibilities to their nurses and 

office assistants. Given this expectation, 

we believe that the Healthcare 

Practitioners and Technical 

Occupations cost estimate is appropriate 

for this calculation. The average hourly 

rate for Healthcare Practitioners and 

Technical Occupations is $54.53 in 

physician offices (see http:// 

www.bls.gov/oes/current/ 

oes290000.htm), which rises to $72.52 

with 33 percent fringe benefits and 

overhead costs. This average includes 

physicians, who account for about half 

of the employment in this category. The 

total number of hours for physicians 

(including physician offices) would be 

334,500 for year 1 and 188,156 hours 

(250,875 × 0.75 hours) for year 2, which 

averages to 236,938 hours annually for 

the first 3 years. The total estimated cost 

for the review and correction period for 

physicians in year 1 is $24,258,000. For 

year 2 and annually thereafter, the 

estimated cost for physician review and 

correction is $13,645,000. For the first 3 

years, the average cost for all physicians 

review and correction will be 

$17,190,000 annually. 

For teaching hospitals, we expect a 

manager to review the payments and 

other transfers of value. Since this 

review could be done by employees 

with multiple titles, we used the Bureau 

of Labor Statistics Occupational 

Employment Statistics reported 

compensation for Management 

Occupations at General Medical and 

Surgical Hospitals in 2010. The hourly 

average rate for Management 

Occupations is $48.88, or $65.01 when 

fringe and overhead costs are applied. 

For year 1, the total number of hours 

would be 11,000 (1,100 × 10 hours) at 

$65.01 per hour. For year 2 this would 

decrease to 8,250 hours (1,100 × 7.5 

hours) at $65.01 per hour. For the first 

3 years, the total number of hours for 

teaching hospitals will be 9,167 

annually. The total estimated cost for 

the review and correction period for 

teaching hospitals is $715,000 for year 

1 and $536,332 for year 2 and annually 

thereafter. On average, the cost for all 

teaching hospitals will be $595,925 

annually for the first 3 years. 

TABLE 3—YEAR 1 ESTIMATED BURDEN FOR PHYSICIANS AND TEACHING HOSPITALS

Estimated entities reviewing Estimated hours 

for review Hourly rate Average total cost per entity Total burden 

Physicians ........................................................ 334,500 1.0 $72.52 $75.52 $24,258,000 

Teaching Hospitals .......................................... 1,100 10.0 65.01 650.10 715,000 

TABLE 4—YEAR 2 AND SUBSEQUENT YEAR ESTIMATED COSTS FOR PHYSICIANS AND TEACHING HOSPITALS

Estimated entities reviewing Estimated hours 

for review Hourly rate Average total cost per entity Total cost 

Physicians ...................................................... 250,875 0 .75 $72.52 $56.64 $13,645,000 

Teaching Hospitals ........................................ 1,100 7 .5 65.01 487.57 536,000 

Based on the assumptions presented 

here, we anticipate that the total 

estimated burden of section 1128G of 

the Act for year 1 is 4,619,000 hours, at 

a cost of $224,360,000. For year 2 and 

annually thereafter, the total estimated 

burden is 3,372,000 hours, at a cost of 

$163,087,390. Annualized over 3 years, 

the total number of hours per year is 

3,788,000 with a cost of $183,560,000. 


emcdonald on DSK5VPTVN1PROD with PROPOSALS2
78762 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 

4All quotes from pages 315–316 of ‘‘Public 

reporting of physicians’ financial relationships’’ at 

http://www.medpac.gov/chapters/Mar09_Ch05.pdf. 

TABLE 5—ESTIMATED ANNUAL INFORMATION COLLECTION BURDEN

Regulation section(s) OMB Control No. 

Number 

of 

respondents 

Number 

of 

responses 

Burden 

per response 

(hours) 

Total annual burden 

(hours) 

Hourly 

labor 

cost of 

reporting 

($) 

Total 

labor 

cost of 

reporting 

($) 

Total 

capital/ 

maintenance 

costs 

($) 

Total cost 

($) 

§ 403.904 and § 404.908(a)– 

(g)—Applicable Manufacturer 

Data Collection and Reporting.

0938–New .. 1,150 1,150 3,009 3,460,427 $46.92 $162,365,548 $0 $162,365,548 

§ 403.906 and § 404.908(a)– 

(g)—Applicable GPO Data 

Collection and Reporting.

.................... 420 420 173 72,800 46.92 3,415,825 0 3,415,825 

§ 403.908—Physician Review 

and Correction Period.

.................... 278,750 278.750 0 .85 236,938 72.52 17,182,708 0 17,182,708 

§ 403.906—Teaching Hospital 

Review and Correction Period.

.................... 1,100 1,100 8 .33 9,167 65.01 595,925 0 595,925 

Total ..................................... .................... 281,410 281,410 13 .43 3,779,331 48.57 183,560,006 0 183,560,006 

We emphasize that these estimates 

are, by necessity, uncertain, and that we 

particularly solicit comments providing 

us a better basis for final estimates. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 

Attention: CMS Desk Officer, CMS– 

5060–P. 

Fax: (202) 395–5806; or 

Email: 

OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Analysis 

A. Statement of Need 

This proposed rule is necessary to 

implement the requirements in section 

1128G of the Act (as added by section 

6002 of the Affordable Care Act), which 

requires applicable manufacturers of 

covered drugs, devices, biologicals and 

medical supplies to report annually to 

the Secretary all payments and other 

transfers of value to physicians and 

teaching hospitals (collectively, covered 

recipients). Section 1128G of the Act 

also requires applicable manufacturers 

and applicable group purchasing 

organizations (GPOs) to report 

ownership and investment interests 

held by physicians or the immediate 

family members of physicians in such 

entities. 

These provisions of the Act were 

modeled largely on the 

recommendations of the Medical 

Payments Advisory Commission 

(MedPAC), which voted in 2009 to 

recommend Congressional enactment of 

a new regulatory program. The problem 

addressed, as stated by MedPAC, is that 

‘‘at least some’’ drug and device 

manufacturer interactions with 

physicians ‘‘are associated with rapid 

prescribing of new, more expensive 

drugs and with physician requests that 

such drugs be added to hospital 

formularies,’’ as well as ‘‘concern that 

manufacturers’ influence over 

physicians’ education may skew the 

information physicians receive.’’ 

MedPAC went on to say that ‘‘there is 

no doubt that those relationships should 

be transparent,’’ while pointing out that 

‘‘transparency does not imply that all— 

or even most—of these financial ties 

undermine physician-patient 

relationships.’’ 4

B. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999) and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and promoting flexibility. Section 4 of 

Executive Order 13563 calls upon 

agencies to consider approaches that 

‘‘maintain flexibility and freedom of 

choice for the public,’’ including the 

‘‘provision of information to the public 

in a form that is clear and intelligible.’’ 

A regulatory impact analysis (RIA) must 

be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). We 

estimate that this rulemaking is 

‘‘economically significant’’ as measured 

by the $100 million threshold. 

