[Federal Register Volume 78, Number 27 (Friday, February 8, 2013)]
[Rules and Regulations]
[Pages 9457-9528]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02572]



[[Page 9457]]

Vol. 78

Friday,

No. 27

February 8, 2013

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 402 and 403





Medicare, Medicaid, Children's Health Insurance Programs; Transparency 
Reports and Reporting of Physician Ownership or Investment Interests; 
Final Rule

Federal Register / Vol. 78 , No. 27 / Friday, February 8, 2013 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 402 and 403

[CMS-5060-F]
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: Final rule.

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SUMMARY: This final rule will 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: Effective date: These regulations are effective on April 9, 
2013.
    Compliance date: Applicable manufacturers and applicable group 
purchasing organizations must begin to collect the required data on 
August 1, 2013 and report the data to CMS by March 31, 2014.

FOR FURTHER INFORMATION CONTACT: Erica Breese, (202) 260-6079.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Background

A. Executive Summary for This Final Rule

1. Purpose
    This final rule is necessary to implement the requirements in 
section 6002 of the Affordable Care Act, which added section 1128G to 
the Social Security Act (the Act). That provision 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.
    We believe that these provisions of the Act were modeled largely on 
the recommendations of the Medicare Payment Advisory Commission 
(MedPAC), which voted in 2009 to recommend Congressional enactment of a 
new regulatory program. In addition, the Institute of Medicine (IOM) 
recommended implementing a national disclosure program for payments to 
health care providers and prescribers in the 2009 report titled, 
``Conflict of Interest in Medical Research, Education and Practice.'' 
Given these recommendations and other information on conflicts of 
interest that could affect treatment decisions, Congress enacted 
legislation establishing a national disclosure program with section 
6002 of the Affordable Care Act. This final rule provides the 
implementing requirements for this program.
2. Summary of the Major Provisions
a. Transparency Reports
    This rule finalizes requirements for applicable manufacturers to 
annually report certain payments or other transfers of value to covered 
recipients. The rule provides definitions of numerous terms, such as 
applicable manufacturer, and covered drug, device, biological, and 
medical supply. In addition, the rule also clarifies how applicable 
manufacturers should report and characterize payments or other 
transfers of value, including rules for research payments, and indirect 
payments provided to a covered recipient through a third party. The 
rule also finalizes which payments or other transfers of value are 
excluded from the reporting requirements.
    In addition, the rule finalizes the requirements for applicable 
manufacturers and applicable GPOs to annually report information about 
certain ownership or investment interests held by physicians and the 
immediate family members of physicians in such entities, as well as 
payments and other transfers of value to such physicians. The rule 
details what constitutes an ownership or investment interest for 
purposes of the reporting requirements, and defines for whom they must 
be reported. The rule also clarifies the content for the ownership or 
investment interest report.
b. Report Submission, Correction, and Publication
    The rule finalizes the processes and requirements for applicable 
manufacturers and applicable GPOs to submit their reports to CMS, 
including the specific data elements required to be included in the 
reports and the report format. The rule also details the processes for 
the review, dispute, and correction period when applicable 
manufacturers, applicable GPOs, covered recipients, and physician 
owners or investors are provided the opportunity to review, dispute, 
and propose corrections to reported payments or other transfers of 
value, or ownership or investment interests, attributed to them. In 
addition, the rule clarifies the information to be included on the 
publicly available Web site, as well as the usability of the public Web 
site. Finally, the rule includes details on the processes for reporting 
and publishing payments or other transfers of value which are eligible 
for delayed publication.
c. Penalties
    The rule includes details regarding the statutorily authorized 
civil monetary penalties for failure to report payments or other 
transfers of value, or physician ownership or investment interests, 
including clarification of the instances when the penalties will be 
imposed.
d. Annual Report
    The rule finalizes the details of the annual reports to Congress 
and the States.
e. Relation to State Laws
    The rule clarifies the statutory requirements for the pre-emption 
of State laws.
3. Summary of Costs and Benefits
    Based on the comments submitted, we anticipate that much of the 
total estimated burden of this final rule will fall on applicable 
manufacturers and applicable GPOs. We have estimated that the total 
cost of these provisions will be approximately $269 million in the 
first year and $180 million annually thereafter. We have no empirical 
ability to estimate the monetary benefits of this provision; however, 
there are nonmonetary benefits, which are difficult to quantify. 
Increased transparency regarding the extent and nature of relationships 
between physicians, teaching hospitals, and industry manufacturers will 
permit patients to make better informed decisions when choosing health 
care professionals and making treatment decisions, and deter 
inappropriate

[[Page 9459]]

financial relationships which can sometimes lead to increased health 
care costs. Additionally, increased transparency about the owners and 
investors in GPOs will allow purchasers to make better informed 
decisions and identify potential conflicts of interest with ordering 
physicians.

B. Background

1. Legislative Overview (Statutory Background)
    Section 6002 of the Affordable Care Act added section 1128G to the 
Act, which requires applicable manufacturers of drugs, devices, 
biologicals, or medical supplies covered under Medicare or a State plan 
under Medicaid 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 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 about 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 physician owners or 
investors. Applicable manufacturers must report the required payment 
and other transfer of value information annually to the Secretary of 
the Department of Health and Human Services (HHS) (the Secretary) in an 
electronic format. The statute also provides that applicable 
manufacturers and applicable GPOs must report annually to the Secretary 
the required information about physician ownership and investment 
interests, including information on any payments or other transfers of 
value provided to physician owners or investors, in an electronic 
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. The Secretary is 
required by statute to publish the reported data on a public Web site. 
The data must be downloadable, easily searchable, and 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
    We recognize that collaboration among physicians, teaching 
hospitals, and industry manufacturers contributes to the design and 
delivery of life-saving drugs and devices and we received many comments 
supporting this statement. However, as discussed in the proposed rule 
and in the public comments submitted, payments from manufacturers to 
physicians and teaching hospitals can also introduce conflicts of 
interest 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 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 will shed light on the nature and extent of relationships, 
and will hopefully discourage the development of inappropriate 
relationships and help prevent the increased and potentially 
unnecessary health care costs that can arise from such conflicts. Given 
the intricacies of disclosure and the importance of discouraging 
inappropriate relationships without harming beneficial ones, we have 
worked closely with stakeholders to better understand the current scope 
of the interactions among physicians, teaching hospitals, and industry 
manufacturers. In addition to this feedback, we consulted with the HHS 
Inspector General, as required by the statute. Our conclusions and 
interpretations in the preamble are solely for purposes of this 
regulation and do not apply in other contexts.

II. Provisions of the Proposed Rule and Analysis of and Responses to 
Public Comments

    In the December 19, 2011 proposed rule (76 FR 78742), we solicited 
public comment on a number of proposals regarding transparency reports 
and the reporting of physician ownership or investment interests. In 
response to our solicitation, we received approximately 373 timely 
public comments. Most of the public comments addressed provisions 
included in the proposed rule. We received some comments that were 
outside the scope of the proposed rule and, therefore, will not be 
addressed in this final rule. Summaries of the public comments that are 
within the scope of the proposals and our responses to those comments 
are set forth in the various sections of this final rule under the 
appropriate headings. In this final rule, we have organized the 
document by presenting our proposals, summarizing and responding to the 
public comments for the proposal(s), and describing our final policy.
    The following sections outline the agency's directives concerning 
implementation of section 1128G of the Act, including clarification of 
the terms and definitions used in the statute, as well as procedures 
for the submission, review, and publication of the reported data. For 
terms undefined by the statute, we have provided definitions where 
appropriate to provide additional clarity, as well as explanations of 
how we interpret such terms. During the public comment period, we 
received numerous comments on how to approach and structure the final 
rule, such as providing additional examples and memorializing 
intentions in the regulatory text. We appreciate the comments and have 
endeavored to develop a final rule that allows for reporting 
flexibility while also providing sufficient detail, clarity, and 
standardized processes, in order to better ensure the accuracy of the 
published data. Throughout the final rule, time periods referenced in 
days are considered to be calendar days, unless otherwise noted.

A. Timing

    This final rule has not been 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 provided in 
the statute. In the proposed rule, we indicated that we would not 
require applicable manufacturers and applicable GPOs to begin 
collecting the required information until after the publication of this 
final rule. We proposed a preparation period of 90 days. Additionally, 
we considered requiring the collection of data for part of 2012, to be 
reported to CMS by the statutory date of March 31, 2013. We also stated 
that we were considering requiring the collection of data for part of 
2012, to be reported to CMS by the statutory date of March 31, 2013, 
and requested comments on the feasibility of a partial year collection.

[[Page 9460]]

    Comment: Many commenters were concerned with the length of time 
applicable manufacturers and applicable GPOs would be given following 
publication of the final rule before the data collection requirements 
begin.
    A number of these commenters suggested that the reporting 
requirements begin as quickly as possible following the publication of 
the final rule, in order to ensure that there is sufficient time for 
data to be collected for a partial year of 2012. These commenters 
recommended a 30-day preparation period. Conversely, many other 
commenters requested that the data collection requirement not begin 
until January 1, 2013, stating that the data collection requirement for 
collecting a partial year of data would be difficult and overly 
burdensome. Other commenters did not address the beginning date for 
data collection, but instead advocated for a longer preparation period 
than the proposed 90 days. The majority of these commenters requested 
an 180-day preparation period, but a few suggested longer, with the 
longest being 15 months. Some commenters also requested that regardless 
of the timing, data collection should begin at the beginning of a 
quarter and also explained that making systems changes during the last 
quarter of a year would be difficult.
    Response: We appreciate these comments and agree that data 
collection needs to begin as soon as reasonably possible; however, to 
allow us time to address the important input we received from 
stakeholders during the rulemaking process, we announced in May 2012 
that we would not require the collection of any data before January 1, 
2013. We are finalizing that the data collection requirement will begin 
on August 1, 2013, allowing about an 180-day preparation period. We 
believe that this is a sufficient amount of time for applicable 
manufacturers and applicable GPOs to prepare.
    Comment: A few commenters requested that CMS modify the reporting 
requirements for the first year. Some suggested easing the initial 
burden by phasing in reporting with a higher minimum dollar threshold, 
while others recommended collecting more data for 2012 by requiring 
retroactive reporting.
    Response: We appreciate these comments, but we do not believe that 
we have authority to amend the reporting requirements for the first 
year. In addition, we believe that changing the reporting requirements 
for a single year would be operationally difficult, since both CMS and 
applicable manufacturers and applicable GPOs would have to develop 
systems and then change them after the first year. The statute sets 
forth the minimum threshold for reportable payments and does not appear 
to provide any authority for us to change it. We believe that because 
the threshold is provided in the statute itself, applicable 
manufacturers were given adequate notice of the threshold amount and 
should be able to prepare for it. We are also concerned that changing 
the threshold for 1 year would be confusing to users. With regard to 
retroactive reporting, we similarly believe that we do not have the 
authority to require this and will not adopt that approach.
    After consideration of the public comments received and given the 
timing of the final rule, we are establishing that data collection will 
begin on August 1, 2013 and must be reported to us by March 31, 2014. 
There will be no retroactive reporting.

B. Transparency Reports

    Section 1128G(a) of the Act outlines the transparency reporting 
requirements and consists of two paragraphs. The first, 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, 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 
proposed 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 
solicited comment on this general approach, but received no comments, 
so we are finalizing this provision as proposed.
    Additionally, we also 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, immediate family members, other 
entities, and other persons 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 the False Claims Act). However, we also want to 
make clear that the inclusion of a payment or other transfer of value, 
or ownership or investment interest on the public database does not 
mean that any of the parties involved were engaged in any wrongdoing or 
illegal conduct.
1. Reports on Payments and Other Transfers of Value Under Section 
1128G(a)(1) of the Act
a. Applicable Manufacturers
    While the term applicable manufacturer was defined in section 1128G 
of the Act, we provided additional clarification in the proposed rule. 
In this section, we aim to even more clearly define the entities that 
will be required to report.
(1) Definition of Applicable Manufacturer
    In the proposed rule we defined ``applicable manufacturer'' for the 
purposes of this regulation as an entity that is--
     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
     Under common ownership with an entity in the first 
paragraph of this definition, and 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 or distribution in the United States, or in a territory, 
possession, or commonwealth of the United States.
    In defining applicable manufacturer, we interpreted the statutory 
phrase ``operating'' in the United States, or in a territory, 
possession, or commonwealth of the United States in section 1128G(e)(2) 
of the Act, as ``for sale or distribution'' in the United States, or in 
a territory, possession, or commonwealth of the United States.
    Comment: Many commenters expressed concern with CMS's 
interpretation of the phrase ``applicable manufacturer.'' Specifically, 
many commenters suggested that the phrase ``for sale or distribution'' 
is overly broad and would apply to nearly any entity in the world 
involved in the manufacturing chain or marketing of a covered drug, 
device, biological, or medical supply (referred to generally for 
purposes of this rule as a ``covered product'') that is ultimately sold 
or distributed in the United States, even if such entity has no 
operations in the United States. These commenters

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recommended that CMS retain the statutory language and define the 
phrase ``operating'' in the United States as having a physical location 
in the United States or conducting business activities in the United 
States. Several commenters agreed with and supported the proposed 
definition.
    Response: We appreciate the comments and agree that the proposed 
definition may have inadvertently captured entities that operate wholly 
outside the United States, many of which may have little or no 
interaction with U.S. health care providers. We did not intend to 
capture foreign entities that may contribute to the manufacturing 
process of a covered product, but have no business presence in the 
United States. Accordingly, we have decided to revise the definition by 
retaining the statutory phrase operating in the United States, which we 
defined as having a physical location within the United States, or 
otherwise conducting activities within the United States or in a 
territory, possession, or commonwealth of the United States. We believe 
that any manufacturer, foreign or not, which operates in the United 
States (including by selling a product) must comply with the reporting 
requirements, regardless of where the product is physically 
manufactured. Therefore, under this final rule, entities based outside 
the United States that do have operations in the United States are 
subject to the reporting requirements. Additionally, we note that 
entities that have operations in the United States are not permitted to 
circumvent the reporting requirements by making payments to covered 
recipients indirectly through a foreign entity that has no operations 
in the United States. Such payments are considered to be made by the 
entity that is operating in the United States as an indirect payment or 
other transfer of value and must be reported as such, so long as the 
entity operating in the United States is aware of the identity of the 
covered recipients receiving the payments as required for all indirect 
payments or other transfers of value.
    Comment: Many commenters recommended additional limitations on the 
scope of the definition of applicable manufacturer. A few commenters 
suggested CMS limit the definition to manufacturers directly involved 
in manufacturing of the final products, and not entities that supply 
components and raw materials. In addition, many commenters stated that 
the definition should not include hospitals or other entities that 
produce covered products for sale to or use by their own patients only. 
A few commenters provided similar comments that entities that produce 
or compound products or tests should be exempt from the definition. For 
example, many pharmacies compound medications in small batches for 
individual patients at the direction of a prescribing physician.
    Response: We recognize that entities that only manufacture raw 
materials or components may differ from manufacturers of the final 
product, and we believe that the statutory framework already treats 
them differently. The definition of ``applicable manufacturer'' is 
dependent on the definition of ``covered drug, device, biological or 
medical supply.'' Raw materials and components often do not meet the 
definition of covered drug, device, biological, or medical supply 
because payment is not available for them in their component form under 
Medicare, Medicaid or CHIP. Entities that only manufacture raw 
materials or components, which are not themselves covered products, 
will not be required to report unless they are under common ownership 
with an applicable manufacturer and assist such manufacturer with the 
production, preparation, propagation, compounding, conversion, 
marketing, promotion, sale, or distribution of a covered drug, device, 
biological, or medical supply. In the event a supplier of raw materials 
is under common ownership with an applicable manufacturer, it will be 
subject to the reporting requirements for entities under common 
ownership, including options for consolidated reporting with the 
applicable manufacturer.
    In addition, we agree with the comments regarding hospitals, 
pharmacies, and laboratories that produce or manufacture materials and 
products solely for their own use or use by their patients. We believe 
that it was not the intent of the statute to include these entities as 
applicable manufacturers, since they are not listed in the statute as 
manufacturers. Given these considerations, we have revised the 
definition of applicable manufacturer to exclude entities such as 
hospitals, hospital-based pharmacies and laboratories that manufacture 
a covered product solely for use by or within the entity itself or by 
an entity's own patients. In addition, the definition of applicable 
manufacturer does not include pharmacies, including compounding 
pharmacies, that meet all of the following conditions: (1) Maintain 
establishments that comply with applicable local laws regulating the 
practice of pharmacy; (2) regularly engage in dispensing prescription 
drugs or devices upon prescriptions from licensed practitioners in the 
course of their professional practice; and (3) do not produce, prepare, 
propagate, compound, or convert drugs or devices for sale other than in 
the regular course of their business of dispensing or selling drugs or 
devices at retail to individual patients.
    Comment: Many commenters addressed whether distributors and 
wholesalers, including repackagers, relabelers, and kit assemblers, met 
the definition of applicable manufacturer. These entities were not 
specifically addressed in the proposed rule other than the recognition 
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 
U.S.C. 1396r-8(k)(5)). The commenters represented both sides--some 
advocated that these types of entities meet the definition, while 
others advocated that they do not. Some commenters noted that 
distributors and wholesalers purchase and often take the title to 
covered products and then sell them to providers. The distributor may 
or may not rebrand or repackage the product before resale. Commenters 
on both sides referred to other definitions of ``manufacturer'' and 
``manufacture'' both in the Affordable Care Act and elsewhere, some of 
which specifically reference distributors and some of which did not, 
similar to the statutory definition in section 1128G(e)(9) of the Act. 
The advocates for including distributors and wholesalers state that 
because these entities are involved in ``preparation'' and 
``propagation'' of covered products, they should be included based on 
the statutory definition. Conversely, other commenters stated that 
distributors and wholesalers stock multiple competing products, so they 
do not try to sway purchasing decisions in the same way as a 
manufacturer.
    Response: We agree that distributors and wholesalers (which include 
repackagers, relabelers, and kit assemblers) that hold the title to a 
covered drug, device, biological or medical supply meet the definition 
of an applicable manufacturer for the purpose of this rule. We believe 
that distributors that hold the title to a covered product are similar 
to applicable manufacturers since both hold title to the product at 
some point in the production and distribution cycle. These entities 
will be subject to the same requirements as all other applicable 
manufacturers, as described in more detail in this section. Wholesalers 
or distributors that do not

[[Page 9462]]

hold the title of a covered product will not be subject to the 
reporting requirements, unless they are under common ownership with an 
applicable manufacturer and provide assistance or support with respect 
to a covered drug, device, biological, or medical supply. Finally, an 
applicable manufacturer that has product(s) with titles held by 
distributors does not need to report payments or other transfers of 
value made by the distributor or wholesaler to covered recipients, 
since these will be reported by the distributor or wholesaler. However, 
in the event that the applicable manufacturer makes payments or other 
transfers of value related to the product independently from the 
distributor or wholesaler (or through the distributor or wholesaler as 
a third party), then the applicable manufacturer would have to report 
these payments or other transfers of value.
(2) Limitations to the Definition of Applicable Manufacturer
    In the preamble to the proposed rule, we clarified that the 
applicable manufacturer definition included 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 interpreted these entities as being ``engaged in the 
production, preparation, propagation, compounding, or conversion of a 
covered drug, device, biological, or medical supply.'' However, we did 
not address whether the entity manufacturing the product under contract 
is an applicable manufacturer. We also proposed that any manufacturer 
that meets the definition of applicable manufacturer by manufacturing 
at least one covered drug, device, biological or medical supply (as 
defined later in this section) would be considered an applicable 
manufacturer, even though it may also manufacture products that do not 
fall within that category.
    Comment: A few commenters requested clarification on the reporting 
requirements for situations when the license-holder is not the 
manufacturer or the manufacturing process is contracted out. These 
commenters recommended that if an entity, which manufactures a covered 
product under contract, but does not market or distribute the product 
and is not an applicable manufacturer otherwise, then the entity does 
not meet the definition and does not need to report.
    Response: We agree that additional clarification is necessary, 
although we recognize that it is difficult to anticipate all potential 
manufacturing arrangements. In general, we believe that our proposed 
position to require reporting by an entity that holds an FDA approval, 
licensure, or clearance for a covered product is appropriate. Such 
entities are clearly ``engaged in the production, preparation, 
propagation, compounding, or conversion'' of a covered product. We did 
not receive any comments on this and are finalizing it as proposed. For 
the contracted entity conducting the actual manufacturing, we believe 
that these entities fit into the definition of applicable manufacturer, 
since they are actually manufacturing a covered product and clearly are 
``engaged in the production, preparation, propagation, compounding, or 
conversion'' of a product. Therefore, we are finalizing that entities 
that manufacture any covered product are applicable manufacturers, even 
if the manufacturer does not hold the FDA approval, licensure, or 
clearance. While we recognize that such entities do not necessarily 
market the product, we believe it is clear that they do manufacture it. 
However, we also understand that these manufacturers' business model 
may not be focused on covered products. Therefore, if an applicable 
manufacturer does not manufacture a covered drug, device, biological, 
or medical supply except pursuant to a written agreement to manufacture 
the covered product for another entity, does not hold the FDA approval, 
licensure or clearance for the product, and is not involved in the 
sale, marketing or distribution of the product, then the manufacturer 
is only required to report payments or other transfers of value related 
to the covered product. This is described in the regulatory text at 
Sec.  403.904(b)(4). If an applicable manufacturer has this business 
arrangement for some products and also manufactures at least one 
covered product that does not meet these criteria, then the applicable 
manufacturer must report all payments or other transfers of value 
subject to the reporting requirements. We believe that this is 
consistent with our treatment of other manufacturers with business 
models that are not focused on covered products, as discussed in more 
detail in this section. Finally, no payment or other transfer of value 
should be reported more than one time by a single entity.
    Comment: Several commenters also discussed CMS's proposed decision 
to require applicable manufacturers to report all payments or transfers 
of value to covered recipients rather than only payments related to 
covered drugs, devices, biologicals, and medical supplies. While a few 
commenters supported this proposal, others did not. Entities and 
organizations with only a small number of covered products believed 
that reporting all payments would be overly burdensome and recommended 
limiting the definition to manufacturers that obtain a certain 
percentage (generally 5 or 10 percent) of their sales or revenues from 
covered products.
    Response: We stand by our decision to require reporting of all 
payments or transfers of value to covered recipients rather than only 
payments related to covered drugs, devices, biologicals, and medical 
supplies and discuss this decision more fully in section II.B.1.b of 
this final rule. We do not believe that all payments or other transfers 
of value are related to particular covered products, so we do not want 
an applicable manufacturer to avoid reporting by representing certain 
payments or other transfers of value to covered recipients as being 
unrelated to covered products.
    However, we are sensitive to applicable manufacturers whose primary 
business focus is not the production of covered drugs, devices, 
biological or medical supplies, but may still produce one or a few 
covered products. We recognize that since so few of their products are 
covered, many of their competitors will not be subject to the reporting 
requirements, providing the competitors with a potential competitive 
advantage. Despite this recognition, we also do not believe that these 
entities should be exempt from all reporting, since other manufacturers 
of the same covered products with a different business model would be 
subject to reporting. We recognize that these applicable manufacturers 
could also classify payments or other transfers of value as unrelated 
to a covered drug, device, biological or medical supply in order to try 
to avoid the reporting requirements; however, we believe the burden on 
these applicable manufacturers of reporting all interactions related to 
all products (not just covered drugs, devices, biologicals, or medical 
supplies) outweighs this concern. Therefore, we have clarified the 
agency's position in Sec.  403.904(b)(1) to allow applicable 
manufacturers with less than 10 percent of total (gross) revenues from 
covered drugs, devices, biologicals or medical supplies during the 
previous fiscal year to report only payments or other transfers of 
value specifically related to covered drugs, devices, biologicals or 
medical supplies.

