DEPARTMENT OF HEALTH AND HUMAN SERVICES FINAL RULE
Transparency Reports and Reporting of Physician Ownership or
February 2013 Investment Interests
On February 1, 2013 the Department of Health and Human Services (HHS) issued a final rule requiring physicians
and teaching hospitals to submit annual reports to the Secretary detailing certain payments and gifts they
receive from pharmaceutical and medical companies. The rule details which entities are subject to reporting,
what must be included in these reports, and under what circumstances payments and transfers of value must be
reported. The rule also requires the annual reporting of physician ownership or investment interests by
manufacturers and group purchasing organizations (GPOs), which will be published on a public website by the
Secretary. HHS emphasizes that compliance with reporting requirements does not exempt applicable parties
from potential liability under other statutes (e.g. the Federal Anti-Kickback Statute), nor does reporting
information on the public database constitute an admission of wrongdoing or illegal conduct.
Applicable manufacturers and GPOs must begin collecting the required data on August 1, 2013 and begin
reporting the data to CMS by March 31, 2014. CMS estimates that the total cost of these provisions will be
approximately $269 million in the first year and $180 million annually thereafter. Despite overlap of information
in some cases, CMS requires separate reporting of (1) payments or other transfers of value to covered recipients
and (2) ownership and investment interests of physicians and their immediate family members in addition to
other transfers of value provided to such physician owners or investors.
Reports on Payments or Other Transfers of Value
Applicable Manufacturers
The requirements will apply to any entity 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. The revised definition in the final rule clarifies that:
 Any manufacturer, foreign or not, which operates within the U.S. is required to comply with the
reporting requirements.
 Distributers and wholesalers that hold the title of a covered product are required to report.
 Manufacturers of raw materials or components of covered products (rather than finished products) are
exempt from reporting.
 Manufacturers that do not hold FDA approval are still subject to the reporting requirements.
 Manufacturers under “common ownership” (e.g. entities that own 5 percent or more of total ownership
in two or more entities) are subject to reporting requirements.
 Hospitals, hospital-based pharmacies, and laboratories that manufacture covered products solely for
use by or within such entities themselves or by those entities’ own patients are exempt from reporting.
Covered Drug, Device, Biological, or Medical Supply
In a more specific definition than originally proposed, the final rule considers “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” as a covered drug, device, biological, or medical supply. CMS revised the proposed definition out
of concern it would inadvertently exclude items such as implantable devices, for which payment may be
available only as part of a bundled payment. The definition allows for two exclusions: (1) drugs or biologicals
that are considered over-the-counter and (2) devices or medical supplies that do not require premarket
approval by or notification to the FDA.
Covered Recipients
The definition of “covered recipients” encompasses physicians and teaching hospitals but excludes physicians
employed by an applicable manufacturer. Medical residents are also excluded regardless of whether a state
requires residents to obtain licenses to practice. The final rule’s definition is consistent with the “bona fide
employment relationship” of the Anti-Kickback Statute.
Interpreting the Value of Payments or Other Transfers
The rule declines to “create numerous rules for calculating value,” but offers guidelines for which items need to
be reported. Manufacturers are required to make reasonable, good faith efforts to determine the actual value
of the payment or transfer. The following instances must be reported:
1. Payments or transfers that do not have discernible economic value for the recipient specifically, but do
have discernible value in general (e.g. a textbook the physician already owns).
2. Payments or transfers that were not formally requested by the recipient.
3. Payments or transfers made to another entity (e.g. to a charity) at the request of a covered entity.
However, the report must include the name of the entity who received the payment.
4. All aspects of a payment or transfer such as tax or shipping costs.
Nature of Payments
The rule also provides additional guidance to applicable manufacturers on how to categorize payments. On their
report, applicable manufacturers must select the “nature of payment” category that best describes the payment
or other transfer from one of following categories:
(1) Consulting fee
(2) Compensation for services
other than consulting
(3) Honoraria
(4) Gift
(5) Entertainment
(6) Food and beverage
(7) Travel and lodging
(8) Education
(9) Research
(10) Charitable contribution
(11) Royalty or license
(12) Current or prospective
ownership or investment
interest
(13) Compensation for serving as
faculty or as a speaker for an
unaccredited and non-certified
continuing education program
(14) Compensation for serving as
faculty or as a speaker for an
accredited or certified
continuing education program
(15) Grant
(16) Space rental or facility fees
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Exclusions
Certain types of payments or other transfers of value are exempt from the abovementioned reporting
requirements:
 Existing personal relationships
 Discounts and rebates
 Covered recipient acting as a
patient
 Payments or other transfers of
 In-kind items for the provision
value less than $10
of charity care
 Provision of healthcare
 Educational materials that
 Product samples
 Nonmedical professional
directly benefit patients or
 Short-term loans
 Civil or criminal action or
are intended for patient
administrative proceeding
 Contractual warranty
use
Reports on Physician Ownership or Investment Interests
Applicable manufacturers and GPOs must report to the Secretary, in electronic form, certain information
concerning ownership and investment interests held by physicians or their immediate family members, and
payments or other transfers of value to such physician owners or investors.
Ownership or Investment Interest
The final definition of “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 of revenue. Excluded from the definition are ownership or
investment interest in a publicly traded security or mutual fund, interest that arises from a retirement plan,
stock options and convertible securities received as compensation until the stock options are exercised or the
convertible securities are converted to equity, and unsecured loans subordinated to a credit facility.
Report Submission, Correction, and Publication
Reports for the preceding calendar year must be submitted electronically to CMS on March 31, 2013 and on the
90th day of each calendar year thereafter. Following the data submission, an authorized representative from
each manufacturer or GPO must submit a signed attestation certifying the report. All parties involved in the
report will have 45 days to review the submission before it is made available to the public. Only entities that
have information to report are required to register on the CMS-secure website; however, CMS strongly
recommends that all covered recipients and physician owners or investors register to be able to review any data
attributed to them. The rule recommends that applicable manufacturers provide covered recipients with the
same information they plan to report to CMS, but does not make this provision mandatory.
The Secretary will allow a 45-day review and correction period for covered recipients and physician owners and
investors to review the data submitted by applicable manufacturers and GPOs on their behalf. If they choose to
dispute reported information, applicable manufacturers and GPOs will have an additional 15 days to make
corrections. Conflicts that cannot be resolved by the end of the 15-day resolution period will be published on
the website but marked as “disputed.” Data reported for CY 2012 will be made publicly available by September
30, 2013. For each year thereafter, data for the preceding calendar year will be available by June 30th.
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Penalties
Applicable manufacturers or GPOs will pay a penalty of between $1,000 and $10,000 for failure to report
required information for each payment, transfer, or ownership or investment interest, with a maximum total
annual penalty of $150,000. For a knowing failure to report required information, the penalty will be between
$10,000 and $100,000 with an annual maximum of $1,000,000. Applicable manufacturers and GPOs must
maintain all records sufficient to enable an audit for a period of at least 5 years from the date the payment,
transfer, or ownership interest is published on the website.
Annual Reports
CMS is required to submit an annual report to Congress on April 1 of each year which will include all information
aggregated on applicable manufacturers and GPOs from the preceding calendar year in addition to any
enforcement action taken and any penalties paid. State-specific information from these entities will be reported
annually to States on June 30 of each year (except in 2013, when it must be reported by September 30).
Relation to State Laws
The reporting requirements in this proposed rule will preempt any State or local laws requiring reporting of the
same type of information except in the cases of a Federal, State, or local government agency collecting
information for public health and/or oversight purposes to be used for a purpose other than transparency.
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