Accordingly, we have prepared a 

Regulatory Impact Analysis that 

presents estimated costs and benefits of 

the rulemaking. We solicit comments on 

all assumptions and estimates in this 

regulatory impact analysis. As is 

standard practice in meeting these 

various requirements for regulatory 

analysis, this section of the preamble 

addresses all of them together. Other 

parts of the preamble, together with this 

analysis, meet all statutory and 

Executive Order requirements. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. Under the RFA, ‘‘small 

entities’’ are those that fall below size 

thresholds set by the Small Business 

Administration, or are not-for-profit 


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5http://www.sba.gov/sites/default/files/ 

Size_Standards_Table.pdf. 

organizations or governmental 

jurisdictions with a population of less 

than 50,000. For purposes of the RFA, 

we estimate that the majority of teaching 

hospitals and physicians, and most 

applicable manufacturers and 

applicable GPOs are small entities 

under either the size or not-for-profit 

standard. We seek comment on our 

assumptions and estimations regarding 

the RFA. According to the Small 

Business Administration size 

standards 5 the threshold size standard 

for ‘‘small’’ pharmaceutical 

manufacturers is 750 employees, for 

biological products, and surgical 

equipment, surgical supplies, and 

electromedical/electrotherapeutic 

apparatus manufacturers is 500 

employees and for drug and medical 

equipment wholesalers is 100 

employees. We estimate that 

approximately 75 percent of applicable 

manufacturers and applicable GPOs are 

smaller than these size standards. In this 

proposed rule, we propose that 

applicable manufacturers that do not 

have payments or other transfers of 

value or physician ownership or 

investment interests to report do not 

need to submit a report. We believe that 

many small applicable manufacturers 

and applicable GPOs will have no 

relationships, thus will not have to 

report, so the burden on them will be 

negligible. For small entities with 

financial relationships to report, we 

believe that they will only have a small 

number to report, making the reporting 

process significantly less burdensome. 

We believe that the average burden of 

the reporting requirements will be about 

$50,000 in the first year (average annual 

wage rate of $97,595 times 0.5 FTE) for 

smaller manufacturers, and even less in 

subsequent years. This amount is far 

below the 3 percent of revenues that 

HHS uses as a threshold for ‘‘significant 

impact’’ under the RFA, so these 

regulations will not have a significant 

effect on these small entities. For 

example, if a firm with only 100 

employees generates annual revenues of 

$200,000 per employee, or $20 million, 

a cost of $50,000 would be about onefourth of 1 percent of revenues. Firms 

this small would potentially face costs 

considerably less than $50,000, and 

hence an even lower effect. 

As previously noted, most teaching 

hospitals and physicians are small 

entities under the RFA, since most 

teaching hospitals are not-for-profit and 

some have revenues below $34.5 

million. We estimate that 95 percent of 

physician practices have revenues 

under $10 million. We believe the 

regulatory effects of this provision on 

physicians and teaching hospitals are 

relatively minor. Physicians and 

teaching hospitals are provided with the 

opportunity to review and correct this 

information, but are not involved in the 

data collection or reporting processes. 

We estimated that this review would 

take the great majority of individual 

physicians and/or their office staff one 

hour or less to perform annually and 10 

hours or less annually for teaching 

hospitals, on average. Given that their 

review will take such a small amount of 

their time annually, the costs faced by 

physicians and teaching hospitals are 

not substantial. As a result, we believe 

that the cost burden of this review and 

correction period will be far below the 

3 percent threshold for ‘‘significant 

impact.’’ Moreover, the amount of time 

spent on such reviews is entirely 

discretionary. Therefore, we have 

determined that this proposed rule will 

not have a significant economic impact 

on a substantial number of small entities 

in any category of entities it affects. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. We do not believe 

that any of the affected teaching 

hospitals are small rural hospitals. 

Therefore, we have determined that this 

proposed rule will not have a significant 

impact on the operations of a substantial 

number of small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any single year of 

$100 million in 1995 dollars, updated 

annually for inflation. In 2011, that 

threshold is approximately $136 

million. The estimates presented in this 

section of this proposed rule exceed this 

threshold and as a result, we have 

provided a detailed assessment of the 

anticipated costs and benefits in section 

V.C.4. of this proposed rule. Reporting 

under section 1128G of the Act is 

required by law, so we are limited in 

another policy avenue for achieving the 

expected benefits. Section V.D. of this 

proposed rule, as well as other parts of 

the preamble, provide detailed 

additional information on the 

alternatives we considered. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

While this proposed rule does preempt 

certain elements of State law, the 

regulatory standard simply follows the 

express preemption provision in the 

statute. Because of this and the fact that 

this regulation does not impose any 

costs on State or local governments, the 

requirements of Executive Order 13132 

are not applicable. We offer a more 

detailed discussion of preemption in 

section II.G. of this proposed rule. 

C. Anticipated Effects 

The regulatory impact of this 

provision includes applicable 

manufacturers and applicable GPOs 

collection and submitting this 

information to CMS, and physician and 

teaching hospital review and correction 

period. The costs of these requirements 

are outlined in section III. of this 

proposed rule. As a reminder, we 

estimate a total cost of about $224 

million for the first year of reporting, 

followed by about $163 million in the 

second year and annually thereafter. 

Because of a paucity of existing data on 

which to base these estimates they are 

very uncertain. We solicit comments on 

the assumptions, data, estimates, and 

anticipated effects described throughout 

this analysis and section III. of this 

proposed rule. 

1. Effects on Applicable Manufacturers 

and Applicable GPOs 

Only applicable manufacturers that 

made reportable payments or other 

transfers of value, or have physicians (or 

immediate family members of 

physicians) holding ownership and 

investment interests, would be required 

to submit reports. Similarly, only 

applicable GPOs that have ownership or 

investment interests held by physicians 

(or immediate family members of 

physicians) would be required to submit 

reports. We estimate that approximately 

1,150 applicable manufacturers (150 

drug and biologic manufacturers and 

1,000 device and medical supply 

manufacturers) and 420 applicable 

GPOs would submit reports. Across 

applicable manufacturers we estimate 

that, on average, fewer than two FTE 

employees would be needed for each 

applicable manufacturer submitting a 

report, and that for smaller 

manufacturers the effort would be on 

average about half of an FTE employee. 

For applicable GPOs, we estimate that 


emcdonald on DSK5VPTVN1PROD with PROPOSALS2
78764 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Proposed Rules 

6 Information on the IOM recommendations may 

be found here: http://www.iom.edu/Reports/2009/ 

Conflict-of-Interest-in-Medical-Research-Educationand-Practice.aspx. 

on average an applicable GPO would 

dedicate 10 percent of an FTE employee 

to reporting under section 1128G of the 

Act. The rationale for these estimations 

is included in section III.A. of this 

proposed rule and Tables 1A and 1B 

provide our total cost estimates for 

applicable manufacturers and 

applicable GPOs to collect and submit 

the information required in section 

1128G of the Act. 

We note, and discuss in the benefits 

section later in this section, that the 

costs of applicable manufacturers may 

be partially offset because many 

companies are already required to report 

to States with similar disclosure 

requirements, but would no longer be so 

required to report the same information 

to States after the final rule is issued. In 

addition, a few large companies are 

already reporting similar information on 

a national level in order to comply with 

Corporate Integrity Agreements (CIAs) 

with HHS OIG. These companies may 

not have to invest as much to comply 

with the requirements in section 1128G 

of the Act, so the burden of these 

requirements may be lower for these 

companies. However, given the differing 

requirements for each State and CIA, 

and broad scope of section 1128G of the 

Act, we do not believe it is possible to 

approximate the lessened burden for 

entities already reporting. We seek 

comment on this interpretation and 

whether there is a more precise way to 

quantify these estimates. Further, we 

estimate that applicable manufacturers 

and applicable GPOs may face 

significant first year costs in scaling and 

staffing up to meet the reporting 

requirements. However, once systems 

are in place and reporting becomes 

routine, such costs would decrease in 

subsequent years. Therefore we estimate 

that the cost for year 2 would be 

approximately 25 percent less for 

applicable manufacturers and 

applicable GPOs. 