[[Page 9463]]

The 10-percent threshold should be calculated based on the company's 
total (gross) annual revenue. Applicable manufacturers with less than 
10 percent of total (gross) revenue from covered products during the 
previous year that have payments or other transfers of value to report 
must register with CMS and must attest that less than 10 percent of 
total (gross) revenues are from covered products, along with their 
attestation of the submitted data. We selected a 10-percent threshold 
based on the public comments that we received suggesting a range from 5 
to 10 percent; we chose the higher percentage in order to reduce the 
reporting burden on a greater number of entities.
    Comment: A few commenters also requested additional clarification 
on when an entity with no covered products becomes an applicable 
manufacturer because payment becomes available for one of the company's 
products under Medicare, Medicaid or CHIP (for example, because a 
manufacturer's only product received FDA approval). Most of the 
commenters simply requested clarification, since this was not addressed 
in the proposed rule. However, a commenter suggested that CMS should 
allow new applicable manufacturers a grace period (for example, 180 
days) to allow the manufacturer time to prepare to comply with the data 
collection requirements.
    Response: We agree that we should provide clarification on when a 
product becomes ``covered'' and, thus, when an applicable manufacturer 
who did not previously have any other covered products becomes subject 
to the data collection and reporting requirements under this rule. We 
will allow the applicable manufacturer a grace period of 180 days 
following a product becoming ``covered'' to begin complying with the 
data collection and reporting requirements. We believe this is 
appropriate because it is the same preparation period allowed after the 
publication of the final rule, allowing all new applicable 
manufacturers the same time to prepare for complying with the data 
collection and reporting requirements.
(3) Common Ownership
    The definition of applicable manufacturer includes entities under 
common ownership with an applicable manufacturer. We proposed to define 
``common ownership'' as when the same individual, individuals, entity, 
or entities, directly or indirectly, own any portion of two or more 
entities. This would apply to a range of corporate arrangements, 
including, but not limited to, parent companies and subsidiaries and 
brother/sister corporations. In addition, we also included 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 
definition described previously, but would only apply to common 
interests of 5 percent or more.
    Regarding how applicable manufacturers under common ownership will 
submit reports, we proposed that if two or more entities individually 
met the proposed definition of an applicable manufacturer under 
paragraph (1) of the definition, the entities should report separately 
under section 1128G of the Act. However, if only one company under 
common ownership met the proposed definition of applicable manufacturer 
under paragraph (1) of the proposed definition, and the other company 
is required to report under paragraph (2) of the definition, then the 
affected entities can choose whether or not to report together. 
Additionally, we proposed that a payment or other transfer of value 
provided to a covered recipient in accordance with a joint venture or 
other cooperative agreement between two or more applicable 
manufacturers must be reported 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.
    Comment: Many commenters did not support the agency's definition of 
common ownership. These commenters generally recommended that a 
threshold greater than the proposed alternative of 5 percent be applied 
to determine common ownership. The commenters that support a higher 
threshold generally advocated for a ``common control'' standard, which 
is traditionally a greater ownership percentage of 50 to 80 percent, 
rather than an affiliate status, which is generally around 5 percent. 
Conversely, some commenters supported the proposed definition, as well 
as the 5 percent alternative.
    Response: We appreciate the comments and have decided to finalize 
the 5-percent ownership threshold for common ownership. We recognize 
that this is a lower threshold than many of the commenters recommended; 
however, we believe this is appropriate. We believe that had Congress 
intended to establish a ``common control'' standard, it would have used 
that term, rather than ``common ownership.'' Similarly, a 5-percent 
threshold for common ownership is used elsewhere in the Act, in other 
CMS regulations, and is one with which entities are familiar. For 
example, section 1124(a)(3) of the Act defines the term ``person with 
an ownership or control interest,'' in part, as a person who has a 
direct or indirect ownership interest in an entity of at least 5 
percent. We also believe that clarifying when an entity under common 
ownership has to report (as explained in this section) will help reduce 
the number of entities under common ownership reporting.
    Comment: Many commenters also requested additional clarification on 
how the agency was interpreting ``assistance and support'' for entities 
under common ownership, since only entities under common ownership 
which provide ``assistance and support'' for the listed manufacturing 
activities need to report. These commenters varied in their 
suggestions, but most advocated a narrow interpretation, such as only 
those involved in sales and marketing or those entities integral or 
necessary to the manufacturing process. In addition, some commenters 
questioned whether separate operating divisions, which are not related 
to covered products, such as the animal health division or over-the-
counter drugs division, need to report. The commenters advocated that 
reporting of these divisions would be confusing, since they are 
unrelated to covered products.
    Response: We appreciate these comments and agree that we should 
provide greater clarification to help identify the entities under 
common ownership which are required to report. We define ``assistance 
and support'' as being necessary or integral to the production, 
preparation, propagation, compounding, conversion, marketing, 
promotion, sale, or distribution of a covered product. For example, an 
entity under common ownership which produces the active ingredient for 
a covered drug and provides it to the applicable manufacturer for 
inclusion in the final product would be considered necessary to the 
manufacturing of that product, since the applicable manufacturer could 
not produce the drug without the active ingredient. Conversely, an 
entity under common ownership that only aids the applicable 
manufacturer with human resources administrative functions would not be 
deemed necessary or integral to the production, preparation, 
propagation,

[[Page 9464]]

compounding, conversion, marketing, promotion, sale, or distribution of 
covered products, since human resources functions are not directly 
involved with any of these manufacturing processes.
    In general, we believe that all payments or other transfers of 
value related to covered products should be reported, but that we 
should minimize the reporting of payments or other transfers of value 
unrelated to covered products. The final rule does not require entities 
under common ownership to report when they are not necessary or 
integral to manufacturing, and are not applicable manufacturers in and 
of themselves. However, an indirect payment or other transfer of value 
made to a covered recipient through an entity under common ownership 
that is not necessary or integral to the manufacturing process must 
still be reported as required for indirect payments or other transfers 
of value. In addition, we believe that entities under common ownership 
that are necessary or integral to the production, preparation, 
propagation, compounding, conversion, marketing, promotion, sale or 
distribution of a covered product should not have to report all 
payments or other transfers of value that the entities provide to 
covered recipients, and Sec.  403.904(b)(2) of this final rule states 
that they only need to report payments or other transfers of value that 
are related to covered products.
    Finally, with regard to applicable manufacturers that have separate 
operating divisions that only produce non-covered products and do not 
meet the definition of providing ``assistance and support,'' we believe 
that such divisions only need to report payments or other transfers of 
value that are related to a covered drug, device, biological or medical 
supply as stated in Sec.  403.904(b)(3). We believe that the vast 
majority of payments or other transfers of value will not be related to 
covered products. To prevent applicable manufacturers from diverting 
payments through these divisions in order to avoid the reporting 
requirements, we are finalizing that all payments or other transfers of 
value made by these divisions that are related to covered products must 
be reported. This includes payments or other transfers of value made 
directly by the operating division, as well as payments or other 
transfers of value made indirectly by the applicable manufacturer 
through the separate operating division, as the latter payments are 
required to be reported as indirect payments or other transfers of 
value.
    Comment: Many commenters advocated that CMS should allow entities 
more flexibility to submit consolidated reports, regardless of whether 
an entity meets the definition of applicable manufacturer under 
paragraph 1 or 2 of the proposed definition and at the company or 
operating division level. These commenters explained that manufacturers 
may have complicated corporate structures and reporting systems and 
suggested that the agency provide additional flexibility in reporting. 
Additionally, the commenters noted that consumers may not be familiar 
with the names of manufacturers' smaller divisions and, therefore, 
publication of the data under the names of the smaller divisions could 
limit the usefulness of the published data to consumers. Other 
commenters agreed with increased flexibility, but advocated that the 
reports should clearly state what entities are included in the report, 
including reporting which payments were made by which entity.
    Response: We agree that entities should have more flexibility to 
report together or separately. Therefore, we clarified in Sec.  
403.908(d) that applicable manufacturers under paragraph 1 of the 
definition that are under common ownership with separate entities that 
are also applicable manufacturers under paragraph 1 may, but are not 
required to, file a consolidated report for all of the entities. 
Additionally, as we stated in the proposed rule, applicable 
manufacturers under paragraph 1 of the definition of applicable 
manufacturer and an entity (or entities) under common ownership with 
such manufacturer under paragraph 2 of the definition also may, but are 
not required to, file a consolidated report. We believe that this will 
make reporting less burdensome to entities and will provide more 
clarity to consumers. However, we are concerned that it will not be 
clear to CMS or consumers which companies are under common ownership 
and are either reporting together or separately. Therefore, if multiple 
applicable manufacturers (under paragraph 1 and/or 2 of the definition) 
submit a consolidated report, we are requiring that the report must 
provide information specified by CMS to identify each applicable 
manufacturer and entity (or entities) under common ownership that the 
report covers. Additionally, applicable manufacturers submitting 
consolidated reports must specify on an individual payment line which 
entity made which discrete payment or other transfer of value. We 
believe this method is more useful for consumers since it clarifies the 
specific entity making the payment. We also believe that this method 
provides significantly more clarity for covered recipients when 
reviewing their payments or other transfers of value, allowing them to 
better review the information submitted on their behalf. Regardless of 
whether applicable manufacturers file separate or consolidated reports, 
Sec.  403.908(d)(1)(iv) and (d)(2)(ii) clarify that in no case shall a 
single payment or other transfer of value be reported more than once by 
multiple applicable manufacturers (under common ownership or not). Each 
transaction between an applicable manufacturer and a covered recipient 
must be reported only one time. Also, to support our ability to improve 
identity and data matching, regardless of whether applicable 
manufacturers file separate or consolidated reports, all covered 
recipients included in the report must be individually, uniquely and 
consistently identified. The same individual, if present on multiple 
payment lines within the same report, must have the same unique 
identifiers for all occurrences within the report. For example, the 
same name and National Provider Identifier (NPI) (as required to be 
reported in this final rule) should be used consistently for all 
payment lines and any subsequent updates for the same individual. 
Finally, we did not receive any comments on our proposed reporting 
method for joint ventures and co-promotions, so we have finalized these 
provisions as proposed, which required reporting by the applicable 
manufacturer that actually made the payment or other transfer of value 
(unless decided by the parties to report differently) and that the 
payment or other transfer of value was only reported once.
    In sum, after consideration of the public comments received, we are 
revising the interpretation of what it means that an entity is 
``operating in'' the United States. We are finalizing the position that 
applicable manufacturers must report all payments or other transfers of 
value, but clarifying that manufacturers with less than 10 percent of 
their gross revenue coming from covered products only have to report 
payments related to covered products. In addition, we are also 
finalizing the definition of common ownership to require a threshold of 
5 percent or more common ownership interest and providing additional 
clarification on the requirements for reporting by entities under 
common ownership. Finally, we are allowing additional flexibility for

[[Page 9465]]

applicable manufacturers (under paragraph 1 and/or 2 of the definition) 
to report separately or together depending on their internal structure.
b. Covered Drug, Device, Biological, or Medical Supply
    The data collection and 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, or CHIP. Because there are 
numerous payment mechanisms in Medicare, Medicaid and CHIP, we proposed 
that drugs, devices, biologicals, or medical supplies for which payment 
is available through a composite payment rate, as well as those 
reimbursed separately, are considered to be covered products under 
section 1128G of the Act. We were particularly concerned about 
inadvertently excluding items, such as implantable devices, for which 
payment may be available only as part of a bundled payment.
    We proposed 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).
    The proposed definition included two exceptions to limit the 
entities reporting. We proposed 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 
``over-the-counter'' (OTC). Similarly, we proposed 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 are devices) 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.
    Beyond coverage, the proposed rule also discussed what payments or 
other transfers of value must be reported. In the proposed rule, we 
specifically stated that manufacturers who manufacture both non-covered 
products (such as OTC drugs) 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).
    Comment: Many commenters inquired about the definition of covered 
drug, device, biological, or medical supply. Many commenters supported 
the proposed definition, particularly the proposed limitations, which 
did not receive any opposition. However, a few commenters sought 
clarification on how the two parts of the definition work together. 
These commenters sought clarification, for example, on whether a drug 
or biological that requires a prescription to be dispensed or a device 
that requires premarket approval or clearance, but for which payment is 
not available under Medicare, Medicaid or CHIP, would be a covered 
product.
    Response: We are pleased with the support for the proposed 
definition, including the limitations, and have finalized them. In 
addition, we agree with the commenters regarding a need for 
clarification concerning the relationship between the parts of the 
definition. We had intended the interpretation of the definition to 
require that a product must meet both parts of the definition in order 
to be considered covered. In order to make this more clear, we have 
revised the definition to clearly state that a covered drug, device, 
biological or medical supply is one for which payment is available 
under Medicare, Medicaid or CHIP and which, requires a prescription to 
be dispensed (in the case of a drug or biological) or premarket 
approval by or notification to the FDA (in the case of a device or a 
medical supply that is a device). For example, a device which is of a 
type that requires premarket notification, but for which payment is not 
available under Medicare, Medicaid, or CHIP, would not be a covered 
device under the program. Finally, we do not intend to capture all 
items that require FDA premarket approval or premarket notification and 
for which payment is available under Medicare, Medicaid, or CHIP; 
rather, we only intend to include items that meet these criteria and 
that are devices (or medical supplies that are devices). For example, 
the definition is not intended to include products that require 
premarket approval or premarket notification, but that are regulated by 
the FDA solely as a food.
    Comment: Many commenters requested additional clarification and 
details concerning the meaning of payment being ``available'' under 
Medicare, Medicaid or CHIP. Some commenters inquired whether the 
availability of payment referred only to those items that have been 
approved or cleared by FDA. Other commenters suggested that the 
definition should only include payments for products which are 
reimbursed separately, and not through a bundled payment. Finally, a 
few commenters inquired whether the proposed definition referred to 
payment availability on a single basis (for example, as a result of an 
appeal) or if payment was regularly available.
    Response: We agree with the comments that additional clarification 
of the meaning of ``availability'' of payment would be useful. The 
statute provides that in order to be a covered product, payment must be 
available under Medicare, Medicaid or CHIP. While the statute does not 
discuss FDA approval, clearance or notification, most products for 
which payment is available under Medicare, Medicaid or CHIP will have 
received FDA approval or clearance. However, we note that there may be 
exceptions. For example, payment may be available under Medicare for 
certain investigative devices that receive an investigational device 
exemption (IDE) from the FDA and are classified as a Category B device, 
in accordance with 42 CFR part 405 Subpart B. In addition, payment may 
be available under Medicaid for certain drug products described in 
section 1927(k)(2) of the Act, that have not been approved by the FDA, 
but were commercially used or sold in the United States before the date 
of the enactment of the Drug Amendments of 1962 (or which are 
identical, similar, or related within the meaning of 21 CFR 310.6(b)(1) 
to such drugs) and have not been the subject of a final determination 
by the Secretary that they are a ``new drug.'' While we understand that 
a bright line test would be useful, limiting covered products to those 
that have received FDA approval or clearance (or for which notification 
has been provided to the FDA) would not be comprehensive. We believe 
that manufacturers are generally aware when payment is available for 
their drugs, devices, biologicals, or medical supplies under a Federal 
health care program.
    In addition, we do not agree with the suggestions to interpret 
payment availability as being limited to those provided separately, 
rather than through a bundled payment. We recognize that

[[Page 9466]]

it is not always clear whether a product is paid through a bundle, 
making it difficult to establish whether payment is available. We also 
recognize that this expands the number of products meeting the 
definition of covered drug, device, biological or medical supply. 
However, bundled payments constitute a significant portion of Medicare 
reimbursement and excluding products that are reimbursed only as part 
of bundled payments would exclude manufacturers of products who have 
historically had significant relationships with physicians and teaching 
hospitals. For example, we believe it would be inappropriate to exclude 
implanted devices that are reimbursed through the hospital inpatient 
prospective payment system (IPPS) or the outpatient prospective payment 
system (OPPS), as well as chronic kidney disease drugs and products 
reimbursed through the end stage renal disease (ESRD) bundled payment 
system. As a result, the final rule adopts the proposal to include 
products which are reimbursed separately or as part of a bundled 
payment. We note that because there was some confusion about the phrase 
``composite payment rate'' in the proposed rule, we have replaced it 
with the phrase ``bundled payment'' and continue to interpret that as 
meaning IPPS, OPPS, and other prospective payment systems.
    Comment: Many commenters also requested clarification on what 
products constituted a device or medical supply. The proposed rule did 
not define these terms, so commenters provided recommendations for ways 
to clarify the terms, such as limiting them to product classes or 
providing definitions. Additionally, commenters questioned whether 
specific products would or would not be considered a ``device'' or 
``medical supply'' for the purposes of the reporting requirements.
    Response: We appreciate the comments and note that covered devices 
and medical supplies are limited to those devices and medical supplies 
for which payment is available under Medicare, Medicaid or CHIP, and 
are of the type that require premarket notification to or premarket 
approval by the FDA. We believe that this provides applicable 
manufacturers with a clear sense of the devices and medical supplies 
that constitute covered devices and medicals supplies, as well as those 
that do not. For example, FDA defines the devices (including certain 
medical supplies) that are exempted from the premarket notification 
requirements. This information can be found in 21 CFR parts 862 through 
892 and is publicly available on the FDA's Web site.\1\
---------------------------------------------------------------------------

    \1\ List of exempt products: http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpcd/315.cfm .
---------------------------------------------------------------------------