2. Effects on Physicians and Teaching 

Hospitals 

We also have estimated costs for 

physicians and teaching hospitals, since 

they would have an opportunity to 

review and correct the data submitted 

by applicable manufacturers. We 

estimated the number of physicians as 

defined in the statute, which includes a 

number of provider types, including 

doctors of medicine and osteopathy, 

dentists, podiatrists, optometrists, and 

licensed chiropractors. We also reduced 

these numbers to adjust for physicians 

with no financial relationships and 

those who would not review and correct 

the data submitted on their behalf. See 

the Table 6 for a breakdown of this 

calculation. Roughly 1,100 teaching 

hospitals meet the proposed definition 

of teaching hospital and would need to 

review the data submitted during the 

45-day review period. 

TABLE 6—NUMBER OF PHYSICIANS BY

TYPE

Physician type Number 

Doctor of Medicine/Doctor of Osteopathy .................................... 660,000 

Doctor of Dental Medicine ............ 150,000 

Doctor of Podiatric Medicine ........ 12,000 

Doctor of Optometry ..................... 35,000 

Licensed Chiropractors ................. *35,000 

Total ....................................... 892,000 

Adjustment for physicians with no 

reports (reduction by 25%) ....... 669,000 

Adjustment for physicians who do 

not review reports (year 1—reduction by 50%) ........................ 334,500 

Adjustment for physicians who do 

not review reports (year 2—reduction by 25%) ........................ 250,875 

*Reduced from 50,000 in BLS to account for 

licensure. 

We estimate that it would take on 

average one hour for physicians or their 

office staffs to review the information 

reported. For teaching hospitals, we 

estimate that, on average, it would take 

a representative from a teaching hospital 

10 hours to review the submitted data, 

ranging from 3 hours for small teaching 

hospitals that receive few payments or 

other transfer of value, to 60 hours for 

teaching hospitals that have lengthy 

disputes. Further we estimate that as 

physicians and teaching hospitals 

become accustomed to receiving these 

reports that the amount of time they 

spend reviewing them and interacting 

with applicable manufacturers and 

applicable GPOs would decrease in year 

2 and subsequent years of reporting. 

These assumptions are described in 

more detail in section III.B. of this 

proposed rule. Additionally, more 

detailed information regarding these 

costs is provided in Tables 3 and 4 of 

this proposed rule. 

3. Effects on the Medicare, Medicaid, 

and CHIP 

Although the Department proposes to 

administer this program through the 

Centers for Medicare and Medicaid 

Services, the proposed rules would have 

no direct effects on the Medicare, 

Medicaid, and CHIP. Reporting is 

required for all physicians and teaching 

hospitals regardless of their association 

with Medicare, Medicaid, or CHIP. 

Manufacturers are identified by whether 

the company has a product eligible for 

payment by Medicare, Medicaid or 

CHIP, but this does not affect whether 

or not the product may be covered 

under titles XVIII, XIX, or XXI of the 

Act. 

4. Benefits 

Collaboration among physicians, 

teaching hospitals, and industry 

manufacturers can contribute to the 

design and delivery of life-saving drugs 

and devices. While collaboration is 

beneficial to the continued innovation 

and improvement of our health care 

system, some payments from 

manufacturers to physicians and 

teaching hospitals can introduce 

conflicts of interests that may influence 

research, education, and clinical 

decision-making in ways that 

compromise clinical integrity and 

patient care, and lead to increased 

program costs. It is important to 

understand the extent and nature of 

relationships between physicians, 

teaching hospitals, and industry 

manufacturers through increased 

transparency, and to permit patients to 

make better informed decisions when 

choosing health care professionals and 

making treatment decisions. 

Additionally, it is important to develop 

a system that encourages constructive 

collaboration, while also discouraging 

relationships that threaten the 

underlying integrity of the health care 

system. 

Recent increases in both the amount 

and scope of industry involvement in 

medical research, education, and 

clinical practice has led to considerable 

scrutiny. Both the Institute of Medicine 

and other experts, such as the Medicare 

Payment Advisory Commission 

(MedPAC), have recommended 

enhanced disclosure and transparency 

to discourage the inappropriate use of 

financial incentives and lessen the risk 

of such incentives interfering with 

medical judgment and patient care. We 

recognize that disclosure is not 

sufficient to differentiate beneficial, 

legitimate financial relationships from 

those that create a conflict of interest or 

are otherwise improper. However, 

transparency can shed light on the 

nature and extent of relationships, and 

discourage inappropriate conflicts of 

interest.6

We have no empirical basis for 

estimating the frequency of such 

problems, the likelihood that 

transparent reporting will reduce them, 

or the likely resulting effects on 

reducing the costs of medical care. 


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However, we observe that the costs of 

the proposed rule for preparing reports 

are small in relation to the size of the 

affected industry sectors. 

Finally, section 1128G(d)(3) of the Act 

preempts State laws requiring the 

reporting of the same type of 

information as required by section 

1128G(a) of the Act. Applicable 

manufacturers and applicable GPOs 

subject to State requirements would not 

have to comply with multiple State 

requirements, and instead would only 

have to comply with a single Federal 

requirement with regard to the types of 

information required to be reported 

under 1128G(a) of the Act. This benefits 

applicable manufacturers and 

applicable GPOs by allowing them a 

single set of reporting requirements with 

which to comply, lessening the 

potential for multiple, conflicting State 

requirements. We do not have a basis for 

estimating the amount of savings that 

manufacturers would realize through 

immediate elimination of duplicative 

reporting, but these could be 

substantial. Future savings from the 

preemption could be far greater, since 

manufacturers were facing potentially 

dozens of State-mandated reporting 

systems, all differing in reporting 

requirements and detail. 

D. Alternatives Considered 

Reporting under section 1128G of the 

Act is required by law, which limits the 

other policy options available. Section 

1128G of the Act encourages 

transparency of financial relationships 

between physicians and teaching 

hospitals, and the pharmaceutical and 

device industry. Although, many of 

these relationships are beneficial, close 

relationships between manufacturers 

and prescribing providers can lead to 

conflicts of interests that may affect 

clinical decision-making. Increased 

transparency of these relationships tries 

to discourage inappropriate 

relationships, while maintaining the 

beneficial relationships. Public 

reporting and publication is the only 

identified option for obtaining this 

transparency and achieving the 

intensions of this provision. In 

developing this proposed rule, we tried 

to minimize the burden on reporting 

entities by trying to simplify the 

reporting requirements as much as 

possible within the statutory 

requirements. 

The statute is prescriptive as to the 

types of information required to be 

reported, and the ways in which it is 

required to be reported; however 

wherever possible we tried to allow 

flexibility in the reporting requirements. 

For example— 

• We do not propose to require the 

submission of an assumptions 

document for nature of payment 

categories, but allow applicable 

manufacturers and applicable GPOs to 

submit this voluntarily; and 

• The Secretary is allowed discretion 

to require the reporting of additional 

information, but we tried to use this 

discretion as sparingly as possible, in 

large part because of the strong desire 

expressed by stakeholders that we not 

expand reporting categories. For 

example, we considered asking 

applicable manufacturers and 

applicable GPOs to report the method of 

preferred communication and email 

address for physicians and teaching 

hospitals with which they have 

relationships, but have solicited 

comment on whether this would be 

useful or additionally burdensome. 

These examples demonstrate our 

effort to minimize the regulatory burden 

of this proposed rule and we solicit 

comments on all the alternatives 

considered in this section or elsewhere 

in the preamble. 

Throughout this preamble we have 

identified alternatives that are possible 

within the statutory framework. While 

we do not have precise cost estimates 

for these, our qualitative assessment of 

each is as follows. 

• We are considering not including 

the two proposed limitations on the 

definition of covered drug, device, 

biological, and medical supply. We 

propose limiting covered drugs and 

biologicals to those that require a 

prescription to be dispensed and 

limiting covered devices (including 

medical supplies) to those that require 

premarket approval by or notification to 

the FDA. These limitations may reduce 

the number of entities meeting the 

definition of applicable manufacturer 

and applicable GPO. However, we do 

not expect that removing these 

limitations would significantly change 

the regulatory burden because we do not 

expect many companies that 

manufacture only these exempt 

products to have significant 

relationships with physicians and 

teaching hospitals. As a result, if the 

companies were included as applicable 

manufacturers, they would likely not be 

required to file a report, or would only 

have a few relationships to report, thus 

minimizing the burden. We request 

information on the potential cost and 

transparency implications of including 

these products. 

• We propose to define ‘‘common 

ownership’’ as covering any ownership 

portion of two or more entities, but are 

also considering an alternate 

interpretation that would limit the 

common ownership definition to 

circumstances where the same 

individual, individuals, entity, or 

entities own 5 percent or more of total 

ownership in two or more entities. We 

solicit information on the potential 

implications of this option or of 

variations for ease of implementation, 

scope of covered entities or 

transparency implications. 

• We are also considering whether we 

should require that applicable 

manufacturers report another unique 

identifier, such as State license number, 

for physicians who are identified but do 

not have an NPI. Such an approach 

would provide additional information 

by which to cross-reference physicians 

who do not have an NPI, but it may be 

confusing to interpret if it is not 

captured in a consistent manner. 

Instead, we are proposing that 

applicable manufacturers may leave the 

NPI blank for physicians that do not 

have an NPI. We seek comments on this 

alternative. 

• The Congress gave the Secretary 

authority to define a GPO and also 

specified that such organizations would 

include organizations that purchase 

covered drugs, devices, biologicals, and 

medical supplies, as well as 

organizations that arrange for or 

negotiate the purchase of covered drugs, 

devices, biologicals, and medical 

supplies. We therefore interpret the 

statute to encompass entities that 

purchase covered drugs, devices, 

biological, and medical supplies for 

resale or distribution to groups of 

individuals or entities. This would 

include physician owned distributors 

(PODs) of covered drugs, devices, 

biological, and medical supplies. We 

welcome comment on this 

interpretation and on whether there is 

some variation that would reasonably 

distinguish entities according to 

potential for improper influence. 

• We are proposing, as required by 

statute, a 45-day review period during 

which applicable manufacturers and 

GPOs, covered recipients, and physician 

owners or investors can review the data 

before it is made available to the public. 

As discussed earlier in the preamble, 

there are some complexities involved, 

especially regarding the latter two 

groups. We request comments on 

alternative time periods and, especially, 

on possible alternatives to this approach 

that might better serve the interest of all 

concerned in publication of accurate 

information. For example, should there 

be a two-step process, in which the 

information when first released is 

labeled provisional, and ‘‘final’’ data is 

labeled as such after a second 

opportunity for correction? As 


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previously discussed, what about mail 

or email options? Should applicable 

manufacturers and applicable GPOs be 

required to inquire of covered recipients 

and physician owners or investors of 

their opportunity to review the data? We 

welcome comments on any approach 

that minimizes costs or improves 

accuracy of the information. We also 

would welcome information on the 

likely frequency of cases in which 

additional communication methods 

would be necessary, useful, costly, 

inexpensive, or otherwise better or 

worse. 

As these alternatives suggest, we 

welcome ideas on how to improve the 

quality and utility of the program, while 

minimizing unnecessary costs. We 

particularly welcome comments that 

can provide not only better methods, 

but also ways to quantify the potential 

savings from those methods. 

E. Accounting Statement (Table 7) 

The Office of Management and 

Budget, in Circular A–40, requires an 

accounting statement for rules with 

significant economic impacts. The table 

that follows shows the costs we have 

estimated by the first year, the second 

year, and annualized over 10 years. We 

assume that future outlay costs may be 

similar to those costs experienced in 

year two. We envision that the number 

of financial relationships required to be 

reported will remain similar, so the cost 

of reporting the information will not 

change significantly. However, we 

welcome information on the burden in 

these future years and seek comment on 

our assumptions for the burden beyond 

year two. 

TABLE 7—ACCOUNTING STATEMENT

Category Costs 

CY 2013 Monetized Costs ........................ Estimated increase in expenditures of $224 million for year one for the implementation of section 

1128G of the Act. 

CY 2014 Annualized Monetized Costs ..... Estimated increase in expenditures of $163 million for year two and beyond for the implementation 

of section 1128G of the Act. 

CY 2013–CY 2022 Annualized Monetized 

Costs.

Estimated increase in expenditures of $170 million at discount rate of 3% or $171 million at discount 

rate of 7%. 

From Whom To Whom? ........................... Increased costs for manufacturers and GPOs of covered drugs, devices, biologicals, and medical 

supplies, as well as physicians and teaching hospitals. 

Benefits ..................................................... Public reporting of the extent and nature of relationships between physicians, teaching hospitals, and 

industry manufacturers through increased transparency will permit patients to make better informed decisions when choosing health care professionals and making treatment decisions, and 

deter inappropriate financial relationships. 

F. Conclusions 

Section 1128G of the Act requires 

applicable manufacturers to report 

annually to CMS certain payments or 

transfers of value provided to 

physicians or teaching hospitals. In 

addition, applicable GPOs are required 

to report annually certain physician 

ownership interests. We estimate that 

the impact of these reporting 

requirements will be about $224 million 

for the first year of reporting, and 

$163 million for the second year and 

annually thereafter. As we have 

indicated throughout, these are rough 

estimates and subject to considerable 

uncertainty. Better estimates might well 

be 25 percent higher or lower. 

Nonetheless, we believe that the public 

comment period offers an excellent 

opportunity for all stakeholders to 

consider alternatives and to present 

quantitative or qualitative information 

that will enable us to both improve the 

effectiveness and lower the costs of the 

final rule. Therefore, we solicit 

comments on the analysis and 

assumptions provided throughout this 

preamble and in the alternatives section 

of the regulatory impact analysis in 

particular. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 402 

Administrative practice and 

procedure, Medicaid, Medicare, 

Penalties. 

42 CFR Part 403 

Grant programs—health, Health 

insurance, Hospitals, Intergovernmental 

relations, Medicare, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

PART 402—CIVIL MONEY PENALTIES, 

ASSESSMENTS, AND EXCLUSIONS 

Subpart A—General Provisions 

1. The authority citation for part 402 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

2. Section 402.1 is amended as 

follows: 

A. In paragraph (c) introductory text, 

by removing the reference ‘‘(c)(33)’’ and 

adding the reference ‘‘(c)(34)’’ in its 

place. 

B. Adding a new paragraph (c)(34). 

The addition reads as follows: 

§ 402.1 Basis and scope. 

* * * * * 

(c) * * * 

(34) Section 1128G (b)(1) and (2) of 

the Act—Any applicable manufacturer 

or applicable group purchasing 

organization that fails to report 

information to CMS as required under 

Part 403 Subpart I. 

* * * * * 

3. Section 402.105 is amended as 

follows: 

A. In paragraph (a), by removing the 

reference to ‘‘paragraphs (b) through (g)’’ 

and adding the reference ‘‘paragraphs 

(b) through (h)’’ in its place. 

B. Adding paragraphs (d)(5) and (h). 

The additions read as follows: 

§ 402.105 Amount of penalty. 