    Comment: A few commenters suggested that reporting on all payments 
or other transfers of value, including those related to products under 
development, is too broad. These commenters recommended that only 
payments or other transfers of value related to covered products should 
be reported. Similarly, other commenters requested that payments or 
other transfers of value for certain products, such as veterinary 
drugs, be excluded since the relationships related to such products are 
not intended to be included by the statute.
    Response: As noted previously, we are finalizing the proposal that, 
in most circumstances, applicable manufacturers must report payments or 
other transfers of value to covered recipients regardless of whether 
they are related to a covered product. We believe that not all payments 
or other transfers of value will be related to specific drugs, devices, 
biologicals, or medical supplies, but they nevertheless represent a 
financial relationship between an applicable manufacturer and a covered 
recipient that has the potential to affect medical judgment and must be 
reported under the requirements in section 1128G of the Act. 
Additionally, we are concerned that limiting the reporting requirements 
to payments or other transfers of value related to covered products 
would create loopholes that would allow entities to avoid reporting of 
certain payments or other transfers of value. However, we do understand 
that payments related to products that will never become covered by 
Medicare, Medicaid or CHIP (such as animal health products) may 
unnecessarily increase the scope of reporting. Therefore, we have 
limited the reporting requirements to address this situation, as well 
as other situations described previously in the discussion of the 
limitations to the definition of ``applicable manufacturer,'' where 
requiring an applicable manufacturer to report payments related to non-
covered products would be unnecessarily burdensome and not particularly 
useful to the public. We are finalizing that separate divisions that 
manufacture only non-covered products do not need to report payments or 
other transfers of values unless the payments or other transfers of 
value are in fact related to covered products (see the applicable 
manufacturer and payments or other transfers of value sections of this 
final rule). Similarly, we do not intend to capture payments made to a 
veterinary school that may be associated with a teaching hospital.
c. 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. As required by section 1128G(e)(11) of the Act, we 
proposed to define ``physician'' as having the meaning set forth in 
section 1861(r) of the Act, which includes doctors of medicine and 
osteopathy, dentists, podiatrists, optometrists, and chiropractors, who 
are legally authorized to practice by the State in which they practice.
    The statute excludes from the definition of covered recipient a 
physician who is an employee of the applicable manufacturer, as defined 
in section 1877(h)(2) of the Act. Section 1877(h)(2) defines 
``employee'' as an individual who would be considered to be an employee 
of an 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).
    Finally, we proposed to define the term ``teaching hospital'' by 
linking it to Medicare graduate medical education (GME). The proposed 
rule defined teaching hospital as any institution that received 
payments under section 1886(d)(5)(B) of the Act (indirect medical 
education (IME)); section 1886(h) of the Act (direct GME); or section 
1886(s) of the Act (psychiatric hospital IME) during the most recent 
year for which such information is available.
    Comment: Many commenters recommended changes to the proposed 
definition of physician. Some commenters requested that CMS expand the 
definition of physician to include other entities with prescribing 
privileges. Other commenters inquired about whether residents would be 
considered physicians. Some commenters requested that the definition 
exclude physicians who are not actively engaged in (or who do not

[[Page 9467]]

``perform'') the practice of medicine, which would include physicians 
not acting solely within their role as a physician, as well as medical 
researchers. They refer to the phrase in the statutory definition that 
a physician is an individual licensed in the State ``in which he 
performs such function or action.'' Other commenters recommended that 
the reporting requirements should be limited to physicians enrolled in 
Medicare, Medicaid or CHIP, on the basis of recent reimbursement or 
expected reimbursement. Finally, a few commenters recommended that CMS 
establish an ``opt-out'' function for physicians to declare that they 
have opted out, and no payments would appear on the public Web site 
attributed to them.
    Response: We appreciate the comments, but we will not expand the 
definition to include other provider types nor will we limit the 
definition to exclude those clearly intended in the statutory 
definition. The statute defines the term ``physician'' as having the 
same meaning as in section 1861(r) of the Act. We recognize that, as a 
result, we will not be able to fully capture financial relationships 
between industry and prescribers, specifically non-physician 
prescribers such as nurse practitioners. However, to the extent that 
applicable manufacturers make payments or other transfers of value to 
non-physician prescribers to be passed through to a physician, they 
would be indirect payments to the physician and would have to be 
reported under the name of the physician.
    Additionally, we believe that the definition hinges on whether a 
physician is ``legally authorized'' to practice, so all physicians 
(including all providers types listed in the statutory definition) that 
have a current license to practice will be considered covered 
recipients. By holding a current license to practice, the physician is 
legally authorized to practice regardless of the extent to which they 
do so.
    Payments or other transfers of value to residents (including 
residents in medicine, osteopathy, dentistry, podiatry, optometry and 
chiropractic) will not be required to be reported for purposes of this 
regulation. We recognize that some States require or allow residents to 
obtain licenses to practice, whereas other States do not require or 
allow residents to obtain them. We do not want to treat residents 
differently depending on their State of residency by requiring 
reporting on payments to residents in only those States that require or 
allow residents to have a license. Moreover, we believe it will be 
difficult for us to accurately identify residents and ensure that 
payments or other transfers of value are attributed across applicable 
manufacturers appropriately because many of them do not have a NPI and/
or State professional license number (used for physician 
identification, discussed later in this section). Due to the 
operational and data accuracy concerns regarding aggregation of 
payments or other transfers of value to residents, many of whom have 
neither an NPI nor a State professional license number, applicable 
manufacturers will not be required to report such payments or other 
transfers of value.
    With regard to the comment that the term ``physician'' should be 
limited to those enrolled in Medicare, we believe such an 
interpretation would be contrary to the language of the statute. In 
contrast to the statutory requirement that products are limited to 
those for which payment is available under Medicare, Medicaid or CHIP, 
the statute did not indicate that physician covered recipients be 
limited to those enrolled in Medicare, Medicaid or CHIP.
    Finally, while we appreciate the interest in allowing physicians 
the opportunity to ``opt-out'' of the reporting requirements, we do not 
believe it would be possible to implement a system of this kind. We 
believe it would be overly burdensome for both CMS and applicable 
manufacturers to track who has opted out and ensure that no payments or 
other transfers of value are made to those individuals. Additionally, 
we would need to create a system to reconcile any payments reported as 
having been made to physicians stating that they have opted out. We 
believe that a physician who wants to opt out should simply refuse all 
payments or other transfers of value from manufacturers, and will, 
accordingly, not be included on the public Web site (unless they hold 
ownership or investment interests in an applicable manufacturer or 
applicable GPO).
    Comment: Many commenters addressed the exclusion for employees of 
applicable manufacturers from the definition of physician covered 
recipient. A few commenters recommended revising the definition to 
ensure that only ``bona fide'' employee relationships are excluded from 
reporting, similar to the language in the employee exception in the 
Anti-Kickback Statute in section 1128(b)(3)(B) of the Act and the 
corresponding HHS OIG regulation at 42 CFR 1001.952(i). Other 
commenters questioned whether employees of agents of the applicable 
manufacturer would be included in the exception. The commenters also 
noted that the language in the proposed rule indicated that the 
exception included physicians employed by an applicable manufacturer, 
so it was not limited to employees of the applicable manufacturer 
making and reporting the payment or other transfer of value. In 
addition to these more general definitional comments, we also received 
numerous comments recommending other situations (such as physicians who 
serve as medical directors or retirees) that should be included in the 
employee exception.
    Response: We appreciate the comments and have clarified the 
definition of covered recipient to ensure that only bona fide 
employment relationships are included in the employee exclusion. We are 
concerned that in the absence of this clarification, applicable 
manufacturers could circumvent the reporting requirements by styling a 
physician as an ``employee'' and not reporting payments made to such a 
physician. Additionally, we did not intend to allow the exception for 
employees to include physician employees at any applicable 
manufacturer, rather than only the reporting applicable manufacturer 
itself. The proposed rule incorrectly quoted the statute, which in 
section 1128G(e)(6)(B) of the Act states that the term covered 
recipient ``does not include a physician who is an employee of the 
applicable manufacturer.'' For the final rule, we have reverted to the 
statutory language. Additionally, regarding employees of agents of the 
applicable manufacturer, we do not intend these individuals to be 
included in the exception, since they are not employees of the 
applicable manufacturer. However, as discussed in the section on 
indirect payments (section II.B.1.k of this final rule), we do not 
believe that payments or other transfers of value to legal agents of an 
applicable manufacturer that happen to have physicians on staff 
constitutes a payment or other transfer of value for the purposes of 
this rule.
    We appreciate the comments regarding other situations that 
commenters would like to see included in the employee exclusion, such 
as an applicable manufacturer's board members and medical directors. 
However, we believe that whether such individuals fall within the 
statutory definition of employee in section 1877(h)(2) of the Act, 
which defines employee by referencing common law rules used to 
determine the employer-employee relationship for Internal Revenue 
Service purposes, will require

[[Page 9468]]

a case-specific analysis. Therefore, we are not able to adopt a bright-
line policy that all board members or medical directors are (or are 
not) bona fide employees for purposes of the reporting exclusion.
    Similarly, with regard to the comments suggesting that prospective 
employees and retirees should treated as employees for purposes of 
being excluded from the reporting requirements, we believe that whether 
such individuals fall within the statutory definition of employee in 
section 1877(h)(2) of the Act will require a case-specific analysis. 
Therefore, we are unable to state that payments to such physicians, 
such as recruiting costs paid to prospective employees, do not need to 
be reported.
    Comment: We received significant support for our proposed 
definition of teaching hospital. However, some commenters recommended 
that CMS clarify that payments or other transfers of value to non-
healthcare departments at universities affiliated with teaching 
hospitals should not be included in the reporting requirements.
    Response: We have decided to finalize the proposed definition. As 
explained in the proposed rule, we recognize that this definition may 
not capture hospitals with accredited medical residency programs that 
do not receive IME or direct GME payments; however, we are unable to 
include these hospitals since we cannot readily identify them based on 
Medicare payment data. Finally, we do agree; payments to non-healthcare 
departments of universities affiliated with teaching hospitals should 
not be included in reporting requirements. However, any payments or 
other transfers of value made through these departments to a covered 
recipient as indirect payments or other transfers of value must be 
reported as required for indirect payments.
d. Identification of Covered Recipients
    In order to accurately identify and distinguish covered recipients, 
section 1128G(a)(1) of the Act requires that applicable manufacturers 
report the covered recipient's name and business address, and for 
physician covered recipients, the physician's NPI, and specialty. The 
collection of this information is necessary for applicable 
manufacturers, in order to distinguish individual covered recipients 
when reporting to CMS, and for CMS, in order to be able to aggregate 
the data. This section outlines the comments received regarding 
identification of both physician and teaching hospital covered 
recipients.
(1) Identification of Physicians
    Section 1128G of the Act requires that applicable manufacturers 
report a physician covered recipient's name, business address, NPI and 
specialty. This information will be used to distinguish physicians and 
allow us to match physicians across applicable manufacturers. We 
proposed that applicable manufacturers use the National Plan & Provider 
Enumeration System (NPPES), which we currently maintain and update on 
the public Web site, to assist with identifying physician covered 
recipients. The NPPES Web site includes a database of physician NPIs 
and has an NPI Registry function that allows applicable manufacturers 
to look up individual physician's NPIs.\2\ The full database can be 
downloaded from the CMS Web site.\3\ We proposed that if the physician 
NPI was not available in NPPES, the applicable manufacturer would be 
responsible for obtaining the physician's individual NPI directly from 
the physician, if the physician has an NPI. Other than NPI, in the 
proposed rule, we considered whether we should require, under the 
discretion granted in section 1128G(a)(1)(A)(viii) of the Act, that 
applicable manufacturers report another unique identifier, such as 
State professional license number, for physicians who are identified, 
but do not have an NPI.
---------------------------------------------------------------------------

    \2\ NPI Registry can be found at: https://nppes.cms.hhs.gov/NPPES/NPIRegistryHome.do.
    \3\ Database can be downloaded at http://nppes.viva-it.com/NPI_Files.html.
---------------------------------------------------------------------------

    Comment: A number of commenters provided input on the processes and 
requirements for applicable manufacturers to report the NPI for a 
physician. Some commenters noted that reporting a physician covered 
recipient's NPI is complicated, since not all physicians have an NPI 
and manufacturers typically do not collect such information. 
Additionally, a few commenters did not support the requirement that 
applicable manufacturers must obtain an NPI from a physician, if it was 
not readily available in the NPPES database. They explained it would be 
difficult to obtain and questioned how an applicable manufacturer would 
really know if a physician did not have an NPI. Some other commenters 
requested clarification that if an applicable manufacturer cannot 
identify an NPI for a physician then the NPI field can be left blank. 
Beyond determining a physician's NPI, a few commenters recommended that 
CMS clarify that physicians are not required to provide their NPI when 
requested and that applicable manufacturers should state that it will 
not be made public. Finally, some commenters recommended that CMS 
should require physicians to obtain NPIs to ensure that all physicians 
have one.
    Response: We appreciate the comments, but want to reiterate that 
reporting a physician covered recipient's NPI is a statutory 
requirement, so the agency does not have flexibility to waive the 
requirement. Similarly, we do not believe that section 1128G of the Act 
provides the agency with authority to require all physicians to obtain 
an NPI. We agree that it may be difficult for an applicable 
manufacturer to definitively know whether a physician does not have an 
NPI; however we believe it is reasonable for the applicable 
manufacturer to bear responsibility for determining a physician covered 
recipient's NPI (or lack thereof). Applicable manufacturers should be 
able to demonstrate that they made a good faith effort to obtain an NPI 
for the physician. We believe that a good faith effort includes, but is 
not limited to, specifically requesting an NPI from the physician, 
checking the NPPES database, and calling the NPPES help desk. This 
statute does not impose requirements on covered recipients, so we do 
not believe we can require physicians to disclose their NPI to 
applicable manufacturers when requested; however, we strongly encourage 
physicians to provide this information because it is essential for 
matching payments or other transfers of value to physicians accurately. 
We believe it is in the best interest of all parties (applicable 
manufacturers, physician covered recipients, consumers and others) that 
payments be attributed to the correct physician, and we hope that 
physicians will be willing to provide their NPI to applicable 
manufacturers to make this possible, especially since their NPI will 
not be made public on the public Web site. If, after a good faith 
effort, the applicable manufacturer cannot determine an NPI for a 
physician covered recipient, or a physician does not have an NPI, we 
agree with the commenters and have finalized that the NPI field may be 
left blank to indicate that the applicable manufacturer could not 
identify an NPI for the physician covered recipient. However, if we 
determine that a physician covered recipient does have an NPI, we may 
inform the applicable manufacturer and require the applicable 
manufacturer to re-submit the data including the NPI and re-attest to 
the updated data. Additionally, not reporting an NPI for physician 
covered

[[Page 9469]]

recipients that do have an NPI will be considered inaccurate reporting, 
which may be subject to penalties. Finally, we want to reiterate that 
only one individual NPI (not a group NPI) may be reported for each 
physician, and that applicable manufacturers should use the NPI listed 
in NPPES, if a dispute arises. Also as required by statute, physician-
covered recipient's NPIs will not be included on the public Web site.
    Comment: Some commenters discussed the proposal to allow reporting 
of an alternative identifier for physicians without an NPI. Many of 
these commenters supported reporting a State professional license 
number as an alternative to an NPI. Conversely, a few advocated that 
CMS not require an additional alternative unique identifier, whether it 
is a State professional license number or another identifier. Some 
commenters that supported State professional license number recommended 
that CMS should allow State professional license number instead of NPI 
at the discretion of the applicable manufacturer, since they believe it 
is could be burdensome for the applicable manufacturer to find the NPI.
    Response: We agree that obtaining a unique identifier is 
particularly important for physicians who do not have an NPI or for 
whom an NPI cannot be reasonably identified. Without this information, 
it will be difficult for us to ensure that payments are attributed to 
the appropriate physician and to aggregate payments accurately. We 
believe that the more unique identifiers supplied for a physician 
covered recipient, the more accurate the data will be, since they are 
essential for us to appropriately match data about the same physician 
within and across reports, and publish data appropriately on the public 
Web site. Therefore, pursuant to the discretion granted in section 
1128G(a)(1)(A)(viii) of the Act, we will finalize that applicable 
manufacturers must report the State(s) and appropriate State 
professional license number(s) for at least one (but multiple will be 
accepted) State where the physician maintains a license for all 
physician covered recipients, regardless of whether the applicable 
manufacturer has identified an NPI for the physician covered recipient 
or not. While this is slightly broader than what was proposed in the 
proposed rule, we believe (based on the comments) that reporting 
applicable State professional license numbers for all physician covered 
recipients, rather than only the subset that do not have NPIs, will 
significantly improve data accuracy and will not represent a 
significant additional burden on applicable manufacturers. Many 
commenters indicated that applicable manufacturers maintain this 
information already. Moreover, we believe that any additional burden 
associated with collecting and reporting physicians' State professional 
license numbers will be outweighed by the increased accuracy of the 
data attributing payments or other transfers of value to physician 
covered recipients.
    Comment: Many commenters discussed the proposal that applicable 
manufacturers use NPPES to identify physician covered recipients. Many 
commenters did not support requiring applicable manufacturers to use 
the information listed in NPPES, rather than what was in their internal 
files, particularly for specialty and business address. The commenters 
explained that the data in NPPES is not as accurate in some cases, as 
their internal databases and information. Similarly, some commenters 
did not believe it made sense to report information from NPPES back to 
CMS. Many commenters also discussed how applicable manufacturers should 
use NPPES. These commenters inquired whether there would be point in 
time (such as 90 days before the reporting year) when the NPIs in the 
database would be finalized and no longer changed, and whether 
manufacturers could rely on it. A few commenters recommended that 
applicable manufacturers should be notified of changes in NPPES. For 
example, a commenter advocated that CMS should keep past ``versions'' 
of NPPES in case of an audit. In addition, some commenters stated that 
NPPES is not user friendly and CMS should be responsible for improving 
it. Finally, a few commenters requested that CMS create a list of 
physician covered recipients rather than using NPPES.
    Response: We appreciate the comments on NPPES and note that we did 
not intend to require applicable manufacturers to specifically or 
solely use NPPES in order to obtain the NPI of a covered recipient. 
Applicable manufacturers may obtain physician NPI information (or any 
other information) in any manner they see fit, as long as they report 
NPIs accurately as required. This may include matching NPIs obtained 
elsewhere with the NPIs provided in NPPES. The NPPES database is 
continually updated, so it is difficult to set a point in time to 
freeze the database for a reporting year or notify applicable 
manufacturers of all changes. Applicable manufacturers may rely on NPI 
information in NPPES as of 90 days before the beginning of the 
reporting year.
    However, just because an NPI is not listed in NPPES does not mean 
that the applicable manufacturer does not need to make a good faith 
effort to obtain the NPI or that the payment should not be reported. 
While it is not possible to keep past ``versions'' of NPPES due to the 
continual updates, we would like to point out that each provider entry 
is date stamped to include the date the entry was created, as well as 
the date of each update, which will help establish the information 
available at a particular time. Beyond the specific concerns regarding 
using NPPES, we understand that NPPES is not perfect, but the agency is 
working to improve it. In addition, we do not believe it is appropriate 
for us to create a new system specifically for this program, as it 
would be duplicative and unnecessary.
    Finally, while we are sensitive to the request for a physician 
covered recipient list, we do not believe it is a viable option. Any 
list of physicians would be created based on NPPES, since it is the 
most comprehensive database available. However, as stated in this 
section, NPPES is not complete since not all physicians meeting the 
definition of covered recipient have an NPI. We also do not want the 
reporting requirements to be based on a list, which will be difficult 
to maintain and invariably include mistakes and inaccuracies. Instead, 
the statute that requires reporting of payments to physicians who meet 
the statutory definition. We believe applicable manufacturers are in 
the best position to identify the individuals with whom they have 
financial relationships who meet this definition.
(2) Identification of Teaching Hospitals
    Regarding the identification of teaching hospitals, we proposed to 
publish a list of hospital covered recipients (that is, those hospitals 
that received Medicare direct GME or IME payments during the last 
calendar year for which such information is available) on the CMS Web 
site once per year. We proposed to do so since it may not be 
immediately apparent to applicable manufacturers whether a particular 
hospital meets our definition of a teaching hospital, and there is no 
currently published database that includes this information. We 
proposed that the list of teaching hospital covered recipients should 
include the name and address of each teaching hospital.
    Comment: Many commenters supported CMS's proposal to publish a list 
of teaching hospitals, but recommended that the agency provide 
additional details regarding the list. The