* * * * * 

(d) * * * 

(5) CMS or OIG may impose a penalty 

of not more than $10,000 for each 

failure of an applicable manufacturer to 

report timely, accurately, and 

completely a payment or other transfer 

of value, or each failure of an applicable 

manufacturer or an applicable group 

purchasing organization to report 

timely, accurately, and completely an 

ownership or investment interest 

(§ 402.1(c)(34)). The total penalty 

imposed with respect to each annual 


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submission of information will not 

exceed $150,000. 

* * * * * 

(h) $100,000. CMS or OIG may impose 

a penalty of not more than $100,000 for 

each knowing failure of an applicable 

manufacturer to report timely, 

accurately and completely a payment or 

other transfer of value, or each knowing 

failure of an applicable manufacturer or 

an applicable group purchasing 

organization to report timely an 

ownership or investment interest 

(§ 402.1(c)(34)). The total penalty 

imposed with respect to each annual 

submission of information will not 

exceed $1,000,000. 

PART 403—SPECIAL PROGRAMS AND 

PROJECTS 

4. The authority citation for part 403 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

5. Subpart I is added to part 403 to 

read as follows: 

Subpart I—Transparency Reports and 

Reporting of Physician Ownership or 

Investment Interests 

Sec. 

403.900 Purpose and scope. 

403.902 Definitions. 

403.904 Reports of payments or other 

transfers of value. 

403.906 Reports of physician ownership 

and investment interests. 

403.908 Procedures for electronic 

submission of reports. 

403.910 Delayed publication for payments 

made under product research or 

development agreements and clinical 

investigations. 

403.912 Penalties for failure to report. 

403.914 Preemption of State laws. 

Subpart I—Transparency Reports and 

Reporting of Physician Ownership or 

Investment Interests 

§ 403.900 Purpose and scope. 

The regulations in this subpart 

implement section 1128G of the Act. 

These regulations apply to applicable 

manufacturers and applicable group 

purchasing organizations and describe 

the requirements and procedures for 

applicable manufacturers to report 

payments or other transfers of value to 

physicians and teaching hospitals, as 

well as for applicable manufacturers 

and applicable group purchasing 

organizations to report ownership or 

investment interests held by physicians 

or immediate family members of 

physicians. 

§ 403.902 Definitions. 

Applicable group purchasing 

organization means an entity that— 

(1) Operates in the United States, or 

in a territory, possession or 

commonwealth of the United States; 

and 

(2) Purchases, arranges for or 

negotiates the purchase of a covered 

drug, device, biological, or medical 

supply for a group of individuals or 

entities, and not solely for use by the 

entity itself. 

Applicable manufacturer means an 

entity that is— 

(1) Engaged in the production, 

preparation, propagation, compounding, 

or conversion of a covered drug, device, 

biological, or medical supply for sale or 

distribution in the United States, or in 

a territory, possession, or 

commonwealth of the United States; or 

(2) Under common ownership with an 

entity in paragraph (1) of this definition, 

which provides assistance or support to 

such entity with respect to the 

production, preparation, propagation, 

compounding, conversion, marketing, 

promotion, sale, or distribution of a 

covered drug, device, biological, or 

medical supply for sale and distribution 

in the United States, or in a territory, 

possession, or commonwealth of the 

United States. 

Charity care means services provided 

by a covered recipient specifically for a 

patient who cannot pay, where the 

covered recipient neither receives, nor 

expects to receive, payment because of 

the patient’s inability to pay. 

Charitable contribution includes, but 

is not limited to, any payment or 

transfer of value made to an 

organization with tax-exempt status 

under the Internal Revenue Code of 

1986. 

Clinical investigation means any 

experiment involving one or more 

human subjects, or materials derived 

from human subjects, in which a drug 

or device is administered, dispensed, or 

used. 

Common ownership means entities 

that are owned, in whole or in part, by 

the same individual, individuals, entity, 

or entities, directly or indirectly. This 

includes, but is not limited to, parent 

corporations, direct and indirect 

subsidiaries, and brother or sister 

corporations. 

Covered device means any device for 

which payment is available under Title 

XVIII of the Act or under a State plan 

under Title XIX or XXI of the Act (or a 

waiver of such plan), either separately, 

as part of a fee schedule payment, or as 

part of a composite payment rate (for 

example, the hospital inpatient 

prospective payment system or the 

hospital outpatient prospective payment 

system). This definition is limited to 

those devices (including medical 

supplies) that, by law, require premarket 

approval by or premarket notification to 

the Food and Drug Administration. 

Covered drug, device, biological, or 

medical supply means any drug, device, 

biological, or medical supply for which 

payment is available under Title XVIII 

of the Act or under a State plan under 

Title XIX or XXI of the Act (or a waiver 

of such plan), either separately, as part 

of a fee schedule payment, or as part of 

a composite payment rate (for example, 

the hospital inpatient prospective 

payment system or the hospital 

outpatient prospective payment system). 

With respect to a drug or biological, this 

definition is limited to those drug and 

biological products that, by law, require 

a prescription to be dispensed. With 

respect to a device or medical supply, 

this definition is limited to those 

devices (including medical supplies) 

that, by law, require premarket approval 

by or premarket notification to the Food 

and Drug Administration. 

Covered recipient means— 

(1) Any physician, except for a 

physician who is an employee (as 

defined in section 1877(h)(2) of the Act) 

of an applicable manufacturer; or 

(2) A teaching hospital, which is any 

institution that received a payment 

under 1886(d)(5)(B), 1886(h), or 1886(s) 

of the Act during the last calendar year 

for which such information is available. 

Employee means an individual who is 

considered to be ‘‘employed by’’ or an 

‘‘employee’’ of an entity if the 

individual would be considered to be an 

employee of the entity under the usual 

common law rules applicable in 

determining the employer-employee 

relationship (as applied for purposes of 

section 3121(d)(2) of the Internal 

Revenue Code of 1986). 

Immediate family member means any 

of the following: 

(1) Spouse. 

(2) Natural or adoptive parent, child, 

or sibling. 

(3) Stepparent, stepchild, stepbrother, 

or stepsister. 

(4) Father-, mother-, daughter-, son-, 

brother-, or sister-in-law. 

(5) Grandparent or grandchild. 

(6) Spouse of a grandparent or 

grandchild. 

Know, knowing, or knowingly. 

(1) Means that a person, with respect to 

information— 

(i) Has actual knowledge of the 

information; 

(ii) Acts in deliberate ignorance of the 

truth or falsity of the information; or 

(iii) Acts in reckless disregard of the 

truth or falsity of the information; and 


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(2) Requires no proof of a specific 

intent to defraud. 

Ownership or investment interest. 

(1) Includes, but is not limited to— 

(i) Stock, stock option(s) (other than 

those received as compensation, until 

they are exercised); 

(ii) Partnership share(s); 

(iii) Limited liability company 

membership(s); 

(iv) Loans, bonds, or other financial 

instruments that are secured with an 

entity’s property or revenue or a portion 

of that property or revenue. 

(2) May be direct or indirect and 

through debt, equity or other means; 

and 

(3) Must not include an ownership or 

investment interest in a publicly traded 

security or mutual fund, as described in 

section 1877(c) of the Act, nor any of the 

following: 

(i) An interest in an applicable 

manufacturer or applicable group 

purchasing organization that arises from 

a retirement plan offered by the 

applicable manufacturer or applicable 

group purchasing organization to the 

physician (or a member of his or her 

immediate family) through the 

physician’s (or immediate family 

member’s) employment with that 

applicable manufacturer or applicable 

group purchasing organization. 

(ii) Stock options and convertible 

securities received as compensation, 

until the stock options are exercised or 

the convertible securities are converted 

to equity. 

(iii) An unsecured loan subordinated 

to a credit facility. 

Physician has the same meaning given 

that term in section 1861(r) of the Act. 

§ 403.904 Reports of payments or other 

transfers of value. 

(a) General rule. Payments or other 

transfers of value provided to any 

covered recipient, including payments 

to another individual or entity at the 

request of (or designated on behalf of) a 

covered recipient, by an applicable 

manufacturer or a third party (on behalf 

of an applicable manufacturer) must be 

reported to CMS by the applicable 

manufacturer on an annual basis. 

(b) Required information to report. A 

report must contain all of the following 

information for each payment or other 

transfer of value: 

(1) Name of the covered recipient. If 

the payment or other transfer of value 

was provided to another individual or 

entity at the request of (or designated on 

behalf of) any covered recipient, the 

payment or transfer of value must be 

disclosed in the name of that covered 

recipient. 

(2) Business address of the covered 

recipient, including street address, suite 

or office number (if applicable), city, 

state, and ZIP code. 

(3) In the case of a covered recipient 

who is a physician, the specialty and 

National Provider Identifier (if 

applicable) of the covered recipient. 

(4) Amount of each payment or other 

transfer of value to the covered 

recipient. 

(5) Date of each payment or transfer 

of value to the covered recipient. 

(6) Form of each payment or other 

transfer of value, as described in 

paragraph (c) of this section. 

(7) Nature of each payment or other 

transfer of value, as described in 

paragraph (d) of this section. 

(8) If a payment or other transfer of 

value is related to marketing, education, 

or research specific to a covered drug, 

device, biological, or medical supply, 

the name under which the covered drug, 

device, biological, or medical supply is 

marketed. If the marketed name has not 

yet been selected, applicable 

manufacturer must indicate the 

scientific name. Applicable 

manufacturers may only report a single 

covered drug, device, biological or 

medical supply for each payment or 

other transfer of value. 

(9) The applicable manufacturer must 

indicate that a payment or other transfer 

of value is subject to delayed 

publication, if the payment or other 

transfer of value is made under any of 

the following arrangements: 

(i) In accordance with a product 

research or development agreement for 

services furnished in connection with 

research on or development of a new 

drug, device, biological, or medical 

supply or a new application of an 

existing drug, device, biological or 

medical supply. 

(ii) In connection with a clinical 

investigation regarding a new drug, 

device, biological, or medical supply. 

(10) If the payment or other transfer 

of value is made to an entity or 

individual at the request of (or 

designated on behalf of) a covered 

recipient, the name of the other 

individual or entity that receives the 

payment or other transfer of value. 

(11) Whether the payment or other 

transfer of value was provided to a 

physician who holds an ownership or 

investment interest (as defined 

§ 403.902) in the applicable 

manufacturer. 

(c) Reporting the form of payment or 

other transfer of value. An applicable 

manufacturer must report each payment 

or transfer of value, or separable part of 

that payment or transfer of value, as 

taking one of the following forms, using 

the designation that best describes the 

form of the payment or other transfer of 

value, or separable part of that payment 

or other transfer of value. Each of the 

following terms has its dictionary 

definition: 

(1) Cash or cash equivalent. 

(2) In-kind items or services. 

(3) Stock, a stock option, or any other 

ownership interest, dividend, profit, or 

other return on investment. 

(d) Reporting the nature of the 

payment or other transfer of value—(1) 

General rule. The categories describing 

the nature of a payment or other transfer 

of value are mutually exclusive. 

(2) Rules for categorizing natures of 

payment. An applicable manufacturer 

must categorize each payment or other 

transfer of value, or separable part of 

that payment or transfer of value, in one 

of the categories listed in this paragraph 

(d)(2), using the designation that best 

describes the nature of the payment or 

other transfer of value, or separable part 

of that payment or other transfer of 

value. If a payment or other transfer of 

value could reasonably be considered as 

falling within more than one category, 

the applicable manufacturer should 

select one category that it deems to most 

accurately describe the nature of the 

payment or transfer of value. Each of the 

following terms has its dictionary 

definition: 

(i) Consulting fee. 

(ii) Compensation for services other 

than consulting. 

(iii) Honoraria. 

(iv) Gift. 

(v) Entertainment. 

(vi) Food and beverage. 

(vii) Travel and lodging. 

(viii) Education. 

(ix) Research. 

(x) Charitable contribution. 

(xii) Royalty or license. 

(xiii) Current or prospective 

ownership or investment interests. 

(xiv) Direct compensation for serving 

as a faculty or as a speaker for a medical 

education program. 

(xv) Grant. 

(xvi) Other. 

(e) Special rules for research 

payments. (1) Applicable manufacturers 

must designate each research payment 

or transfer of value as direct research or 

indirect research. 

(i) Direct research, is a payment or 

other transfer of value provided to a 

covered entity directly by an applicable 

manufacturer or through a contract 

research organization (or similar entity). 

(ii) Indirect research, is a payment or 

other transfer of value provided by an 

applicable manufacturer (including 

through a contract research organization 

or similar entity) to a clinic, hospital, or 

other institution conducting the 

research, and that clinic, hospital, or 


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other institution conducting the 

research in turn pays the physician 

covered recipient (or multiple physician 

covered recipients) serving as the 

principal investigator(s). 

(2) All payments or other transfers of 

value designated as research (direct or 

indirect) must be subject to a written 

agreement and research protocol. Direct 

or indirect research payments (whether 

made directly by an applicable 

manufacturer or through a clinical 

research organization or similar entity) 

must be reported as follows: 

(i) For indirect research, individually 

under the name(s) and NPI(s) (if 

applicable) of the physician covered 

recipient principal investigator(s). The 

total amount paid to the clinic, hospital 

or other institution conducting the 

research, must be reported for each 

principal investigator. 

(ii) For direct research, individually 

under the name(s) and NPI(s) (if 

applicable) of the covered recipient. The 

total must indicate the amount the 

covered recipient received. 

(3) If payment is made to a teaching 

hospital, the payment to the teaching 

hospital must be reported as follows: 

(i) Direct research under the name of 

the teaching hospital. 

(ii) Indirect research under the 

name(s) and NPI(s) (if applicable) of the 

physician covered recipient serving as 

principal investigator(s). 

(4) For direct or indirect payments 

provided to physician covered 

recipients, CMS reports the total 

payment amount separately from other 

payments or transfers of value. 

(f) Exclusions from reporting. The 

following types of payments or other 

transfers of value are excluded from the 

reporting requirements specified in this 

section: 

(1) Transfers of value made indirectly 

to a covered recipient through a third 

party in cases when the applicable 

manufacturer is unaware of the identity 

of the covered recipient. An applicable 

manufacturer is unaware of the identity 

of a covered recipient if the applicable 

manufacturer does not know (as defined 

in § 403.902) the identity of the covered 

recipient. 

(2)(i) For CY 2012, transfers of value 

less than $10, unless the aggregate 

amount transferred to, requested by, or 

designated on behalf of the covered 

recipient exceeds $100 in a calendar 

year. 

(ii) For CY 2013 and subsequent 

calendar years, to determine if transfers 

of value are excluded under this section, 

the dollar amounts specified in 

paragraph (f)(2)(i) of this paragraph 

must be increased by the same 

percentage as the percentage increase in 

the consumer price index for all urban 

consumers (all items; U.S. city average) 

for the 12-month period ending with 

June of the previous year. 

(3) Product samples that are not 

intended to be sold and are intended for 

patient use. 

(4) Educational materials that directly 

benefit patients or are intended for 

patient use. 