[[Page 9470]]

commenters suggested that CMS publish the list prior to the beginning 
of the reporting year and ensure that applicable manufacturers will be 
able to download the list. The majority of these commenters recommended 
that the list be published 90 days before the end of the year, but the 
comments varied. Additionally, some commenters requested that CMS 
clarify that applicable manufacturers could rely on the teaching 
hospital list for the entire year and that entities not included on the 
list would not be covered recipients for the whole data collection 
year. They also advocated that the list should remove hospitals 
classified in error. Finally, a few commenters also requested that the 
list contain additional information to help clarify corporate 
identities (such as inclusion of a tax identification number (TIN) or 
an OSCAR number), as well as an institutional contact or officer for 
all hospitals.
    Response: We agree that the teaching hospital list will be useful 
for applicable manufacturers and appreciate the comments making 
suggestions for how to improve the list. We will publish the list once 
annually and make it available publicly and for download at least 90 
days before the beginning of the reporting year, or for the first 
reporting year, at least 90 days prior to the start of data collection. 
Applicable manufacturers can rely on the list for the entirety of the 
data collection year. The list will include all hospitals that CMS had 
recorded as receiving a payment under one of the defined Medicare 
direct GME or IME programs. The list will include hospital TINs to 
provide more specific information on hospitals with complex corporate 
identities. Finally, we will not include an institutional contact, 
since we do not have this information readily available and do not 
believe it is integral to the success of the program.
e. Payments or Other Transfers of Value
    Section 1128G(a)(1)(A) of the Act requires that applicable 
manufacturers report a ``payment or other transfer of value'' made to a 
covered recipient or ``to an entity or individual at the request of or 
designated on behalf of a covered recipient.'' Under Section 
1128G(a)(1)(B), if an applicable manufacturer makes a payment or other 
transfer of value to an entity or individual at the request of or 
designated on behalf of a covered recipient, the applicable 
manufacturer must disclose the payment or other transfer of value under 
the name of the covered recipient. Section 1128G(e)(10)(A) of the 
statute defines ``payment or other transfer of value'' broadly as ``a 
transfer of anything of value.''
    We would like to clarify that we interpret payments or other 
transfers of value to an entity or individual at the request of or 
designated on behalf of a covered recipient to refer to a situation in 
which an entity or individual receives and keeps the payment that was 
made on behalf of (or at the request of) the covered recipient and the 
covered recipient does not receive the payment or other transfer of 
value. Rather, the covered recipient directs the payment or other 
transfer of value and does not receive the payment personally. Such 
payments or other transfers of value to third party recipients are 
somewhat different than indirect payments to a covered recipient made 
through a third party (discussed in section II.B.1.k. of this final 
rule). Indirect payments or other transfers of value are made to an 
entity or individual (that is, a third party) to be passed through to a 
covered recipient. In the case of indirect payments or other transfers 
of value, we believe that the applicable manufacturer will generally 
direct the payment path.
    We proposed that payments or transfers of value made to an 
individual or entity at the request of or designated on behalf of a 
covered recipient included payments or other transfers of value 
provided to a physician (or physicians) through a physician group or 
practice. We proposed 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).
    When reporting payments or other transfers of value made at the 
request of, or designated on behalf of a covered recipient, we proposed 
that applicable manufacturers should report the payment or other 
transfers of value in the name of the covered recipient, but include 
the entity or individual that received the payment at the request of or 
designated on behalf of the covered recipient. We believed that 
reporting the entity or individual paid would 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. Additionally, 
we proposed that we did not believe it was feasible to provide a review 
period for these entities before the data is made public. Instead, we 
explained that review by the covered recipient was sufficient.
    Comment: Many commenters requested additional information on how to 
determine the amount and value of a payment or other transfer of value 
since neither the statute nor the proposed rule provided much guidance. 
While some commenters recommended specific options, such as 
interpreting value as discernible economic value on the open market, 
the majority advocated that the applicable manufacturers be allowed 
flexibility to determine whether a payment or other transfer of value 
has a cognizable economic value, and if so, to allow flexibility to 
determine such value. Several commenters also recommended that if a 
payment or other transfer of value does not have a measurable economic 
value to a covered recipient, then it does not need to be reported. In 
addition, a few commenters requested clarification on how to handle tax 
and other additional payments, such as shipping. Finally, a few 
commenters recommended that CMS clarify that goods purchased for market 
value should not be reportable.
    Response: We appreciate the comments and agree that more 
information will be useful for applicable manufacturers. In general, 
for purposes of this rule only, we interpret value similarly to many 
comments as the discernible economic value on the open market in the 
United States. However, we agree and support that applicable 
manufacturers should be allowed flexibility to determine value, so we 
do not plan to create numerous rules for calculating value. We have 
outlined a few guidelines to help manufacturers. First, payments or 
other transfers of value that do not have a ``discernible'' economic 
value for the covered recipient specifically, but nevertheless have a 
discernible economic value generally must be reported. For example, an 
applicable manufacturer may provide a physician with a textbook that 
the physician already owns. Since it is a duplicate, it may not have a 
value to the physician; however, the textbook does have an economic 
value, so it must be reported. Second, even if a covered recipient does 
not formally request the payment or other transfer of value, it still 
must be reported. Similarly, when calculating value we believe that all 
aspects of a payment or transfer of value, such as tax or shipping, 
should be included in the reported value. Finally, all applicable 
manufacturers must make a reasonable, good faith effort to determine 
the value of a payment or other transfer of value. The methodology used 
and assumptions made by the applicable manufacturer may be included in 
the applicable manufacturer's voluntary assumptions document (discussed 
in section II.B.1.h.

[[Page 9471]]

of this final rule). Finally, we added the statutory definition of 
``payment or other transfer of value'' to the regulatory text to ensure 
consistency with the statute.
    Comment: A few commenters stated that applicable manufacturers 
should not report payments or other transfers of value provided to a 
group practice as if the payment or other transfer of value had been 
provided to all members of the group.
    Response: We agree that payments or other transfers of value being 
provided to a specific physician through a group practice should not 
necessarily be attributed to all physicians in that group. However, we 
also do not want payments or other transfers of value to go unreported 
because they were provided to a group or practice rather than to a 
specific physician. This was the intent of our proposal for reporting 
payments to group practices. We have finalized that payments provided 
to a group or practice (or multiple covered recipients generally) 
should be attributed to the individual physician covered recipients who 
requested the payment, on whose behalf the payment was made, or who are 
intended to benefit from the payment or other transfer of value. This 
means that the payment or other transfer of value does not necessarily 
need to be reported in the name of all members of a practice. For 
example, if an applicable manufacturer donates a set of dermatology 
textbooks to a group practice, we believe that applicable manufacturers 
should attribute the transfer of value to only the dermatologists at 
the practice by dividing the cost equally across all dermatologists. We 
intend for applicable manufacturers to divide payments or other 
transfers of value in a manner that most fairly represents the 
situation. For example, many payments or other transfers of value may 
need to be divided evenly, whereas others may need to be divided in a 
different manner to represent who requested the payment, on whose 
behalf the payment was made, or who was intended to benefit from the 
payment or other transfer of value. We agree with the commenters that 
this approach attributes payments more fairly, since some physicians in 
a group practice may not make use of a payment or other transfer of 
value and may have concerns about such payments or other transfers of 
value being attributed to them.
    Comment: A few commenters requested clarification of the reporting 
requirements for payments or other transfers of value provided through 
a covered recipient to another covered recipient. We did not address 
this specific situation in the proposed rule. These commenters 
generally refer to a situation when a payment is provided to a 
physician covered recipient, but made through a teaching hospital 
covered recipient.
    Response: We appreciate the comments and agree that this is an area 
of potential confusion, so we believe that clarification is necessary. 
While the comments are generally limited to payments or other transfers 
of value to a physician through a teaching hospital, we provide 
clarification more generally. However, we recognize that the majority 
of payments to one covered recipient through another will likely 
involve a physician and teaching hospital.
    Payments provided to one covered recipient, but directed by the 
applicable manufacturer to another specific covered recipient should be 
reported in name of the covered recipient that ultimately received the 
payment because the intermediate covered recipient was merely passing 
through the payment. For example, if an applicable manufacturer 
provides a payment to a teaching hospital intended for a physician 
employee of the teaching hospital, then the payment should be reported 
in the name of the physician covered recipient, since that is who 
ultimately received the payment. In addition, a payment provided 
directly to a physician covered recipient should be reported in the 
name of the physician, regardless of whether the physician is an 
employee of a teaching hospital, since the payment was provided to the 
physician and not the teaching hospital. In order to prevent double 
counting, payments provided in these circumstances should not also be 
reported in the name of the intermediate covered recipient. If the 
payment or other transfer of value was not passed through in its 
entirety, then the applicable manufacturer should report separately the 
portion of the payment or other transfer of value retained by the 
teaching hospital covered recipient and the portion passed through to 
the physician covered recipient. If the payment or other transfer of 
value was not passed through at all, the applicable manufacturer should 
report it in its entirety in the name of the teaching hospital. We note 
that the rules regarding research-related payments made to teaching 
hospital covered recipients differ somewhat and are discussed further 
in the section on research herein.
    Comment: A few commenters recommended that CMS set a limit for the 
total amount a physician can receive annually.
    Response: This statute does not afford us the authority to limit 
the payments or other transfers of value made to covered recipients. 
The statute requires applicable manufacturers to report the 
relationships, but does not limit or ban them in any way. This is a 
transparency initiative, and inclusion on the public Web site does not 
indicate that the relationships are necessarily improper or illegal.
    Comment: There were a number of comments, some which supported 
reporting the name of the entity or individual that received the 
payment and others opposing this approach. However the most common 
suggestion was to only report the name of entities that receive the 
payment, rather than individuals, due to privacy concerns. 
Additionally, a few commenters stated that the applicable manufacturer 
may not know the amount if it was at the request or designated on 
behalf of a covered recipient.
    Response: We appreciate the comments and continue to believe that 
reporting the name of the entity which received the payment at the 
request of or designated on behalf of a covered recipient is 
beneficial. However, we agree that reporting the name of an individual 
that received the payment could be problematic. We will finalize that 
applicable manufacturers must report, in the name of the covered 
recipient, all payments or other transfers of value made at the request 
of or designated on behalf of a covered recipient, as well as the name 
of the entity that received the payment or other transfer of value. In 
the event that a payment was provided to an individual, at the request 
of or designated on behalf of a covered recipient, the individual's 
name does not need to be reported. Instead, the applicable manufacturer 
should report simply ``individual'' in the field for entity paid.
    Finally, we do not agree with the comment that the applicable 
manufacturer may not know the amount of the payment. We believe that 
because the applicable manufacturer is making the payment, it should 
know the amount being provided. We believe regardless of what entity 
received the payment or other transfer of value, the details are 
available to the applicable manufacturer.
    Comment: Many commenters recommended that CMS should provide 
entities receiving payments or other transfers of value at the request 
of or designated on behalf of a covered recipient (as a third-party 
recipient) should have the opportunity to review and correct the 
information. However,

[[Page 9472]]

other commenters supported the CMS proposal.
    Response: While we appreciate the interest in allowing these 
entities the opportunity for review, dispute and proposing corrections, 
we do not believe there is a viable method for administering it. The 
agency will not have any information on the entities beyond their name, 
so we will not be able to match an entity across applicable 
manufacturers. More importantly, since the entities will not be readily 
identifiable groups or individuals (such as physicians), the agency 
will have no means to validate the identity of an individual signing on 
to the Web site and stating that he or she is from a specific entity. 
Additionally, we believe a covered recipient will be able to review 
these payments or other transfers of value sufficiently since they 
should be aware of the payment or other transfer of value made at their 
request or designated on their behalf. As explained in this section, we 
have decided to only require reporting and publication of the name of 
entities (and not individuals) that received payments or other 
transfers of value at the request of or designated on behalf of covered 
recipients. We believe this should alleviate some of the concerns 
regarding review and correction because personal payments to an 
individual will not be made public on the Web site. Given these 
considerations, we will finalize that review and correction for 
entities which receive a payment at the request of or designated on 
behalf of a covered recipient will be done by the covered recipient, 
rather than the entity.
    Comment: Numerous commenters noted various situations when a 
payment or other transfer of value may be at the request of or 
designated on behalf of a covered recipient. In some cases, a covered 
recipient may direct the payment elsewhere; conversely, in others, the 
covered recipient may simply waive the payment and the applicable 
manufacturer provides it to a third-party recipient of their choosing. 
In addition, there are also models when a covered recipient does not 
have any claim to the payment and it is automatically provided 
elsewhere (such as a charity) on his/her behalf. The commenters 
recommended various methods to report these situations, including 
categorizing some as non-reportable.
    Response: We appreciate these comments and recognize that there are 
various circumstances where a payment will be made at the request of or 
on behalf of a covered recipient, which will all be slightly different. 
In general, we do not believe it will be possible to create rules for 
each situation. Instead, we are providing the following general 
guidelines and information on how we intend to interpret the phrases 
``at the request of'' and ``designated on behalf of.''
    If a covered recipient directs that an applicable manufacturer 
provide a payment or other transfer of value to a specific entity or 
individual, rather than receiving it personally, then the payment is 
being made ``at the request'' of such covered recipient and must be 
reported as described in this section (under the name of the covered 
recipient, but also including the name of the entity paid or 
``individual,'' in the case of an individual). For example, in the 
event that a covered recipient directs an applicable manufacturer to 
donate a payment or other transfer of value--to which he would have 
otherwise been entitled--to a particular charity, the applicable 
manufacturer must report the payment in the name of the covered 
recipient and provide the name of the charity that received the payment 
at the covered recipient's request. However, if a covered recipient 
decides to neither accept the payment or other transfer of value nor 
request that it be directed to another individual or entity, then the 
payment or other transfer of value that was offered by the applicable 
manufacturer does not need to be reported. In this situation, there is 
nothing to report because no reportable payment or other transfer of 
value was made to a covered recipient or to an individual or entity at 
the request of or designated on behalf of a covered recipient.
    In addition, we interpret ``designated on behalf of a covered 
recipient'' as when a covered recipient does not receive a payment or 
other transfer of value, but the applicable manufacturer provides the 
payment or other transfer of value to another entity or individual in 
the name of the covered recipient. For example, a covered recipient may 
waive his payment, and the applicable manufacturer nevertheless donates 
the payment to a charity ``on behalf of'' the covered recipient. We 
recognize that this could result in a covered recipient who waived a 
payment nevertheless having a payment reported in his or her name; 
therefore, we encourage covered recipients to make very clear to 
applicable manufacturers whether they would like their waived fee to be 
paid to another individual or entity--
    After consideration of the public comments received, we are 
finalizing that reporting of payments or other transfers of value at 
the request of or designated on behalf of a covered recipient should be 
reported, but should include the name of the entity paid or that 
another individual received the payment. The covered recipient will 
have the opportunity to review and correct the payment on behalf of the 
entity or individual that received the payment.
f. Payment and Other Transfer of Value Report Content
    The specific categories of information required to be reported for 
each payment or other transfer of value provided to a covered recipient 
are set forth in section 1128G(a)(1)(A) of the Act. In the proposed 
rule, we provided explanations and details on how we proposed that 
applicable manufacturers report some of this information to CMS. This 
section outlines the comments we received on the data elements.
(1) Name
    We proposed that applicable manufacturers should report the first 
name, last name, and middle initial for physician covered recipients.
    Comment: A few commenters stated that not all physicians have 
middle names and not all existing systems include middle name or 
initial, so they recommended middle initial not be reported.
    Response: We appreciate the comments, but believe that given the 
number of physicians with the same first and last name, reporting a 
middle initial will be important when identifying and distinguishing 
physician covered recipients and aggregating payments across applicable 
manufacturers. While we recognize that not all physicians have middle 
names, we believe that this information should be reported whenever 
possible. As required in Sec.  403.904(c)(1), applicable manufacturers 
must report the middle initial of a physician covered recipient as 
listed in NPPES, but will not be penalized for leaving the field blank 
if it is not available in NPPES or if the physician does not have a 
middle name. Additionally, as stated previously, we hope that 
applicable manufacturers provide as much identifying detail as possible 
on physician covered recipients to ensure we can attribute payments 
appropriately. In order to ensure that physician covered recipients are 
appropriately matched across applicable manufacturers and to their own 
data during the review and correction period, we will require 
applicable manufacturers to report a physician covered recipient's name 
as listed in NPPES.

[[Page 9473]]

(2) Business Address
    We proposed that applicable manufacturers should report the full 
street address. For teaching hospital covered recipients, we proposed 
using only the address included in the CMS-published list of teaching 
hospitals. For physician covered recipients, we proposed that 
applicable manufacturers report the physician's primary practice 
location address, since this is more easily recognizable to end users 
of the data.
    Comment: A few commenters recommended that CMS allow applicable 
manufacturers to use the address kept on file for a physician covered 
recipient, rather than the address in NPPES, since the address on file 
may be more accurate than the NPPES address. Regarding NPPES, a few 
commenters also suggested that CMS should require physicians to keep 
their address updated. Some commenters recommended reporting the 
address used for correspondence, rather than business location. 
Finally, a few commenters discussed that providing the full street 
address for the business address field for each payment or other 
transfer of value will increase the data elements significantly.
    Response: We appreciate the comments. We agree that (unlike with a 
physician covered recipient's name) applicable manufacturers do not 
need to use NPPES when reporting addresses. In the proposed rule, we 
simply wanted to be clear that it was available and explain what field 
to use, if an applicable manufacturer chose to use NPPES. Regarding the 
requirement to keep addresses updated, we encourage physicians to keep 
their NPPES profiles updated, but we do not believe that we have the 
authority to force all physicians to do so.
    We also have finalized our proposal to require the primary practice 
location address to be reported as the business address. We realize 
that a physician can be associated with multiple addresses, but we 
believe that primary practice location is the most recognizable to 
consumers. However, we understand that it may be difficult for an 
applicable manufacturer to know which address represents the primary 
practice location, so we plan to not penalize applicable manufacturers 
for providing the incorrect address, as long as applicable manufacturer 
reports a legitimate business address for the covered recipient.
    Finally, we appreciate the comment that the reporting of a full 
street address (as opposed to a portion of the address, such as City 
and State) will require a significant amount of data to be submitted. 
We agree that we want to minimize the data submitted; however, we 
believe that full street address is important since in large urban 
areas there may be multiple physicians with the same name in the same 
city, so we will continue to require reporting of full street business 
address.
(3) Specialty and NPI
    In the proposed rule, we stated that, as required by the statute, 
applicable manufacturers are required to report the specialty and NPI 
for physician covered recipients. We suggested that applicable 
manufacturers use the ``provider taxonomy'' field when reporting 
physician specialty. We proposed that applicable manufacturers only 
report a single specialty and use only the specialties available for 
the ``provider taxonomy'' field in NPPES. More details on these terms 
are available online.\4\ For NPI, we proposed that applicable 
manufacturers report the physician's individual NPI, rather than any 
group NPI, with which the physician may be associated.
---------------------------------------------------------------------------

    \4\ Health 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.
---------------------------------------------------------------------------

    Comment: Many commenters addressed the requirements for reporting 
physician specialty and NPI. Some commenters recommended that 
applicable manufacturers be able to use their own internal files for 
reporting specialty, rather than NPPES. They were concerned that 
specialty in NPPES may not be accurate and could lead to concerns about 
off-label marketing. Regarding the NPPES list, a few commenters 
recommended that CMS include the nine recognized American Dental 
Association (ADA) specialties. Some commenters also requested 
clarification on whether applicable manufacturers should report both 
the specialty name and the associated NPPES code. In addition, a few 
commenters recommended that CMS allow methods for an applicable 
manufacturer to provide more context regarding physician specialty, 
such as reporting multiple specialties with one listed as primary or 
allowing a statement justifying specialty choice.
    Response: We appreciate the comments and agree that applicable 
manufacturers may use their internal information when reporting 
specialty. However, the NPPES ``provider taxonomy'' list (as referenced 
previously) should be used as the list of accepted specialties since 
consistency in the names of reported specialties is important for 
facilitating aggregation of the data. We note that the NPPES list does 
include the nine recognized ADA specialties. When reporting specialty, 
applicable manufacturers should list both the specialty name and code 
to ensure consistency.
    Additionally, we do not believe applicable manufacturers need to 
provide more information when reporting physician covered recipient 
specialty. We believe that a single specialty should be sufficient and 
that allowing applicable manufacturers to provide a justification of 
physician specialty would be too much information to be beneficial.
(4) Date of Payment
    In the proposed rule, we required applicable manufacturers to 
provide the date on which a payment or transfer of value was provided 
to the covered recipient. We recognized that some payments or other 
transfers of value might be provided over multiple dates, such as a 
consulting agreement with monthly payments. We proposed that applicable 
manufacturers use their discretion as to 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.
    Comment: Many commenters supported the proposed requirements for 
reporting the date(s) of payment. These comments appreciated the 
flexibility since applicable manufacturers may use different tracking 
systems. However, some commenters requested additional flexibility on 
how to report the payment date. For example, some commenters suggested 
that applicable manufacturers should have flexibility, depending on 
their individual systems, to report the date a flight actually occurred 
or the date the trip was booked, as long as this information is 
reported consistently within a category. Additionally, the commenters 
recommended that CMS clarify how to report payments which may happen 
across a reporting year.
    Response: We appreciate the comments and have finalized the 
proposal that applicable manufacturers have the flexibility to report 
payments made over multiple dates either separately or as a single line 
item for the first payment date. In addition, we will allow flexibility 
for what specific date to report for a nature of payment category. We 
believe that the methodology employed should be consistent within a 
single nature of payment category. For example, for all flights, 
applicable manufacturers should report dates in a consistent manner 
(such as the flight