(5) The loan of a covered device for 

a short-term trial period, not to exceed 

90 days, to permit evaluation of the 

covered device by the covered recipient. 

(6) Items or services provided under 

a contractual warranty, including the 

replacement of a covered device, where 

the terms of the warranty are set forth 

in the purchase or lease agreement for 

the covered device. 

(7) A transfer of anything of value to 

a covered recipient when the covered 

recipient is a patient and not acting in 

the professional capacity of a covered 

recipient. 

(8) Discounts, including rebates. 

(9) In-kind items used for the 

provision of charity care. 

(10) A dividend or other profit 

distribution from, or ownership or 

investment interest in, a publicly traded 

security or mutual fund. 

(11) In the case of an applicable 

manufacturer who offers a self-insured 

plan, payments for the provision of 

health care to employees under the 

plan. 

(12) In the case of a covered recipient 

who is a licensed non-medical 

professional, a transfer of anything of 

value to the covered recipient if the 

transfer is payment solely for the nonmedical professional services of the 

licensed non-medical professional. 

(13) In the case of a covered recipient 

who is a physician, a transfer of 

anything of value to the covered 

recipient if the transfer is payment 

solely for the services of the covered 

recipient with respect to a civil or 

criminal action or an administrative 

proceeding. 

§ 403.906 Reports of physician ownership 

and investment interests. 

(a) General rule. Each applicable 

manufacturer and applicable group 

purchasing organization must report to 

CMS on an annual basis all ownership 

or investment interests in the applicable 

manufacturer or applicable group 

purchasing organization that were held 

by a physician or an immediate family 

member of a physician during the 

preceding year. 

(b) Identifying information. Reports 

on physician ownership or investment 

interests must include the following 

identifying information: 

(1) Name of the physician, and 

whether the ownership or investment 

interest is held by an immediate family 

member of the physician. 

(2) Business address of physician, 

including street address, suite or office 

number (if applicable), city, State, and 

ZIP code. 

(3) The physician owner’s specialty 

and NPI (if applicable). If the ownership 

or investment interest is held by the 

immediate family member of a 

physician, the physician’s specialty and 

National Provider Identifier must be 

reported. 

(4) Dollar amount invested by each 

physician or immediate family member 

of the physician. 

(5) Value and terms of each 

ownership or investment interest. 

(6) For any payment or other transfer 

of value provided to a physician holding 

an ownership or investment interest (or 

to an entity or individual at the request 

of, or designated on behalf of, a 

physician holding such an ownership or 

investment interest), an applicable 

manufacturer or applicable group 

purchasing organization must report the 

information requested in § 403.904(b). 

The same exclusions from reporting in 

§ 403.904(f) apply to payments or other 

transfers of value made by applicable 

manufacturers and applicable group 

purchasing organizations to physician 

owners or investors under this section. 

§ 403.908 Procedures for electronic 

submission of reports. 

(a) File format. Reports required 

under this subpart must be 

electronically submitted as comma 

separated value (CSV) files to CMS by 

March 31, 2013, and by the 90th day of 

each subsequent calendar year. 

(b) General rules. (1) If an applicable 

manufacturer made no reportable 

payments or transfers of value in the 

previous calendar year, nor had any 

reportable ownership or investment 

interests held by a physician or a 

physician’s immediate family member 

(as defined in § 403.902) during the 

previous calendar year, the applicable 

manufacturer is not required to file a 

report. 

(2) If an applicable group purchasing 

organization had no reportable 

ownership or investment interests held 

by a physician or physician’s immediate 

family member during the previous 

calendar year, the applicable group 

purchasing organization is not required 

to file a report. 

(c) Registration. Any applicable 

manufacturer or applicable group 

purchasing organization that is required 

to report under this subpart must 

register with CMS before March 31, 


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2013. During registration, applicable 

manufacturers and applicable group 

purchasing organizations must name a 

point of contact with appropriate 

contact information. 

(d) Other rules. (1) An applicable 

manufacturer under paragraph (1) of the 

definition of ‘‘applicable manufacturer’’ 

in § 403.902 and an entity (or entities) 

under common ownership with the 

applicable manufacturer under 

paragraph (2) of the definition of 

‘‘applicable manufacturer’’ may, but are 

not required to, file a consolidated 

report of payments or other transfers of 

value to covered recipients, and 

physician ownership or investment 

interests. 

(2) If an applicable manufacturer and 

an entity (or entities) under common 

ownership choose to file a consolidated 

report, the report must provide the 

names of each applicable manufacturer 

and entity (or entities) under common 

ownership that the report covers. It is 

up to the discretion of the applicable 

manufacturer and entity (or entities) 

under common ownership whether or 

not specific payments need to be 

identified to the entity that provided the 

payment. 

(3) If a payment or other transfer of 

value is provided in accordance with a 

joint venture or other cooperative 

agreement between two or more 

applicable manufacturers, the payment 

or other transfer of value must be 

reported— 

(i) In the name of the applicable 

manufacturer that actually furnished the 

payment or other transfer of value to the 

covered recipient, unless the terms of a 

written agreement between the 

applicable manufacturers specifically 

require otherwise, so long as the 

agreement requires that all payments or 

other transfers of value in accordance 

with the arrangement are reported by 

one of the applicable manufacturers; 

and 

(ii) Only once by one applicable 

manufacturer. 

(e) Errors or omissions. If an 

applicable manufacturer or applicable 

group purchasing organization discovers 

an error or omission in its annual report, 

it must submit corrected information to 

CMS immediately upon discovery of the 

error or omission. 

(f) Attestation. Each report, including 

any subsequent corrections to a filed 

report, must include a certification by 

the Chief Executive Officer, Chief 

Financial Officer, or Chief Compliance 

Officer of the applicable manufacturer 

or applicable group purchasing 

organization that the information 

submitted is true, correct, and complete 

to the best of his or her knowledge and 

belief. 

(g) 45-day review period for review 

and error correction—(1) General rule. 

Applicable manufacturers, applicable 

group purchasing organizations, covered 

recipients, and physician owners or 

investors must have an opportunity to 

review and submit corrections to the 

information submitted for a period of 

not less than 45-days before CMS makes 

the information available to the public. 

In no case may this 45-day period for 

review and submission of corrections 

prevent the information from being 

made available to the public. 

(2) Notification. CMS notifies the 

applicable manufacturers, applicable 

group purchasing organizations, covered 

recipients, and physician owners or 

investors when the reported information 

is ready for review. 

(i) Applicable manufacturers and 

applicable group purchasing 

organizations are notified through the 

point of contact the applicable 

manufacturer or applicable group 

purchasing organization identified 

during registration. 

(ii) Physicians and teaching 

hospitals— 

(A) Are notified using a CMS’ list 

serve and through a posting. 

(B) May also register with CMS to 

receive notification about the review 

processes. 

(iii) The 45-day review period begins 

on the date of this notification, but in no 

case may the 45-day review period 

begin later than August 16, 2013, or May 

16 of any subsequent year. 

(3) Process. (i) An applicable 

manufacturer, applicable group 

purchasing organization, covered 

recipient, and a physician owner or 

investor may log into a secure Web site 

where each applicable manufacturer, 

applicable group purchasing 

organization, covered recipient, and 

physician owner is able to view the 

information reported specific to it. 

(ii) If the applicable manufacturer, 

applicable group purchasing 

organization, covered recipient, or 

physician owner or investor agrees with 

the information reported, the applicable 

manufacturer, applicable group 

purchasing organization, covered 

recipient, or physician owner or 

investor may electronically certify that 

the information reported is accurate. 