[[Page 9474]]

date or ticket purchase date). In addition, the aggregated payments 
should not cross years, so for payments which span multiple years, the 
amount paid in a given year must be reported for that reporting year. 
Similarly, the date of payment methodology should not be used to move 
payments from one reporting year to another. Applicable manufacturers 
are encouraged to include information on the methods they used for 
reporting date of payment or other transfer of value in their 
assumptions document. When reporting the date of payment for bundled 
small payments (as described in Sec.  403.904(i)(2)(iv)), applicable 
manufacturers should report the date of payment as the date of the 
first small payment or other transfer of value made to the covered 
recipient.
(5) Context
    Comment: Some commenters recommended that CMS allow applicable 
manufacturers to voluntarily report contextual information about each 
payment or other transfer of value and make the information publicly 
available. CMS did not propose including this in the proposed rule.
    Response: We agree that information on the context of a payment or 
other transfer of value could be useful. We believe it could help the 
public better understand the relationships between the industry and 
covered recipients. In addition to consumers, we believe contextual 
information will be useful for covered recipients when reviewing the 
payments or other transfers of value. Hopefully, the context will 
provide information to help the covered recipient assess the accuracy 
of the payment. However, we do not want this information to overwhelm 
users or significantly increase the data reported, so will limit the 
amount of data that can be reported in that field. Section 
403.904(c)(12) allows applicable manufacturers to provide brief 
contextual information for each payment or other transfer of value, but 
does not require them to do so.
(6) Related 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 
proposed that 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. 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, but many 
are, and we proposed that those must be reported.
    When reporting a related product, we proposed that applicable 
manufacturers could 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 covered products related to the 
payment. However, we considered, 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. We believed that 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 could make aggregating payments by product 
difficult.
    With regard to reporting a product name, we proposed that the 
applicable manufacturer should report 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, we proposed the 
applicable manufacturer should report the scientific name.
    Comment: Many commenters questioned how and when to report an 
associated product. A number of these commenters discussed whether a 
product name should be reported for payments associated with non-
covered products (such as pre-commercial or OTC drugs) and recommended 
only requiring reporting of a product when the payment is related to 
``marketing, education, or research.'' Many commenters also recommended 
that CMS allow the reporting of ``n/a'' or ``none'' in instances when a 
product is not associated or when associated with a non-covered 
product. Similarly, a few commenters recommended that applicable 
manufacturers should not have to report an associated product for 
research on a new indication of a covered product.
    A few commenters provided more specific requirements, such as only 
reporting a covered product for a payment or other transfer of value, 
when there is a written agreement or an understanding with the covered 
recipient that the product will be named. Similarly, some commenters 
suggested that CMS should allow flexibility to report business purpose, 
in addition to product family or a single product.
    Response: We appreciate the comments and agree that it is important 
to provide additional information on when and how a related product 
should be reported. Section 1128G(a)(1)(A)(vii) of the Act requires 
that ``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,'' applicable manufacturers must report the name of 
the covered product. We believe that many financial relationships 
between applicable manufacturers and covered recipients are related to 
marketing, education or research associated with a particular product, 
often a covered product. Therefore, we will finalize that applicable 
manufacturers must report a related product name for all payments or 
transfers of value, unless the payment or other transfer of value is 
not related to a covered product. However, we do not believe applicable 
manufacturers should be required to report the name of associated non-
covered products, since this may be misleading to consumers and would 
provide information that is beyond the goal of the statute. However, we 
do believe it is useful to know the extent of payments or other 
transfers of value that are not associated with any product or not 
associated with a covered product. This distinction will not be 
possible if applicable manufacturers leave the associated products 
fields blank in cases when it is not applicable. Given this interest, 
the final rule directs applicable manufacturers to fill in associated 
product fields as appropriate. Instead, if the payment or other 
transfer of value is not related to at least one covered product, then 
applicable manufacturers should report ``none.'' Conversely, if the 
payment or other transfer of value is related to a specific product, 
which is not a covered product, then applicable manufacturers are to 
report ``non-covered product.'' Finally, if the payment or other 
transfer of value is related to at least one covered product, as well 
as at least one non-covered product, then applicable manufacturers must 
report the covered products by name (as required), and may include non-
covered products in one of the fields for reporting associated product.
    Comment: Many comments addressed the number of associated products 
that may be reported for each payment or other transfer of value. 
Several commenters supported allowing

[[Page 9475]]

reporting of only a single product, whereas several others supported 
allowing applicable manufacturers to report multiple products as being 
associated with the a payment or other transfer of value. The 
commenters who advocated reporting multiple products explained that 
often a financial relationship is associated with multiple products, 
and it would be misleading to attribute it to a single product. 
Conversely, some commenters were sympathetic to the need to aggregate 
the payments or other transfers of value by product. As a compromise, 
some of these commenters suggested reporting a single product would be 
sufficient, as long as we allowed applicable manufacturers to report 
``multiple,'' as well. Other commenters recommended that CMS allow 
reporting of up to five products. However, these comments cautioned 
that aggregation by product should not give the impression that there 
were multiple interactions. A commenter recommended requiring 
applicable manufacturers to report a percentage of the interaction to 
be attributed to each product listed. The comments also addressed what 
product name should be used. Many commenters advocated that applicable 
manufacturers should be allowed to report the product category or 
therapeutic area rather than the product-specific name. Many commenters 
recommending this method referenced implantable devices, since 
consumers may not know the specific name of the device that had been 
implanted during a medical procedure. Many devices are given a complex 
name and number combination, which consumers may not know. For example, 
a patient may be aware that she received a hip implant manufactured by 
company A, but may not know the specific model number of the implant. 
Similarly, some commenters recommended slight changes to the name 
required to be reported, such as using the clinicaltrials.gov name for 
drugs without a name or allowing reporting of the generic name. 
Finally, a few commenters suggested that we require reporting of 
National Drug Code (NDC), as well as brand and generic name.
    Response: We appreciate the comments and agree that reporting 
multiple products will likely improve the accuracy of the database in a 
way that is more beneficial than the difficulty in aggregating by 
product. Therefore, we will finalize that applicable manufacturers may 
report up to five related covered products for each interaction. If the 
interaction was related to more than five products, an applicable 
manufacturer should report the five products which were most closely 
related to the payment or other transfer of value. Additionally, when 
aggregating payments or other transfers of value by product, we will 
not represent a single interaction related to multiple products as 
multiple interactions. However, we do not agree that the applicable 
manufacturer should report the percentage of the interaction dedicated 
to each product. We believe this will be burdensome to the applicable 
manufacturers and would not be beneficial to consumers, since it will 
greatly increase the volume of the data.
    We also agree that we should allow greater flexibility in reporting 
the product name, particularly for devices where the product name is 
less recognizable to consumers. For drugs and biologicals, we are 
finalizing that applicable manufacturers must report the market name of 
the product and must include the NDC (if any). If a market name is not 
yet available, applicable manufacturers should use the name registered 
on clinicaltrials.gov. We believe that reporting the NDC will greatly 
help CMS aggregating the data by product. However, if there is no NDC 
available for a product, it does not have to be reported. For devices 
and medical supplies, Sec.  403.904(c)(8)(ii) allows reporting of 
either the name under which the device or medical supply is marketed, 
or the therapeutic area or product category. We believe that reporting 
devices and medical supplies in this manner is appropriate, since 
device names are less known to consumers and a single product may 
actually be comprised of multiple devices. Conversely, we believe that 
the names of drugs and biologicals are more readily available to 
consumers, since they are often listed on a prescription.
(7) 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 add additional categories.
    Section 1128G(a)(1)(A)(v) of the Act includes the following form of 
payment categories:
     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.
     Any other form of payment or other transfer of value.
    Section 1128G(a)(1)(A)(vi) of the Act includes the following nature 
of payment categories:
     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 o 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.
    In this section, we discuss the general policies for reporting the 
form of payment and the nature of payment, rather than the specific 
categories, which will be discussed in sections II.B.1.g and h. of this 
final rule.
    In the proposed rule, we proposed that the categories within both 
the form of payment and the nature of payment should be defined as 
distinct from one another. Additionally, 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 proposed 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. In these cases, we proposed 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 proposed 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 lump sum payments or other 
transfers of value, we proposed that the applicable manufacturer break 
out the distinct parts of the payment that fall into multiple 
categories for both form of payment and nature of payment. We also 
solicited comment on an alternative approach of allowing a payment or 
other transfer of value for an activity that is

[[Page 9476]]

associated with multiple segregable categories to be reported as a 
single lump sum, rather than separately by each segregable category.
    Finally, in the proposed rule we also discussed the interpretations 
of various forms of payment and natures of payment categories. We did 
not define the categories individually and instead proposed that they 
would have their dictionary definitions.
    Comment: Many commenters addressed our proposed method for 
reporting form of payment and nature of payment. A number of these 
commenters supported our proposed method of reporting a single form of 
payment and a single nature of payment for each reported payment, 
whereas others supported the alternative of reporting multiple forms of 
payment and natures of payment for a single payment. The commenters 
supporting multiple forms of payment and natures of payment recommended 
that the applicable manufacturer should be allowed flexibility to 
report, but should explain their decisions and methodology for 
reporting form and nature of payment in the assumptions document. 
Additionally, a few commenters suggested that the applicable 
manufacturer should be allowed to report lump payments, but should be 
required to produce segregated payments in an audit. Finally, a few 
commenters recommended that CMS allow applicable manufacturers to 
report additional details beyond form of payment and nature of payment 
to allow end users to understand that not all reported relationships 
are payments.
    Response: We appreciate the comments and believe they provided 
important background on the processes of reporting. However, we have 
finalized these provisions as proposed. We believe that flexibility in 
the reporting requirements is important to aid applicable manufacturers 
with different systems. However, we believe that there should also be 
consistency in the way payments or other transfers of value are 
reported across applicable manufacturers, particularly when describing 
and classifying payments or other transfers of value. We believe that a 
single form of payment and a single nature of payment for each line 
item characterizes a payment or other transfer of value much 
differently than reporting multiple forms of payment and natures of 
payment for a lump sum payment. We are concerned that allowing this 
flexibility will be confusing to covered recipients and end users, 
since they will not be able to readily tell a specific applicable 
manufacturer's method for reporting the payment or other transfer of 
value, since the assumptions document will not be made public. We also 
believe that a flexible method would create additional disputes because 
a covered recipient would not know what was included in a single line 
item, since some line items would be separated, whereas others would be 
aggregated. Additionally, a State with a similar reporting requirement 
for manufacturers that allows the reporting of secondary natures of 
payment stated in its public comment that reporting entities seldom use 
the secondary field, indicating that a single field should be 
sufficient.
    With regard to choosing the appropriate nature of payment, we agree 
that if a payment could fit within multiple possible categories, 
applicable manufacturers should have flexibility to select the category 
that best described the payment, in accordance with their own 
documented methodology. However, this should not be used to bundle 
payments of separate categories into a single payment. For example, a 
meal should be reported as a meal, even if associated with travel or a 
consulting contract. Additionally, serving as a faculty for a medical 
education program should be reported separately from a consulting 
contract, even if the medical education program speech was similar in 
content to the consulting services provided by the covered recipient.
    Comment: A number of commenters generally questioned the form of 
payment and nature of payment categories. Many commenters requested 
that CMS develop precise definitions, and a few commenters provided 
recommended definitions. However, in the event that the agency does 
retain the dictionary definitions, some commenters suggested that CMS 
should ensure that the dictionary definitions are sufficient to provide 
clarity. Additionally, a few commenters recommended that CMS publish 
and allow for Q&As to further clarify the categories. A few commenters 
provided additional categories for CMS to add, whereas others 
recommended methods for categorizing payments or other transfers of 
value to explain the details of the payment. For example, a commenter 
recommended that we create separate reporting categories for payments 
or other transfers of value made directly and indirectly. Finally, a 
few commenters recommended that we should consider form of payment as 
``payment type'' or the modality used to transfer value, whereas we 
should consider nature of payment as ``payment nature'' or the reason 
the payment was made.
    Response: We appreciate the comments and have carefully considered 
the best way to provide additional context to the categories. Given the 
very specific statutory requirements, we are unable to fully 
reconfigure the categories; while the Secretary is granted discretion 
to add forms of payment and natures of payment, she is not given 
discretion to remove or collapse them. However, we appreciate the 
clarification on form of payment being considered the modality used to 
transfer value and nature of payment being the reason the payment was 
made. We believe these classifications should help applicable 
manufacturers when assigning categories, and will help us provide more 
accurate guidance on the categories.
    In order to provide additional information we have provided general 
discussions and additional contextual information, particularly for the 
nature of payment categories, since we believe most comments were 
concerned with the nature of payment categories. We provide additional 
details in the following two sections of this final rule dedicated to 
form of payment and nature of payment.
g. Form of Payment
    Section 1128G(a)(1)(A)(v) of the Act lists forms of payment that 
applicable manufacturers must use to describe payments or other 
transfers of value. 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. In the proposed rule, 
we did not add any forms of payment beyond those outlined in the 
statute because we believed what is provided in the statute was 
sufficient to describe payments and other transfers of value. 
Additionally, as explained, we proposed that each form of payment be 
defined by the term's dictionary definition, since we believed that 
these terms are understandable as written.
    Comment: We received a few comments supporting the categories, as 
well as a few recommending small changes to the categories. A few 
commenters advocated adding a category for ``grant'' to make clear that 
it was not personal income. Another few commenters recommended 
separating stock, stock option, or any other investment interest from 
dividend, profit or other return on investment, since they are 
materially different. These commenters explained that stocks, stock 
options, and investment interests are different from dividends, 
profits, and return on investments

[[Page 9477]]

because the former are actively granted to a covered recipient while 
the latter are earned on existing investments. Finally, regarding the 
definitions, a few commenters suggested that CMS use standard legal 
definitions.
    Response: We appreciate the comments and agree that the forms of 
payment categories are sufficient. However, we do agree that the 
``stock, stock option, or any other ownership investment interest, 
dividend, profit or other return on investment'' category should be 
divided into two categories. We agree that the categories are different 
and separating them would create additional specificity in the 
categories, without changing them significantly. Conversely, we do not 
agree that grant should be a form of payment. Instead, we believe 
``grant'' should remain as a nature of payment (as included in the 
statute), since it best describes a reason a covered recipient might 
receive a payment. After consideration of the public comments received, 
we are finalizing the proposal to break the category of ``stock, stock 
option, or any other ownership investment interest, dividend, profit or 
other return on investment'' category into two categories, but 
otherwise will not be adding any additional categories to form of 
payment. We agree that stock, stock options, and other ownership 
investment interests are different than dividends, profits and other 
returns of investment, so separating these categories may provide 
additional clarity to consumers. We do not believe that this changes 
the way forms of payments will be reported, since the categories 
existed previously, we are simply providing more clarity and 
specificity to the categories. We believe the dictionary definitions 
are sufficient, particularly since these terms are generally 
understandable to consumers.
h. 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. In the proposed rule, 
we encouraged 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 proposed that 
applicable manufacturers should make reasonable determinations about 
the nature of payment reported for the payment or transfer of value. 
Additionally, as explained, we believed that the nature of payment 
categories have meanings to the general public that are familiar to the 
industry and proposed defining each nature of payment category by its 
dictionary definition.
    Comment: Many commenters discussed the nature of payment 
categories, including our proposed method for defining the categories. 
A few commenters recommended that CMS provide more guidance on how 
these categories should be applied. For example, one commenter 
recommended that CMS rank the categories and if multiple categories 
could apply to a single payment or other transfer of value, the 
applicable manufacturer should report it in the ``higher'' ranked 
category. Another commenter requested that CMS break the categories 
into two groups: those made in exchange for value (such as services or 
intellectual property rights) and those made without any expectation of 
benefit. Beyond categorizing payments or other transfers of value, many 
commenters requested additional guidance on the definitions for the 
nature of payment categories. We also received a few recommendations 
for additional nature of payment categories. For example, a few 
commenters recommended including a category for agreements to appear as 
an ``author'' of an industry ghost-written publication. Another 
commenter recommended that we include a category for space or facility 
fee for events at a teaching hospital.
    Response: We appreciate the comments. However, we believe that 
providing precise definitions for applicable manufacturers to use in 
categorizing nature of payments will be too restrictive. Applicable 
manufacturers are required to report all payments or other transfers of 
value, unless they specifically fall within an exception. The nature of 
payment categories are simply used to describe these payments or other 
transfers of value. We believe precise definitions could make these 
descriptors less useful and could make reporting more challenging for 
applicable manufacturers. For example, if a payment or other transfer 
of value that the applicable manufacturer generally would classify as a 
consulting fee does not meet our precise definition, the applicable 
manufacturer would be forced to report it in another category, which 
would likely be less accurate than the consulting fee category. The 
relationships between applicable manufacturers and covered recipients 
are extremely diverse; we are concerned that providing specific, narrow 
definitions would not encompass every situation, forcing applicable 
manufacturers to describe payments or other transfers of value by less 
specific categories that do not accurately describe the relationship. 
Additionally, since all payments or transfers of value must be 
reported, we do not believe we should rank the categories and indicate 
some as more desirable or beneficial than others. Instead, we believe 
that the nature of payment categories are descriptors and that 
applicable manufacturers should select the most appropriate 
description. However, we do understand the interest in consistency to 
enhance of the usefulness of the data, so we will provide some 
additional explanations for the categories.
    Finally, we appreciate the recommended additional categories. We 
have tried to limit the number of additional categories as much as 
possible, so we have only added categories for those recommendations 
that we believe cannot be described by existing nature of payment 
categories. For example, we believe that agreement to appear as an 
author of a ghostwritten article is an important relationship that 
should be reported, but believe there are sufficient existing nature of 
payment categories, such as compensation for services other than 
consulting, which can be used to describe the relationship. Conversely, 
regarding space rentals, we do agree that this represents a specific 
relationship between a covered recipient (likely a teaching hospital) 
and an applicable manufacturer that cannot be accurately described by 
the existing nature of payment categories. We understand that space 
rental or facility fees are commonly part of hosting an event at a 
hospital and believe that including them in another category would 
inflate the amount in that category. Similarly, the statutory nature of 
payment categories are mostly directed towards physician covered 
recipients, so it is important to consider the common relationships 
between teaching hospital covered recipients and applicable 
manufacturers. Given these considerations, we will add space rental and 
facilities fees as a nature of payment category under our authority in 
section 1128G(a)(1)(A)(vi)(XV) of the Act, but will not add appearing 
as an author for a ghostwritten article.
    We are providing some additional explanation of the nature of 
payment categories to provide additional context. These explanations 
are not exhaustive (unless specified as such), but rather are intended 
to provide additional guidance to applicable manufacturers when they 
are categorizing payments. Additionally, we will discuss research in a 
separate section in light of the additional complexities in reporting 
research-related payments or other transfers of