(4) Data disputes. (i) Upon request by 

a covered recipient, physician owner or 

investor, CMS provides the point of 

contact information for the applicable 

manufacturer or applicable group 

purchasing organization in the event 

that the covered recipient or physician 

owner disputes the reported data. 

(ii) The covered recipient or physician 

owner or investor must directly contact 

the applicable manufacturer or 

applicable group purchasing 

organization to attempt to resolve any 

dispute regarding a reported payment or 

other transfer of value or an ownership 

or investment interest. 

(iii) At the discretion of the parties 

involved, one entity must notify CMS 

that a specific payment or other transfer 

of value, or ownership or investment 

interest is disputed and the outcome of 

the dispute at the end of the 45-day 

review period. 

(iv) If the dispute is not resolved by 

the end of the 45-day review period, 

CMS publicly reports both the 

applicable manufacturer’s or applicable 

group purchasing organization’s version 

of the payment or other transfer of 

value, or ownership or investment 

interest data, as well as the covered 

recipient’s or physician owner’s version 

of the payment or other transfer of 

value, or ownership or investment 

interest data. 

§ 403.910 Delayed publication for 

payments made under product research or 

development agreements and clinical 

investigations. 

(a) General rule. In the case of 

payments or other transfers of value 

made to a covered recipient by an 

applicable manufacturer under a 

product research or development 

agreement, or in connection with a 

clinical investigation, payments may be 

delayed from publication on the Web 

site. Publication of a payment or other 

transfer of value is delayed when made 

in connection with the following 

instances: 

(1) Research on or development of a 

new drug, device, biological, or medical 

supply or a new application of an 

existing drug, device, biological, or 

medical supply. 

(2) Clinical investigations regarding a 

new drug, device, biological, or medical 

supply. 

(b) Research or development 

agreement. The research or 

development agreement must include a 

written agreement and research protocol 

between the applicable manufacturer 

and covered recipient. 

(c) Date of publication. Payments 

must be reported to CMS on the first 

reporting date following the year in 

which they occur, but CMS does not 

publicly post the payment until the first 

annual publication date after the earlier 

of the following: 

(1) The date of the approval, licensure 

or clearance of the covered drug, device, 

biological, or medical supply by the 

Food and Drug Administration. 


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(2) Four calendar years after the date 

the payment or other transfer of value 

was made. 

(d) Notification of delayed 

publication. It is the responsibility of 

the applicable manufacturer to notify 

CMS during subsequent annual 

submissions, if the new drug, device, 

biological or medical supply, with 

which the payment is associated, is 

approved by the FDA. 

(1) An applicable manufacturer must 

indicate on its report to CMS whether a 

payment or other transfer of value is 

eligible for a delay in publication. The 

absence of this indication in the report 

results in CMS posting all payments 

publicly in the first year of public 

reporting. 

(2) An applicable manufacturer must 

continue to indicate annually in its 

report that FDA approval of the new 

drug, device, biological or medical 

supply, with which the payment is 

associated, is pending. 

(3) Failure to notify CMS when FDA 

approval occurs may be considered 

failure to report, and the applicable 

manufacturer may be subject to civil 

monetary penalties. 

(4) If, after 4 years from the date of a 

payment first appearing in a report to 

CMS, there is an indication in a report 

that the payment is subject to delayed 

reporting, it is reported regardless of the 

indication. 

§ 403.912 Penalties for failure to report. 

(a) Failure to report. (1) Any 

applicable manufacturer or applicable 

group purchasing organization that fails 

to accurately and completely submit the 

information required in accordance with 

the rules established under this subpart 

in a timely manner is subject to a civil 

monetary penalty of not less than 

$1,000, but not more than $10,000, for 

each payment or other transfer of value 

or ownership or investment interest not 

reported. 

(2) The total amount of civil monetary 

penalties imposed on an applicable 

manufacturer or applicable group 

purchasing organization under this 

subpart with respect to each annual 

submission of information will not 

exceed $150,000. 

(b) Knowing failure to report. (1) Any 

applicable manufacturer or applicable 

group purchasing organization that 

knowingly fails to accurately and 

completely submit the information 

required in accordance with the rules 

established under this subpart in a 

timely manner is subject to a civil 

monetary penalty of not less than 

$10,000, but not more than $100,000, for 

each payment or other transfer of value 

or ownership or investment interest not 

reported. 

(2) The total amount of civil monetary 

penalties imposed on an applicable 

manufacturer or group purchasing 

organization for knowing failure to 

report under this subpart with respect to 

each annual submission of information 

will not exceed $1,000,000. 

(c) Determinations regarding the 

amount of civil monetary penalties. In 

determining the amount of the civil 

monetary penalty, factors to be 

considered include, but are not limited 

to, the following: 

(1) The length of time the applicable 

manufacturer or applicable group 

purchasing organization failed to report, 

including the length of time the 

applicable manufacturer and applicable 

GPO knew of the payment or other 

transfer of value, or ownership or 

investment interest. 

(2) Amount of the payment the 

applicable manufacturer or applicable 

group purchasing organization failed to 

report. 

(3) Level of culpability. 

(4) Nature and amount of information 

reported in error. 

(5) Degree of diligence exercised in 

correcting information reported in error. 

(d) Record retention and audits— (1) 

Maintenance of records. (i) Applicable 

manufacturers and applicable group 

purchasing organizations must maintain 

all books, contracts, records, documents, 

and other evidence sufficient to enable 

the audit, evaluation, and inspection of 

the applicable manufacturer’s or 

applicable group purchasing 

organization’s compliance with the 

requirement to accurately and 

completely submit information in a 

timely manner in accordance with the 

rules established under this subpart. 

(ii) The items described in paragraph 

(d)(1)(i) of this section must be 

maintained for a period of at least 

5 years from the date the payment or 

other transfer of value, or ownership or 

investment interest is published 

publicly on the Web site. 

(2) Audit. HHS, CMS, OIG or their 

designees may audit, inspect, and 

evaluate any books, contracts, records, 

documents, and other evidence of 

applicable manufacturers and 

applicable group purchasing 

organizations that pertain to their 

compliance with the requirement to 

accurately and completely submit 

information in a timely manner in 

accordance with the rules established 

under this subpart. 

(3) The record retention and audit 

requirements in this subpart are in 

addition to, and do not limit, any other 

applicable requirements that may 

obligate applicable manufacturers or 

applicable group purchasing 

organizations to retain and allow access 

to records. 

§ 403.914 Preemption of State laws. 

(a) General rule. In the case of a 

payment or other transfer of value 

provided by an applicable manufacturer 

to a covered recipient, this subpart 

preempts any statute or regulation of a 

State or political subdivision of a State 

that requires an applicable manufacturer 

to disclose or report, in any format, the 

type of information regarding the 

payment or other transfer of value 

required to be reported under this 

subpart. 

(b) Information collected for public 

health purposes. (1) Information 

required to be reported to a Federal, 

State, or local governmental agency for 

public health surveillance, 

investigation, or other public health 

purposes or health oversight purposes 

must still be reported to appropriate 

Federal, State, or local governmental 

agencies, regardless of whether the same 

information is required to be reported 

under this subpart. 

(2) Governmental agencies include, 

but are not limited to, the following: 

(i) Agencies that are charged with 

preventing or controlling disease, 

injury, disability. 

(ii) Agencies that conduct oversight 

activities authorized by law, including 

audits, investigations, inspections, 

licensure or disciplinary actions, or 

other activities necessary for oversight 

of the health care system. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program; Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: November 9, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: December 13, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

BILLING CODE 4120–01–P 


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[FR Doc. 2011–32244 Filed 12–14–11; 4:15 pm] 

BILLING CODE 4120–01–C 


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