[[Page 9478]]

value, which warrants additional consideration.
(1) Charitable Contributions
    In the proposed rule, we stated that 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, but only if it is not more specifically described 
by one of the other nature or payment categories. We did not receive 
any comments on the definition of charitable contribution and intend to 
finalize it as proposed.
    Comment: Many commenters questioned how to report payments or other 
transfers of value for when a covered recipient (usually a physician) 
does not receive a payment personally and instead the payment is 
provided to a charity. In these situations, the covered recipient may 
or may not choose the charity and may be waiving his or her customary 
fee.
    Response: We appreciate the comments and understand these payments 
or other transfers of value can be complicated. We discussed general 
guidelines for reporting payments through another covered recipient in 
the payments or other transfer of value section of the final rule, but 
will provide additional detail in this section for situations when a 
payment or other transfer of value is directed to charity. We believe 
that the ``charitable contribution'' nature of payment category should 
be used only in situations when an applicable manufacturer makes a 
payment or other transfer of value to a charity on behalf of a covered 
recipient and not in exchange for any service or benefit. For example, 
in circumstances where a physician provides consulting services to an 
applicable manufacturer, but requests that his payment for the services 
be made to a charity, this would not be a charitable contribution for 
purposes of this rule because the payment was not provided by the 
applicable manufacturer as a charitable contribution, but rather as a 
directed consulting fee. This payment would be reported as a consulting 
fee with the physician as the covered recipient, but the entity paid 
would be the charity.
    Additionally, we note that in the cases of teaching hospital 
covered recipients that have tax-exempt status under the Internal 
Revenue Code of 1986, payments or other transfers of value made to 
these organizations (other than payments or other transfers of value 
made for expected services or benefits, such as consulting services or 
rental of space in a hospital for an event) would be considered and 
reported as charitable contributions for purposes of this rule.
(2) Food and Beverage
    When reporting food and beverage, we proposed that in group 
settings, such as the office of a group practice, where it is more 
difficult to keep track of which covered recipients actually partook in 
the food and beverage provided by an applicable manufacturer, the 
applicable manufacturer should report the cost per covered recipient 
receiving the meal even if the covered recipient does not actually 
partake of the meal.
    Comment: Numerous commenters questioned our proposed allocation 
method for food and beverage. The majority of commenters recommended 
that we revise our proposed allocation methodology, but we did receive 
some support for it. Many commenters recommended various options for 
dividing the cost of group meals; however, there were some common 
themes in the recommendations. The majority of these commenters 
recommended that applicable manufacturers should report the amount 
based on the cost per participant (including, for example, support 
staff members who are not covered recipients), rather than the cost per 
covered recipient. Many commenters also strongly recommended that we 
should not attribute meals to all covered recipients in a practice 
because it may be difficult for applicable manufacturers to identify 
all the physicians within a practice, and this methodology could 
implicate concerns of off-label marketing in large multispecialty 
practices. These commenters suggested that the cost of a meal should 
only be attributed to physicians who actually partook of the food. They 
suggested that it would not be unduly burdensome to keep track of which 
physicians actually participated in the meal. Some commenters also 
recommended that CMS allow applicable manufacturers flexibility in 
allocating the value of meals depending on their internal systems or 
that the value should be based on the amount actually received. 
Finally, a few commenters recommended that CMS provide covered 
recipients with the opportunity to ``opt-out'' of interactions with 
applicable manufacturers, including meals, and attest that they never 
partake in such meals.
    Beyond the allocation method, we received significant support for 
our proposal 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 the 
individuals who accept the offerings. However, a few commenters also 
recommended that meals that are dropped off at a physician's office 
should also be excluded, as well as meals when the attendees are 
outside the control of an applicable manufacturer.
    Response: We appreciate the comments and understand that reporting 
payments or other transfers of value that fall under the ``food'' 
nature of payment category is quite complicated, both in terms of 
calculating the value of the payments and determining who should be 
reported as having received payments. We believe that while reporting 
the transactions accurately is important, tracking exactly what a 
person ate or drank may not be practical for purposes of the reporting 
requirements. We have considered how to improve accuracy in reporting, 
while ensuring that the reporting requirements for this nature of 
payment are not overly burdensome. For meals in a group setting (other 
than buffet meals provided at conferences or other similar large-scale 
settings), we will require applicable manufacturers to report the per 
person cost (not the per covered recipient cost) of the food or 
beverage for each covered recipient who actually partakes in the meals 
(that is, actually ate or drank a portion of the offerings). In other 
words, applicable manufacturers should divide the total value of the 
food provided by the number of people who actually partook in the food 
and beverage including both covered recipients and non-covered 
recipients (such as support staff). If the per person cost exceeds the 
minimum threshold amount, then the applicable manufacturer must report 
the food or beverage as a payment or other transfer of value for each 
covered recipient who actually participated in the group meal by eating 
or drinking a food or beverage item. For example, a sales 
representative brings a catered lunch costing $165 to a 10-physician 
group practice. Six of the ten physicians and five support staff 
participate in the meal. Because the meal cost $15 per participant 
($165/11 participants = $15), the meal needs to be reported for the 6 
physicians who participated in it. However, the meal does not need to 
be reported for the 4

[[Page 9479]]

other physicians in the group who did not participate in the meal (that 
is, did not eat or drink any of the offerings). Additionally, if the 
total cost of the meal was $100, making the cost per participant less 
than $10, then the meal would not have to be reported since it was 
below the minimum threshold. We decided to make this modification to 
the proposed rule because we agree with commenters that for the 
purposes of this rule this method will more accurately reflect the 
actual transaction, and will not unfairly attribute a payment to a 
physician who did not partake in it. Additionally, we believe this 
approach will reduce disputes between applicable manufacturers and 
physicians, since food-related payments or other transfers of value 
will not be attributed to physicians that did not actually receive 
them. Finally, this method does not require the reporting of meals 
eaten by support staff, for the purposes of this reporting requirement. 
However, we recognize that in other contexts, transfers of value to a 
physician's office support staff (which may include meals) may 
constitute transfers of value to the physician.
    While we appreciate the importance of flexibility, we believe that 
we need to set out the attribution methodology in order to ensure as 
much consistency as possible. If we did not provide a methodology, it 
could result in very different amounts being reporting across 
applicable manufacturers and could lead to increased disputes since 
covered recipients would not know how a particular applicable 
manufacturer attributed the value of a meal. We believe that there must 
be some consistency across applicable manufacturers in this complicated 
area, so we have finalized the position that applicable manufacturers 
must report the cost per participant for covered recipients in 
attendance.
    Regarding meals that are dropped off at a covered recipient's 
office (for example, by a sales representative) and other meals where 
the attendees are not controlled or selected by the applicable 
manufacturer, we believe that these situations nevertheless constitute 
payments or other transfers of value to a covered recipient, so they 
must be reported. Applicable manufacturers are responsible for keeping 
track of food and beverages provided to covered recipients and must use 
the same attribution method for all meals as described previously 
regardless of whether the manufacturer's representative remained in the 
office for the entire meal.
    We also appreciate the comments regarding allowing covered 
recipients the opportunity to opt-out from receiving meals; however, we 
believe that this would be operationally difficult for CMS. We would 
need to track the covered recipients and would have to develop a method 
of arbitration if an applicable manufacturer reports a meal for a 
physician who has opted-out. We believe that covered recipients who do 
not want to receive meals simply should make clear to applicable 
manufacturers that they do not accept them. The finalized methodology 
will no longer attribute meals to physicians who do not attend the 
meal, so a physician who does not want to receive meals should not 
attend or accept them.
    Finally, we appreciate the support regarding offerings of buffet 
meals, snacks, or coffee at conferences or other large-scale events 
where it would be difficult for applicable manufacturers to 
definitively establish the identities of the physicians who partake in 
the food or beverage. Accordingly, we have finalized that food and 
beverage provided at conferences in settings where it would be 
difficult to establish the identities of people partaking in the food 
do not need to be reported. This applies to situations when an 
applicable manufacturer provides a large buffet meal, snacks or coffee 
which are made available to all conference attendees and where it would 
be difficult to establish the identities of the physicians who partook 
in the meal or snack. We do not intend this to apply to meals provided 
to select individual attendees at a conference where the sponsoring 
applicable manufacturer can establish identity of the attendees.
(3) Direct Compensation for Serving as a Faculty or as a Speaker for a 
Medical Education Program
    In the proposed rule, we interpreted this category 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 acknowledged that this 
interpretation does not allow for differentiation between continuing 
education accredited speaking engagements, and all other speaking 
engagements.
    Comment: Many comments addressed our proposed interpretation of 
this category, particularly regarding its relationship to accredited 
and/or certified continuing medical and dental education.
    A few commenters supported our interpretation to include all 
speaking engagements in one category; however, numerous others were 
concerned about payments for accredited and/or certified continuing 
education-related speaking engagements and recommended that they be 
treated differently than unaccredited and/or certified continuing 
education speaking engagements. Many of these commenters provided 
significant background information on accredited and certified 
continuing education. Accredited Continuing Medical Education (CME) 
refers to CME activities that have been deemed to meet the requirements 
and standards of a CME accrediting body, as authorized by the 
Accreditation Council for Continuing Medical Education (ACCME). 
Certified CME refers to CME activities that carry credit offered by the 
grantors of CME credit (the American Osteopathic Association (AOA), the 
American Academy of Family Physicians (AAFP), and the American Medical 
Association (AMA)). Continuing dental education is similarly accredited 
through the American Dental Association's Continuing Education 
Recognition Program (ADA CERP).
    These commenters explained that accredited and certified continuing 
education speaker payments will generally not be made directly by an 
applicable manufacturer to a covered recipient, as this category 
suggests, due to the accreditation requirements. Some commenters 
suggested that these be reported in another ``indirect'' speaking 
engagement category. Conversely, other commenters recommended that this 
category be limited to accredited and certified continuing education 
payments, and that compensation for other speaking engagements should 
be described by other natures or payments.
    Response: We appreciate the comments and agree that it is important 
that CMS clarify this category. We understand the importance of 
continuing medical education and discuss the requirements for reporting 
it generally in section II.B.1.k. of the final rule, dedicated to 
indirect payments or other transfers of value. We agree that given the 
title of this nature of payment category, which was set out in the 
statute itself, it should not include compensation for accredited or 
certified continuing education payments. However, we do not believe 
that all payments to physicians for serving as speakers at an 
accredited or certified continuing education program should be granted 
a blanket exclusion (as discussed in the indirect payment section), so 
we have added an additional nature of payment category for serving as a 
faculty or speaker at an accredited or certified continuing education 
event, at Sec.  403.904(e)(2)(xv). This category, named ``compensation 
for

[[Page 9480]]

serving as faculty or as a speaker for an accredited or certified 
continuing education event,'' includes all accredited or certified 
continuing education payments that are not excluded by the conditions 
set forth in Sec.  403.904(g)(1)(i) through (iii), and further 
discussed in section II.B.1.k. of this final rule. Additionally, we 
also renamed the category for direct compensation to include speaking 
engagements at unaccredited and non-certified continuing education 
events at Sec.  403.904(e)(xiv). We recognize that not all payments or 
other transfers of value related to unaccredited and non-certified 
continuing education will be provided directly. Therefore, we retitled 
the category as ``compensation for serving as a faculty or as a speaker 
for an unaccredited and non-certified continuing education program.'' 
This renamed category includes all other instances when an applicable 
manufacturer provides compensation to a covered recipient for serving 
as a speaker or faculty at an unaccredited and non-certified education 
event, regardless of whether the payment was provided directly or 
indirectly. Finally, the nature of payment category for ``compensation 
for services other than consulting'' at Sec.  403.904(e)(2)(ii) now 
explicitly includes payments or other transfers of value for speaking 
engagements that are not for continuing education.
    We believe this reporting strategy appropriately separates 
accredited and certified continuing education from unaccredited and 
non-certified continuing education, so that consumers can better 
understand the nature of the payment received by a covered recipient. 
Accredited and certified continuing education that complies with 
applicable standards of the accrediting and certifying entities 
generally includes safeguards designed to reduce industry influence, so 
we believe that, when reportable (that is, when the payments or 
transfers of value do not meet the conditions delineated at Sec.  
403.904(g)(1)(i) through (iii)), payments or transfers of value made to 
support accredited and certified continuing medical education should 
remain in a distinct category from unaccredited or non-certified 
continuing education. We also believe that educational speaking 
engagements should be separated from all other speaking engagements, 
promotional or otherwise, to have separated them appropriately. 
Finally, we believe the renaming of the statutory nature of payment 
category for ``direct compensation for serving as a faculty or as a 
speaker for a medical education program'' to include indirect 
compensation as well, provides applicable manufacturers flexibility to 
describe payments or other transfers of value more accurately.
(4) Other
    In the proposed rule, we added a nature of payment category, titled 
``other,'' to serve as a catch all for payments or other transfers of 
value that do not fit into one of the listed natures of payment.
    Comment: Many commenters recommended that CMS remove the proposed 
additional nature of payment category ``other.''
    Response: We appreciate the comments and agree that an ``other'' 
category could dilute the usefulness of the nature of payment 
categories. Therefore, the final rule omits ``other'' category from the 
nature of payment categories at Sec.  403.904(e). However, all payments 
or transfers of value from applicable manufacturers to covered 
recipients (other than those excluded under section 1128G(e)(10) of the 
Act) must be reported. Any payments or transfers of value that are not 
specifically excluded, must be reported and described based on the 
nature of payment categories included in the final rule. Applicable 
manufacturers are required to report each payment under the nature of 
payment category that most closely describes the payment; the absence 
of a nature of payment category that closely describes the payment does 
not constitute a basis for not reporting an otherwise reportable 
payment or other transfer of value. Failure to report such a payment 
may result in the imposition of a civil monetary penalty on the 
applicable manufacturer.
(5) Other Nature of Payment Categories
    Although we did not address these categories in the proposed rule, 
we received comments requesting additional information on these 
categories and what CMS intends them to include. In the following 
sections, we have provided additional guidance on how we interpret the 
categories. Once again, this is not intended to define the categories, 
but rather to provide additional information for applicable 
manufacturers when considering the categories.
(A) Consulting Fees
    This category is intended to include fees paid by an applicable 
manufacturer to a covered recipient for services traditionally viewed 
as consulting services. While we believe there is likely variation, we 
believe that consulting services are typically provided under a written 
agreement and in response to a legitimate need by the applicable 
manufacturer. Similarly, we believe there is often a connection between 
the competence of the covered recipient paid and the purpose of the 
arrangement, as well as a reasonable number of individuals hired to 
achieve the intended purpose.
(B) Compensation for Services Other than Consulting
    This category is intended to capture compensation for activities or 
services that are not traditionally considered consulting services, but 
are provided by a covered recipient to an applicable manufacturer. As 
discussed in the section on direct compensation for serving as a 
faculty or as a speaker for a medical education program, this category 
should include payments or other transfers of value for speaking 
engagements that are not related to continuing education, such as 
promotional or marketing activities.
(C) Honoraria
    We believe this category is similar to ``compensation for services 
other than consulting.'' However, honoraria are distinguishable in that 
they are generally provided for services for which custom prohibits a 
price from being set.
(D) Gift
    This category is a general category, which will often include 
anything provided to a covered recipient that does not fit into another 
category. For example, the provision of small trinkets (above the 
minimum threshold) would need to be reported as a ``gift'' since they 
are not included in any other category. However, provision of tickets 
to a professional sporting event should not be reported as a ``gift'' 
since this transaction is better described by the nature of payment 
category ``entertainment'' even if the provision of the tickets was a 
gift.
(E) Entertainment
    This category is intended to include, but is not limited to, 
attendance at recreational, cultural, sporting or other events that 
would generally have a cost.
(F) Travel and Lodging
    This category includes travel, including any means of 
transportation, as well as lodging. As required in section 
1128G(a)(1)(A)(vi)(VII) of the Act, the destination, including City, 
State and country must be reported.

[[Page 9481]]

(G) Education
    We believe this category generally includes payments or transfers 
of value for classes, activities, programs or events that involve the 
imparting or acquiring of particular knowledge or skills, such as those 
used for a profession. As stated in the section on indirect payments or 
other transfers of value, we do not intend to capture the attendees at 
accredited or certified continuing education events whose fees have 
been subsidized through the CME organization by an applicable 
manufacturer (as opposed to payments for speakers at such events); 
however, we believe that any travel or meals provided by an applicable 
manufacturer to specified covered recipients associated with these 
events must be reported under the appropriate nature of payment 
categories.
(H) Royalty or License
    This category includes, but is not limited to, the right to use 
patents, copyrights, other intellectual property and trade secrets, 
including methods and processes. We believe this may be pursuant to a 
written agreement and could entail various payment schedules (such as 
scheduled or milestones methods). Applicable manufacturers may report 
total aggregated payment amounts for payments made under a single 
agreement, in order to consolidate reporting.
(I) Current or Prospective Ownership or Investment Interests
    We believe this category includes ownership or investment interests 
currently held by the covered recipient, as well as ownership interests 
or investment that the covered recipient has not yet exercised. Details 
on current ownership or investment interests is discussed in the 
section of the final rule dedicated to reporting ownership or 
investment interests of physicians.
(J) Grant
    This category generally refers to payments to covered recipients in 
support of a specific cause or activity.
(6) Nature of Payment Categories
    Based on the comments, and the discussion and justifications 
included in this section, we will allow applicable manufacturers to 
report the following categories in the nature of payment field to 
describe payments or other transfers of value. However, as stated 
previously, all payments or other transfers of value must be reported, 
unless excluded, even if they do not explicitly fit into one of the 
outlined nature of payment categories. Applicable manufacturers must 
select the nature of payment category that best describes the payment 
or other transfer of value. The nature of payment categories in the 
final rule are as follows:
     Consulting fee.
     Compensation for services other than consulting, including 
serving as faculty or as a speaker at an event other than a continuing 
education program.
     Honoraria.
     Gift.
     Entertainment.
     Food and beverage.
     Travel and lodging (including the specified destinations).
     Education.
     Research.
     Charitable contribution.
     Royalty or license.
     Current or prospective ownership or investment interest.
     Compensation for serving as faculty or as a speaker for an 
unaccredited and non-certified continuing education program.
     Compensation for serving as faculty or as a speaker for an 
accredited or certified continuing education program.
     Grant.
     Space rental or facility fees.
(7) Assumptions Document
    In order to monitor how applicable manufacturers were classifying 
payments or other transfer of value, we proposed that applicable 
manufacturers could submit along with their data a document describing 
the assumptions used when categorizing the natures of payments. We 
proposed that submission of the assumptions document would be voluntary 
and would not be made public. We explained that the documents could aid 
the agency in offering further guidance to applicable manufacturers 
regarding how natures of payment should be classified.
    Comment: A few commenters questioned the CMS proposal to allow 
applicable manufacturers to submit an assumptions document in order to 
ensure consistency in the reporting and selection of categories. Many 
of these commenters supported the submission of the assumptions 
document; however, the commenters varied as to whether the assumptions 
documents should be mandatory. Some commenters recommended that it be 
mandatory, while others supported that it be voluntary. Additionally, 
the commenters also both supported and opposed the proposal not to make 
the assumptions document public. A few commenters expressed that the 
assumptions documents should not be published on the public Web site 
and should also not be subject to a Freedom of Information Act (FOIA) 
request. Conversely, other commenters recommended that even if the 
assumptions documents were not made public, they should be available to 
covered recipients upon request to help mitigate disputes.
    Beyond the publication of the assumptions document, some commenters 
discussed the expected content for the assumptions document, as well as 
how CMS intends to use the documents. Regarding the content of the 
assumptions document, a few commenters recommended that applicable 
manufacturers may include other reporting assumptions and 
methodologies, beyond natures of payment, such as determining whether 
an interaction constitutes a payment or other transfer of value. Other 
commenters recommended that CMS create its own assumptions document for 
applicable manufacturers to use when characterizing payments or other 
transfers of value. Finally, a few commenters recommended that CMS 
clarify that it intends to review the submitted assumptions documents 
and does not plan to use them for purposes of prosecution for failure 
to report.
    Response: We appreciate the comments, and given the support for the 
assumptions document, we are finalizing the voluntary submission of an 
assumptions document in this final rule. As discussed in the section of 
the preamble to this final rule on payments or other transfers of value 
(section II.B.1.F. of this final rule), applicable manufacturers may 
include in the assumptions document assumptions and methodologies other 
than only those employed when classifying nature of payment categories. 
Furthermore, applicable GPOs reporting under section 1128G(a)(2) of the 
Act may also submit an assumptions document. The assumptions document 
may include the applicable GPO's assumptions when categorizing nature 
of payment categories for any information submitted on payments or 
other transfers of value provided to physician owners or investors (as 
required in section 1128G(a)(2)(C) of the Act) or any other assumptions 
or methodologies the applicable GPO wishes to include.
    After review of the comments, we continue to believe that 
submission of the assumptions document should be voluntary and that the 
contents of the assumptions documents submitted should not be made 
public. We believe that they will likely contain significant detailed 
information, which will not necessarily be consumer friendly, so it 
could be overwhelming on the public Web site. We encourage applicable

[[Page 9482]]

manufacturers to be as clear and specific as possible with regard to 
the information submitted within the assumptions document. If a 
statement within the assumptions document pertains to a particular 
section of the report, applicable manufacturers should explicitly refer 
to that section in the assumptions document. Additionally, we do not 
believe that we should provide the assumptions documents to covered 
recipients. This would be difficult for the agency to track and would 
greatly reduce the confidentiality of the documents. Applicable 
manufacturers may provide their assumptions document to covered 
recipients upon the request of covered recipients independently from 
CMS. To the extent an assumptions document is requested under the FOIA, 
we would follow our predisclosure notification procedures at 45 CFR 
5.65(d) and seek the submitter's input on the applicability of FOIA 
Exemption 4, which protects trade secrets and commercial or financial 
information that is obtained from a person and is privileged or 
confidential.
    The agency intends to carefully review the assumptions documents to 
determine whether we need to publish more detailed guidance to assist 
applicable manufacturers in classifying the nature of payment 
categories, or other assumptions or methodologies included in the 
assumptions document. Additionally, we intend to provide assistance to 
applicable manufacturers to help classify payments or other transfers 
of value and hope that such guidance will be useful. Finally, we do not 
intend to use the assumptions document for prosecution, but acknowledge 
that the reporting based on the assumptions would be open to 
prosecution. Other HHS divisions, the Department of Justice (DOJ), or 
the Office of the Inspector General (OIG) could request access to the 
documents as part of an audit or investigation into an applicable 
manufacturer or applicable GPO.
i. Research
    We received numerous comments on our proposed methods for reporting 
and presenting research-related payments. We recognize that reporting 
payments or other transfers of value for research activities is 
extremely complicated, since many research activities include large 
payment amounts which are spread across numerous activities and 
parties, and acknowledge that our proposed method did not fully address 
this complexity. We understand the need for a simple and clear 
reporting process, which allows the agency to accurately present 
research payments to consumers. We appreciate the comments and have 
revised the system to try to improve the process and ensure that the 
research is reported in a manner that most accurately describes the 
research relationship. A summary of the comments and our finalized 
process are outlined in this section.
(1) Scope of Research
    In the proposed rule, we proposed to limit the research category to 
bona fide research activities, including clinical investigations that 
are subject to a written agreement or contract between the applicable 
manufacturer and the organization conducting the research and a 
research protocol. We based this criteria on the method used to 
identify payments eligible for delayed publication.
    Comment: We received a number of suggestions from commenters about 
which types of research payments should be reportable. Many commenters 
recommended including a definition of research and suggested many 
different definitions. Additionally, some commenters recommended that 
CMS provide information on what constitutes a research protocol or 
written agreement. These commenters stated that not all research has a 
``research protocol'' and recommended that the agency interpret the 
term broadly or not require that one exist in order for a payment to be 
described as research. For example, clinical research for devices is 
often different from clinical drug research and does not require a 
research protocol. Finally, many commenters recommended that CMS 
exclude certain research-related payments from the reporting 
requirements altogether, such as payments related to pre-clinical 
research, indirect research, or research by Principal Investigators 
(PI) not practicing medicine, due to the importance of research-related 
relationships in developing new treatments and products.
    Additionally, a few comments addressed how to handle payments that 
could conceivably be related to research, but do not meet the 
definition of research. In the proposed rule, we solicited comments on 
the preferred method for these payments and the comments were mixed. 
Some recommended that CMS create another nature of payment category for 
these payments (such as one titled ``other research''); others 
recommended that CMS require applicable manufacturers to report the 
payment in another category.
    Response: We appreciate the comments and agree that we should 
provide additional information and clarification about what constitutes 
research and what research-related payments must be reported. Based on 
suggestions in the comments received, we have decided to define 
research based on the Public Health Service Act definition of research 
in 42 CFR 50.603; this definition defines research as: ``a systematic 
investigation designed to develop or contribute to generalizable 
knowledge relating broadly to public health, including behavioral and 
social-sciences research. This term encompasses basic and applied 
research and product development.'' We believe this definition includes 
pre-clinical research and FDA Phases I-IV research, as well as 
investigator-initiated investigations. We have finalized that payments 
reported as research should be made in connection with an activity that 
meets the definition. In addition, we agree that requiring both a 
written agreement or contract and a research protocol is limiting for 
some types research, so we are finalizing that if a payment falls 
within the nature of payment category for research, it only needs to be 
subject to a written agreement or contract or a research protocol. This 
may include an unbroken chain of agreements (instead of a single 
agreement between the applicable manufacturer and the covered 
recipient) which link the applicable manufacturer with the covered 
recipient because we understand that many applicable manufacturers use 
other entities such as contract research organizations (CROs) (as 
defined in 21 CFR 312.3(b)), or site management organizations (SMOs) to 
manage their clinical research activities. For example, agreements 
between an applicable manufacturer and a CRO, between a CRO and an SMO, 
and then between an SMO and a teaching hospital would be considered a 
continuous chain of agreements from the applicable manufacturer to a 
covered recipient and would be considered a research agreement.
    Regarding reporting of research-related payments which do not meet 
the definition of research, applicable manufacturers should report 
using the other categories available. We believe that the categories 
are sufficiently broad to provide applicable manufacturers options; for 
example, we believe the grant category could be used to sufficiently 
describe some of the transactions.
    We also seek to respond to comments about which research-related 
payments should be reportable. In general, we believe that any payments 
related to the definition of research discussed previously should be 
reportable. We

[[Page 9483]]

recognize that research is important and have allowed research to be 
reported in a manner that acknowledges its special role. Given this 
consideration, we do not believe we should further limit the scope of 
research payments to be reported. Many of the comments sought to limit 
the reporting of research related payment in significant ways, such as 
only reporting direct research. However, we believe Congress clearly 
intended research-related payments or other transfers of value to be 
included in the reporting requirements, based on the inclusion of 
``research'' as a nature of payment, the statutory definition of 
``clinical investigation,'' and the procedures for delayed reporting 
for certain research-related payments or other transfers of value. We 
believe that excluding payments or other transfers of value related to 
clinical research or indirect research from the reporting requirements 
would be inconsistent with the intent of Congress. We do agree that 
pre-clinical research is slightly different, so we have outlined 
reporting requirements tailored to its unique structure which are 
discussed more in this section.
    Additionally, as explained in the section on covered recipients, we 
do not believe the statute limits the reporting requirements to 
licensed physicians who regularly treat patients, so we plan to require 
reporting of research payments to PIs who meet the definition of 
``physician,'' even if they do not regularly treat patients. Finally, 
material transfers (such as provision of a protein) to a researcher for 
discovery collaboration does not need to be reported when not part of a 
commercial or marketing plan and precedes the development of a new 
product. We believe for the purposes of this regulation that due to the 
early stage of the research process, the transferred material does not 
have independent value.
(2) Reporting Research Payments
    We also understand that research payments are unique and should be 
reported differently than other payments or other transfers of value. 
We proposed special rules to report research payments, including a rule 
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. When reporting payments or other transfers of 
value designated as research, we proposed that applicable manufacturers 
must report the payment or other transfer of value as either ``indirect 
research'' or ``direct research.'' Additionally, we proposed that the 
payment or other transfer of value (whether direct or indirect 
research) should be reported individually under the names and NPIs of 
physician covered recipients serving as principal investigators. For 
indirect payments, this included 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). Finally, we proposed 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.
    Comment: A significant number of comments addressed the method 
proposed for reporting research payments. While there was some support 
for our proposed methods, the majority of the commenters did not 
support it and recommended a new method. Many commenters stated that 
allocating 100 percent of the research payment to the physician PI 
would be misleading, even if the payment amount was not aggregated into 
the physician's total payments. Similarly, many commenters did not 
support reporting a single payment multiple times, which some 
commenters feared could lead to double counting of research payments. 
These commenters provided numerous recommendations for how to report 
and present research related payments. The most common recommendation 
was to report research in a separate reporting template, which would 
include a single line item for each payment. The payment would include 
both the entity paid (such as the research institution) and list the 
name of the principal investigator. There were some variations in the 
recommendations, including reporting only the amount the PI received 
and that the applicable manufacturer must control the selection of the 
PI; however, the majority of comments followed this basic process. A 
few commenters also requested that applicable manufacturers should be 
allowed to report context of research or additional information on the 
research payment. Finally, a few commenters recommended that research 
payments be presented separately on the public Web site to clearly 
delineate them as a research-related payment or other transfer of 
value.
    Response: We appreciate the comments and agree that reporting of 
research-related payments should be more representative of the actual 
payment stream for research. Applicable manufacturers must report 
research-related payments that ultimately are paid, in whole or in 
part, to a covered recipient (physician or teaching hospital). We have 
finalized that applicable manufacturers must report research payments 
separately in a different template, since we will be requiring the 
reporting of modified information. Applicable manufacturers will not be 
responsible for indicating whether a payment was direct or indirect. We 
have adopted a procedure similar to the process outlined in many of the 
comments, where a single research payment is reported once and includes 
the entity paid, as well as the name of the principal investigator(s). 
Applicable manufacturers must report each research payment once as a 
single interaction. They must report the name of the individual or 
entity (regardless of whether it is a covered recipient) that received 
the payment for the research services, as well as the principal 
investigator(s). When reporting the entity or individual that received 
the payment, we intend for the applicable manufacturer to report the 
entity or individual that received the payment, either directly from 
the applicable manufacturer or indirectly through a CRO or SMO. We 
believe that the recipient of the payment could include individual 
principal investigators, teaching hospitals, nonteaching hospitals or 
clinics. We intend for the principal investigator(s) to include the 
individual(s) conducting the research or providing the services on 
behalf of the research institution.
    As discussed regarding the reporting elements for all payments or 
other transfers of value, in order to better identify and match covered 
recipients, the same identifying information will be required to be 
reported for each PI meeting the definition of covered recipient.
    The applicable manufacturer shall be required to report the 
following for each research-related payment that ultimately is paid, in 
whole or in part, to a covered recipient (physician or teaching 
hospital):
     Name of research institution/other entity or individual 
receiving payment (regardless of whether a covered recipient)
    ++ If paid directly to a physician covered recipient, list the 
individual's name, NPI, State professional license number(s) and 
associated State names for at least one State where the physician 
maintains a professional license, specialty, and primary business 
address of the physician(s).

[[Page 9484]]

    ++ If paid directly to a teaching hospital covered recipient, list 
name and primary business address of the teaching hospital.
    ++ If paid to a non-covered recipient (such as a non-teaching 
hospital or clinic), list name and primary business address of the 
entity.
     Total amount of research payment.
     Name of study.
     Name(s) of related covered drug, device, biological or 
medical supply (same requirements as for all payments or other 
transfers of value) and NDC (if any).
     Principal investigator(s) (including name, NPI, State 
professional license number(s) and associated States for at least one 
State where the physician maintains a professional license, specialty, 
and primary business address);
     Context of research (optional).
     ClinicalTrials.gov identifier (optional).

We believe reporting this information for each research payment will 
better capture the nature of the research relationship, creating a 
simpler reporting mechanism for the applicable manufacturers to report 
payments and allowing end users a more accurate understanding of the 
relationship. We believe the study name will provide information on the 
research topics, but we have also included an optional field allowing 
applicable manufacturers to provide additional contextual information 
on or the objectives of the research. We intend this to be used 
similarly to the additional context allowed for reporting all payments 
or other transfers of value. Additionally, we also will allow 
applicable manufacturers to provide the ClinicalTrials.gov Identifier 
to allow consumers the ability to obtain more information on the study 
from ClinicalTrials.gov. However, we recognize that not all research 
studies will be posted on ClinicalTrials.gov, so this category will be 
optional. Finally, this represents the information required to be 
reported for each research-related payment or other transfer of value, 
but the agency may identify other optional fields, such as information 
on publications related to the research, in order to provide additional 
information and background on the public Web site.
    For pre-clinical research, we finalize slightly modified reporting 
requirements since such early stage research is often not connected to 
a specific product. We intend pre-clinical research to include 
laboratory and animal research that is carried out prior to beginning 
any studies in humans, including FDA's defined phases of investigation. 
For pre-clinical research, applicable manufacturers only have to report 
the name of the research institution, principal investigator(s) 
(including name, NPI, State professional license number(s), specialty 
and business address), and the total amount of the payment, so they do 
not need to report an associated product, or study name.
    We are also finalizing guidelines for what should be included in 
the total research payment amount. The amount should include the 
aggregated amount of any payments for services included in the written 
agreement/research protocol. We envision that this would include the 
costs associated with patient care, including diagnostics, exams, 
laboratory expenses, time spent by health care professionals treating 
the patient and managing the study, and the provision of study drugs, 
devices, biologicals, and medical supplies or other in-kind items. The 
payment amount should not include any payments for activities which are 
separate or segregable from the written agreement or research protocol 
or are paid through a method different than that of the research. For 
example, payments made directly to a physician for serving on a study 
steering committee or data monitoring committee that are not a part of 
the larger research payment should be reported separately. Payments for 
medical research writing and/or publication would be included in the 
research payment, if the activity was included in the written agreement 
or research protocol and paid as a part of the research payment. In 
addition to research payments, we also believe that meals and travel 
should be reported separately (under the food and travel nature of 
payment categories) unless included in written agreement or research 
protocol and paid for through the large research contract.
    We realize that reporting requirements for research will be 
somewhat different than the procedure outlined for other natures of 
payment, but we believe that this is appropriate for research-related 
payments or other transfers of value. As several comments pointed out, 
due to the flow of research payments from sponsor to research 
institution, an applicable manufacturer might not know the specific 
details or amounts of how the larger research payment was spent. We do 
not intend for applicable manufacturers to be required to itemize each 
research payment, since they are usually large payments obligated to 
general administration of the study and the applicable manufacturer may 
not be aware of the daily activities. Additionally, we do not require 
the reporting of payments to non-covered recipients that are not passed 
on to covered recipients. For example, if an applicable manufacturer 
paid separately for a non-covered recipient to travel to a meeting, 
then it would not need to be reported. However, if an applicable 
manufacturers paid separately for a covered recipient (regardless of 
whether the individual was a PI or not) to travel to a meeting, then 
the travel would have to be reported in the name of the covered 
recipient traveling.
    When reporting research payments, we also acknowledge that research 
payments are generally different than other payments and may not 
represent a payment to the covered recipient. For physician covered 
recipients whom are paid by a third party and not directly by the 
manufacturer, we will list research studies separately from all other 
payments provided to the covered recipient. For teaching hospitals, we 
will publish all research payments which went to the hospital as a 
research institution. These will be listed separately from other 
payments to the hospital, but will include both the study amount and 
study name.
    We believe that presenting research payments in this method 
reflects the fact that research payments are unique and do not 
necessarily represent a personal payment to physicians; however, it 
still allows for research payments to be reported as intended by 
Congress, but in a less burdensome way for applicable manufacturers. In 
light of the public comments received, we believe that the 
modifications represent a better, more accurate method of reporting 
research payments.
j. Exclusions
    Section 1128G(e)(10) of the Act excludes specific types of payments 
or other transfers of value from the reporting requirements.
    Comment: We received numerous comments on the exclusions section of 
the proposed rule. Many of the comments focused on the statutory 
exclusions and the explanations CMS provided in the proposed rule. 
Beyond these comments, we also received numerous recommendations for 
additional exclusion categories to be included in the final rule. The 
recommended exclusions covered numerous specific relationships between 
applicable manufacturers and covered recipients, some related to 
healthcare, such as paying a physician at an on-site clinic, whereas 
others did not, such as campaign contributions to physicians running 
for political office.

[[Page 9485]]

    Response: We appreciate these recommendations, but do not believe 
that we have the statutory authority to add exclusions beyond what was 
outlined in the statute. The statute expressly provides the Secretary 
discretion to require the reporting of additional information of 
payments or other transfers or value, and ownership or investment 
interests, but it does not provide a similar authority to add exclusion 
categories. We have finalized our policy that the exclusions will be 
defined by their dictionary definitions, but plan to provide additional 
clarification in response to the comments in this section. We believe 
that some of the recommended exclusions could be included in some of 
the statutory exclusions, so we have provided additional information to 
clarify our interpretation of these categories.
(1) Existing Personal Relationships
    In the proposed rule we stated that we did not intend to require 
reporting of 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), and we solicited comments 
on this proposal.
    Comment: Many commenters supported our intention to exclude 
payments or other transfers of value between individuals who happen to 
have existing personal relationships and recommended that it be 
included as a listed exclusion. A few commenters also recommended 
specific requirements, such as to include relationships between family 
members, to limit to bona fide relationships or to mirror the Federal 
employee exemption.
    Response: We appreciate the comments and do not intend existing 
personal relationships to be reported, so we have finalized this 
provision in Sec.  403.904(i)(14).
(2) Payments or Other Transfers of Value of Less Than $10
    Small payments or other transfers of value, 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 required by 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 (CPI) for all 
urban consumers (all items; U.S. city average) for the 12-month period 
ending with June of the previous year. In the proposed rule, we 
proposed 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. We 
believed this would simplify reporting for applicable manufacturers and 
prevent the reporting of payments less than $10 individually. Given the 
timing of this final rule, we have decided to begin increasing the de 
minimis thresholds for reporting in CY 2014, and retain the statutory 
de minimis thresholds ($10 and $100) for reporting in CY 2013. We 
believe this simplifies reporting for the first year of data collection 
by employing simple numbers as thresholds. Also because these were the 
statutory thresholds, we believe applicable manufacturers should be 
prepared to collect data and report using these thresholds for CY 2013.
    Comment: We received various comments on small payments or other 
transfers of value. Some commenters indicated that our proposed method 
for reporting small payments together might (for some applicable 
manufacturers) be more difficult than reporting small payments 
individually; these commenters recommended that CMS allow applicable 
manufacturers discretion in their reporting mechanism. Some commenters 
also recommended that CMS not change the thresholds within a single 
reporting year. Beyond comments on reporting of small payments, many 
commenters also addressed the small payment or transfer of value 
exclusion more generally. Many commenters questioned the thresholds and 
indicated that they were too low and recommended various higher 
thresholds. Similarly, some commenters recommended that CMS consider 
methods within the statutory requirements to reduce the number of small 
payments being reported. Finally, many commenters supported CMS's 
proposal to not report food and beverages at conferences and indicated 
that CMS should extend this to other items provided at conferences 
(both above and below the $10 threshold).
    Response: We appreciate the comments and agree that applicable 
manufacturers should have discretion when reporting small payments. We 
had proposed requiring applicable manufacturers to bundle payments in 
order to reduce burden, but we do not want to require that method if 
some applicable manufacturers actually believe it to be more 
burdensome. Therefore, we will finalize that applicable manufacturers 
have flexibility in reporting small payments. They may either report 
them individually or bundled with other small payments or other 
transfers of value in the same nature of payment category, as long as 
applicable manufacturers are reporting consistently and clearly 
indicating the method they are using. Additionally, we agree that the 
de minimis thresholds should not change within a reporting year and 
will be constant for the entire year. For example, for the entirety of 
data collection in 2014, the thresholds will be those adjusted based on 
CPI published in June 2013. We will report the new de minimis value 
with the reporting template for the next reporting year.
    We appreciate the comments on the threshold for small payments and 
understand that they may be low for some stakeholders. Nevertheless, 
the thresholds were mandated by the statute, and we do not have 
discretion to change them. However, we recognize that we do not want 
the database to be overwhelmed by small payments. We have considered 
options for reducing the number of small payments, but we believe that 
we do not have authority to change the reporting requirements for small 
payments or other transfers of value.
    Regarding reporting of payment or other transfers of value at 
conferences or similar events, we appreciate the comments and have 
provided additional guidelines expanding on the proposed rule. In 
general, we will finalize that these guidelines will apply to 
conference and similar events, as well as events open to the public. We 
believe that at events open to the public, it will be extremely 
difficult for applicable manufacturer to identify physician covered 
recipients. Therefore, we will finalize that small incidental items 
that are under $10 (such as pens and note pads) that are provided at 
large-scale conferences and similar large-scale events will be exempted 
from the reporting requirements, including the need to track them for 
aggregation purposes. While these small payments are excluded by 
statute, the $100 aggregate payment requirement generally requires the 
tracking of small payments in order to determine whether covered 
recipients received more than $100 annually. For these covered 
recipients, we believe it would be difficult for applicable 
manufacturers to track who receives these small items at conferences or 
similar events, due to the nature and disparate attendance at large-
scale conferences or similar events. Additionally, this method is 
consistent with our decision to not require

[[Page 9486]]

reporting of food and beverage at large-scale conferences. We note that 
payments or other transfers of value of $10 or more (for calendar year 
(CY) 2013) need to be tracked and reported even when provided at large-
scale conferences or similar events. We believe that if an applicable 
manufacturer is handing out an item above the threshold, they should be 
able to track who received the payment since it is a more significant 
transfer.
    Finally, we will not be providing a standard template for reporting 
by entities that organize and oversee events and conferences. These 
event and conference vendors are not applicable manufacturers, so we do 
not believe we should have any contact with them or impose requirements 
on them. We recognize that applicable manufacturers and their vendors 
will need to devise business practices to meet the requirements; 
however, we believe that many of the interactions at large-scale 
conferences and similar events will not be reportable, so we do not 
believe this will be excessively burdensome.
(3) Educational Materials That Directly Benefit Patients or are 
Intended For Patient Use
    In the proposed rule, we explained that this exclusion was limited 
to materials (including, but not limited to, written or electronic 
materials) and did not include services or other items. Additionally, 
we considered whether certain materials provided by applicable 
manufacturers to covered recipients for their own education, but which 
are not actually given to patients (for example, medical textbooks), 
should be interpreted as educational materials that ``directly benefit 
patients.''
    Comment: Many commenters addressed this exclusion, particularly 
questioning the meaning of ``materials.'' A few commenters stated that 
``materials'' should be interpreted more broadly to include ``programs, 
services, and items'' since many applicable manufacturers provide 
services and items to patients in order to support disease management 
or increase medication adherence. These items are generally provided to 
patients through covered recipients. Finally, a few commenters also 
asked for clarification on what form these materials needed to be in 
and whether overhead costs for educational materials, such as time and 
printing, were included in the exclusion.
    Response: We appreciate the comments and agree that ``materials'' 
should be interpreted somewhat more broadly for purposes of this 
exclusion. We understand that patient education is important and 
recognize that it may take a form other than written material, 
especially in the device context. For example, a device manufacturer 
may give a physician an anatomical model to help explain to patients 
how a procedure would work. We agree that such an item, which is given 
to physicians for the purpose of educating patients, falls within the 
exclusion. Similarly, if a manufacturer provides educational materials 
to a physician on a flash drive to be distributed to patients, the 
flash drive would also be included in the exclusion. However, if the 
drive was provided as a gift alongside the materials, then it would 
have to be reported, since it was secondary to the materials. 
Similarly, we believe that overhead expenses, such as printing and 
time, should be included in the exclusion as long as they are directly 
related to the development of the materials, which directly benefit 
patients or are intended for patient use.
    Comment: Numerous commenters questioned CMS's interpretation of 
``directly benefit patients or are intended for patient use.'' These 
commenters had mixed reactions to CMS's proposed interpretation. Some 
recommended that all materials provided to educate physicians (such as 
textbooks or journals) should be included in the exclusion, since 
educating the physician benefits patients. Others suggested that these 
should not be included, since they do not benefit patients directly. 
Some commenters also recommended that materials that are used ``for or 
with'' patients, but not taken home (such as anatomical models or wall 
charts) should be included in the exclusion because they are intended 
for patient use. Finally, a few commenters recommended that all 
materials intended for patients should be included in the exclusion.
    Response: We appreciate the comments and agree that additional 
clarification is required. We agree that items that are educational to 
covered recipients (such as medical textbooks and journal reprints), 
but are not intended for patient use are important for physicians; 
however, we do not believe that these materials fall within the 
statutory exclusion. Although these items may have downstream benefits 
for a patient, we believe they are not directly beneficial to patients, 
nor are they intended for patient use, as required by section 
1128G(e)(10)(B)(iii) of the Act. Therefore, we will finalize that 
educational materials provided to covered recipients for their own 
education, but that do not ``directly'' benefit patients, do not fall 
within the exclusion and are therefore subject to the reporting 
requirements. Conversely, we have finalized that this exclusion does 
encompass materials, such as wall models and anatomical models which 
are ultimately intended to be used with a patient. In addition, we 
believe that pursuant to the statutory text, the exclusion is limited 
to educational materials only, and not marketing or promotional 
materials.
(4) 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.
    We did not receive any comments on this exclusion, so we have 
finalized it as proposed.
(5) In-Kind Items for the Provision of Charity Care
    In the proposed rule, we defined ``in-kind items for the provision 
of 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 in-kind items for the 
provision 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). 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.
    Comment: Many commenters provided recommendations on the charity 
care exclusion. These comments fell in two categories: first, on the 
interpretation of a patient's ability to pay, and second, on the 
interpretation of in-kind items. Regarding a patient's ability to pay, 
the commenters generally supported the proposed interpretation, but 
recommended that CMS provide additional clarification that a patient's 
ability to pay includes whether the patient can afford the copayment or 
coinsurance, but not the entire visit. Additionally, a few commenters 
recommended that ability to pay should be based on whether payment will 
be a significant burden to a patient. Regarding in-kind items, the

[[Page 9487]]

commenters discussed whether payments to a covered recipient and/or a 
third party should be excluded if used to support charities or other 
charitable activities, such as patient assistance programs. Finally, a 
few commenters advocated that this exclusion should be based on the 
mission of the organization receiving the items, rather than what 
actually happened to them, since it will be impossible for applicable 
manufacturers to track the uses of these items.
    Response: We appreciate the comments and agree that an analysis of 
a patient's ability to pay should include whether the patient can 
afford his or her copayment or coinsurance and whether the patient has 
insurance to cover the care. We intend this exclusion to include in-
kind items given to covered recipients to provide care to patients who 
are unable to pay, or for whom payment would be a significant hardship.
    Finally, we do not intend applicable manufacturers to be 
responsible for tracking each individual item provided to a covered 
recipient to ensure it is provided to a patient unable to pay. We 
believe it is sufficient for the applicable manufacturer and covered 
recipient to agree in writing that the covered recipient will use the 
in-kind items only for charity care.
    Secondly, we believe that the statutory text for this exclusion 
(section 1128G(e)(10)(B)(viii) of the Act) clearly states that the 
exclusion should only apply to ``in-kind items'' and not all payments, 
so we have finalized that only in-kind items will be included in the 
exclusion, which does not include financial support for charitable 
covered recipients. However, we recognize that some payments made to 
charitable third parties may at some point indirectly benefit a covered 
recipient. We believe that these payments or other transfers of value 
should be reported based on the reporting requirements for indirect 
payments or other transfers of value. However, we believe that 
charitable contributions made directly to or intended for a covered 
recipient should be reported as a charitable contribution.
(6) Product Samples
    Even though this exclusion was not specifically discussed in the 
proposed rule, we received comments on the exclusion for product 
samples from section 1128G(e)(10)(B)(ii) of the Act which states that 
``product samples that are not intended to be sold and are intended for 
patient use'' are excluded from the reporting requirements.
    Comment: Many commenters recommend that CMS clarify the boundaries 
of the exclusion and interpret it widely to include samples beyond 
traditional drug samples, such as single use or disposable devices, 
demonstration devices, and evaluation equipment. A few commenters also 
recommended that the exclusion should include products used for 
research studies, as well as coupons and vouchers. Finally, a commenter 
stated that an applicable manufacturer may not know what actually 
happens to samples and should not be required to track them.
    Response: We appreciate the comments and agree that further 
clarification is necessary. We believe that the statutory text is clear 
that this exclusion applies to products intended for patient use; 
therefore, any drug, device, biological or medical supply provided as a 
sample to a covered recipient that is intended for use by patients will 
be included in the exclusion. Given this interpretation, as long as 
single use or disposable devices, demonstration devices or evaluation 
equipment provided to a covered recipient are intended for patient use, 
they will be included in the exclusion. Otherwise, we believe these 
items may be excluded from the reporting requirements under the 
exclusions for short term loans, as explained in that section. In 
addition, we believe that products used for research studies should be 
included as a part of the larger research payment. Regarding coupons 
and vouchers, we believe they fall within the exclusion, so we have 
finalized that all coupons and vouchers for the applicable 
manufacturer's products that are intended for patient use to defray the 
costs of covered drugs, devices, biologicals or medical supplies will 
be included in this exclusion category. For the purposes of this rule, 
we believe such coupons and vouchers are materially similar to samples. 
Finally, we do not believe the applicable manufacturer should be 
responsible for tracking what actually happens to samples. Instead, we 
believe that as long as the applicable manufacturer and covered 
recipient agree in writing that the products will be provided to 
patients, which is commonplace in the industry, the provision of 
samples can be excluded.
(7) Short Term Loans
    This exclusion was also not addressed in detail in the proposed 
rule; however we did receive some comments recommending clarifications. 
Section 1128G(e)(10)(b)(iv) of the Act excludes ``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.''
    Comment: A few commenters recommended that we include loans of a 
broad range of devices (including medical supplies) such as both 
covered and non-covered devices, as well as a short-term supply of 
disposable devices. Additionally, some commenters requested 
clarification on the timing of the 90-day loan period and what to 
report if the loan goes beyond 90 days. We also received a comment to 
shorten the loan period to 60 days.
    Response: We appreciate the comments and agree that this exclusion 
can include a broad range of devices. We have finalized that this 
exclusion may include loans for covered devices, as well as those under 
development. We also have finalized that this will include a supply of 
disposable or single use devices (including medical supplies) intended 
to last for no more than 90 days. We believe that these products should 
be treated similarly to non-disposable devices and, therefore, should 
be included in the exclusion. However, we do not believe that 
applicable manufacturers should be allowed to provide an unlimited 
supply of these products and still fall within the exclusion, so we are 
establishing a 90-day supply as the limit. If an applicable 
manufacturer provides a specific disposable or single use device for 
more than 90 days (even if provided over multiple dates), the products 
provided beyond the 90-day supply will be subject to the reporting 
requirements.
    For a single product the total number of days for the loan should 
not exceed 90 days for the entire year, regardless of whether the 90 
days were consecutive. We believe that this aligns with the intention 
of the statute to limit the loan period to 90 days and not allow a new 
loan to start at the end of the previous loan period, thus avoiding the 
reporting requirements. In the event that the loan of a non-disposable 
device exceeds 90 days (for the entire calendar year), the applicable 
manufacturer should start reporting as if the loan began on day 91. We 
do not believe that reporting the prior 90 days as a payment or other 
transfer of value would greatly increase the payment value which would 
be misleading to consumers. Additionally, if a device is purchased 
within 90 days, the applicable manufacturer does not need to report the 
loan since the loan was less than 90 days. The loan period is 
statutorily defined, so we do not have the authority to lower it, but 
appreciate the input that 90 days should be more than sufficient for 
the loan period.

[[Page 9488]]

(8) Contractual Warranty
    While this exclusion was not addressed in the proposed rule, we 
received a few comments on it. Section 1128G(e)(10)(B)(v) excludes 
``items and services provided under a contractual warranty, including 
the replacement of a covered device, where he terms of the warranty are 
set forth in the purchase or lease agreement for the covered device.''
    Comment: Some commenters recommended that CMS allow the exclusion 
to extend to items and services provided under a contractual warranty, 
regardless of whether or not the warranty period had expired. These 
comments stated that often applicable manufacturers grant the terms of 
a warranty even after the period has expired. Additionally, a few 
commenters recommended that the exclusion should include other product 
contracts, such as product sale agreements, maintenance service 
agreements, and technical support agreements. Finally, a few commenters 
also recommended that replacement products as a part of a product 
recall should be included in this category.
    Response: We appreciate the comments and agree that it is not 
materially different for an applicable manufacturer to grant the terms 
of a contractual warranty before the period expires or afterwards. We 
have finalized that as long as the contract warranty specified the 
terms prior to expiration and the terms do not change, then the 
exclusions may extend to items and services provided outside the 
expiration period. We believe the exclusion should extend beyond the 
express time period of the warranty, since the warranty terms, and thus 
the relationship, are the same before or after the expiration period 
and it will be misleading to consumers to only include a portion of the 
relationships.
    In addition, we agree that there are numerous other contractual 
agreements that are similar to a warranty agreement, but are not 
specifically excluded. We believe that service or maintenance 
agreements are so similar to warranty agreements that it may be 
difficult to consumers and applicable manufacturers to meaningfully 
separate. We also believe the replacement products in the case of a 
product recall are materially similar and should be included. Given the 
similarities, we have finalized that items and services provided under 
a contractual service or maintenance agreement will also be subject to 
the exclusion.
(9) Covered Recipient Acting as a Patient
    While this exclusion was not addressed specifically the proposed 
rule, we received a few comments on it. Section 1128G(e)(10)(B)(vi) of 
the Act excludes ``a transfer or 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.''
    Comment: A few commenters recommended that CMS include in this 
exclusion situations when a covered recipient is a subject in a 
research study.
    Response: We appreciate the comments and agree that a covered 
recipients participating as a subject (and not in a professional 
capacity) in a research study is the same as being a patient and, 
should be included in the exclusion.
(10) Provision of Healthcare
    Although the exclusion was not discussed in detail in the proposed 
rule, we did receive a few comments. Section 1128G(e)(10)(B)(x) 
excludes ``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.''
    Comment: A few commenters recommended that CMS clarify that this 
exclusion includes the provision of health care to both covered 
recipients and their families covered under the self-insured plan. 
Similarly, received few commenters discussed other situations, outside 
a self-insured plan when an applicable manufacturer may reimburse a 
physician for provision of health care services to employees.
    Response: We appreciate the comments and agree that payments to 
covered recipients for services rendered to family members receiving 
care under a self-insured plan should also be excluded from the 
reporting requirements. Similarly, we believe that the provision of 
healthcare to employees should extend beyond that offered under a self-
insured plan. We understand that applicable manufacturers, both self-
insured and otherwise, may provide healthcare services to employees 
beyond traditional insurance. We believe that for the purposes of this 
exclusion there is little material difference between the provision of 
healthcare under a self-insured plan and provision of healthcare 
outside a self-insured plan. We have finalized that this category 
encompasses other situations, beyond a self-insured plan, when an 
applicable manufacturer makes a payment to a covered recipient as part 
of healthcare services provided to the manufacturer's employees or 
their family, such as at an on-site clinic or at a health fair.
(11) Nonmedical Professional
    This exclusion was not specifically addressed in the proposed rule 
and we did not receive specific comments on it, and we have finalized 
it as proposed. Section 1128G(e)(10)(B)(xi) of the Act excludes ``in 
the case of a covered recipient who is a licensed nonmedical 
professional, a transfer of anything of value to the covered recipient 
if the transfer is solely for the non-medical professional services of 
such licensed nonmedical professional.''
(12) Civil or Criminal Action or Administrative Proceeding
    Although this exclusion was not specifically addressed in the 
proposed rule, we did receive a few comments on it. Section 
1128G(e)(10)(B)(xii) of the Act excludes ``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 
a covered recipient with respect to a civil or criminal action or an 
administrative proceeding.''
    Comment: A few commenters recommended that CMS clarify the 
exclusion to include specific legal proceedings or arrangements, such 
as legal defense, prosecution, settlement or judgment of a civil or 
criminal action and arbitration or other legal action.
    Response: We appreciate the comments and agree that the agency can 
help clarify this exclusion. We will finalize that other specific legal 
relationships will be included in the exclusion. We believe that there 
are numerous legal proceedings that require physician involvement and 
we plan to exclude all of them, in order to allow for clear, consistent 
reporting requirements for applicable manufacturers, covered 
recipients, and consumers.
k. Indirect Payments or Other Transfers of Value 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 where 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

[[Page 9489]]

applicable manufacturer is aware of the covered recipient's identity.
    In the proposed rule, we proposed that indirect payments are 
excludable when an applicable manufacturer is unaware of the identity 
of the covered recipient and explained that an applicable manufacturer 
is unaware of the identity if the applicable manufacturer does not know 
(as defined in Sec.  403.902) the identity of the covered recipient. 
The definition of ``know'' in Sec.  403.902 provides that a person, 
with respect to information, has actual knowledge of the information, 
acts in deliberate ignorance of the information, or acts in reckless 
disregard of the truth or falsity of the information. This standard is 
consistent with the knowledge standard set forth in many laws, 
including the False Claims Act, and we believed it is one with which 
many applicable manufacturers are already familiar.
    Comment: Numerous commenters discussed when an applicable 
manufacturer should be required to report indirect payments to covered 
recipients made through a third party. Many commenters recommended 
additional interpretations to further clarify when an indirect payment 
is reportable. A few commenters recommended that all indirect payments 
should be excluded from the reporting requirements; however, some other 
commenters supported the reporting of indirect payments. Similarly, 
some commenters requested that payments or other transfers of value 
made through certain third parties, such as medical professional 
societies, be carved out of the third party reporting requirements such 
that payments to covered recipients made through these entities would 
not be reportable.
    Many commenters did not advocate excluding all indirect payments, 
but instead recommended ways to limit which indirect payments would be 
reported. One common recommendation was to limit the reporting of 
indirect payments to those under control of the applicable 
manufacturer. Commenters described this concept in various ways, but 
generally suggested that reporting should be limited to when an 
applicable manufacturer has control of the selection of the recipient 
of the payment, and not merely when they are aware of the covered 
recipient's identity.
    Another common comment was that indirect payments or other 
transfers of value should only be reported if they are at the request 
of or designated on behalf of a covered recipient. These commenters 
stated that this was the statutory intent for reporting indirect 
payments given the language requiring reporting of payments made at the 
request of or designated on behalf of a covered recipient to a third 
party recipient. A subset of these commenters recommended that in order 
for a payment to be reportable, the applicable manufacturer must notify 
both the covered recipient and the third party that the payment will be 
reported and receive concurrence that it is accurate. Finally, a few 
commenters recommended that the applicable manufacturer must require, 
instruct or direct the third party to provide a payment or other 
transfer or value (or a portion of one) to a covered recipient(s).
    Response: We appreciate the comments and agree that CMS should 
consider ways to further clarify when an indirect payment or other 
transfer of value should be reported. In addition, we intend that this 
exclusion refers to both payments and other transfers of value, despite 
references in the proposed rule to only transfers of value.
    We do not agree that all indirect payments or other transfers of 
value should be excluded from the reporting requirements. Section 
1128G(e)(10)(A) of the Act states that the exclusion of indirect 
payments or other transfers made through a third party is limited to 
situations ``where the applicable manufacturer is unaware if the 
identity of the covered recipient.'' This indicates that indirect 
payments or other transfers of value where the applicable manufacturer 
is aware of the identity of the covered recipient must be reported, and 
only those where the applicable manufacturer is unaware of the identity 
are excluded. Moreover, we believe that excluding from the reporting 
requirements all payments made through a third party would create a 
significant loophole by allowing manufacturers to funnel payments 
through a third party and not report them; such a loophole would 
significantly undermine the intent of the reporting requirements. 
Additionally, we do not believe that we have statutory authority to 
carve out otherwise reportable indirect payments made through 
particular third parties, such as medical professional societies.
    With regard to the recommendation that indirect payments should 
only be reported when under the control of the applicable manufacturer, 
we believe that controlling the selection of a recipient is different 
than being aware of the identity of the recipient. Congress based the 
exclusion on an applicable manufacturer being unaware of a covered 
recipient's identity, not on the applicable manufacturer lacking 
control over the selection of the covered recipient. Accordingly, we do 
not believe that Congress intended lack of control to be the basis for 
the indirect payment exclusion. Additionally, we believe that receiving 
a payment or other transfers of value from an applicable manufacturer 
could lead to conflicts of interest, even in the event that the 
applicable manufacturer does not directly control the selection of the 
covered recipient.
    Similarly, we also do not believe that the statutory language 
suggests that indirect payments or other transfers of value are only 
reportable if they are made at the request of or designated on behalf 
of a covered recipient. The parenthetical reference in section 
1128G(a)(1)(A) of the Act refers to payments or other transfers of 
value made to an entity or individual other than a covered recipient on 
behalf of or at the request of a covered recipient. We believe this 
situation is different from one in which a payment is provided to a 
third party and passed through to a covered recipient, as referenced in 
the exclusion in section 1128G(e)(10)(A) of the Act. In situations 
where a covered recipient requests that a payment or other transfer of 
value be provided to a third party, and the third party in turn 
provides the payment or other transfer of value to the covered 
recipient, the payment must be reported under the name of the covered 
recipient.
    We agree with the comments that we should provide some guidance on 
when indirect payments must be reported. We understand that there are 
circumstances where an applicable manufacturer makes a payment to a 
third party, which will be passed indirectly to a covered recipient, 
unbeknownst to the applicable manufacturer. For example, an applicable 
manufacturer could make a payment to a consulting firm for professional 
services and the consulting firm incidentally employs a physician on 
the project. The applicable manufacturer's payment was ultimately 
transmitted, at least in part, to a physician covered recipient, but 
not because the applicable manufacturer directed that the payment be 
made to a specific physician, or to any physician at all. We believe 
that in these situations, it would be misleading to require reporting 
of the relationship, since the applicable manufacturer did not intend 
or expect that a covered recipient would receive any portion of the 
payment or other transfer of value.
    In order to address this concern and clarify when an indirect 
payment must be reported, we have provided for the purposes of these 
regulations a definition of ``indirect payments or other transfers of 
value'' in Sec.  403.902.

[[Page 9490]]

The definition states that an indirect payment or other transfer of 
value is one that an applicable manufacturer requires, instructs, or 
directs to be provided to a covered recipient, regardless of whether 
the applicable manufacturer specifies the specific covered recipient. 
For example, if an applicable manufacturer provided an unrestricted 
donation to a physician professional organization to use at the 
organization's discretion, and the organization chose to use the 
donation to make grants to physicians, those grants would not 
constitute ``indirect payments'' because the applicable manufacturer 
did not require, instruct, or direct the organization to use the 
donation for grants to physicians. The physician professional 
association could have used the donation for another purpose at its 
discretion. In this situation, the applicable manufacturer would not be 
required to report the donation, even if a portion of the payment or 
other transfer of value was ultimately provided to a covered recipient 
as a grant (or some other type of payment or other transfer of value). 
However, if an applicable manufacturer gave money to a medical 
professional society earmarked for the purpose of funding awards or 
grants for physicians, the awards or grants would constitute indirect 
payments to covered recipients and would be subject to the reporting 
requirements. In another example, an applicable manufacturer may 
provide a general payment to a clinic for one of its employed 
physicians to review materials. In this case, the applicable 
manufacturer directed that the payment be provided to a physician 
covered recipient, so it would constitute an indirect payment and would 
be a reportable indirect payment or other transfer of value.
    Comment: A number of commenters recommended alternative definitions 
of ``aware.'' For example, many commenters recommended that we use a 
standard of ``actual knowledge'' or ``constructive knowledge,'' rather 
than the False Claims Act standard. Additionally, many commenters also 
discussed an applicable manufacturer's affirmative duty to investigate 
the identities of covered recipients. The commenters suggested that 
applicable manufacturers should not have an affirmative duty to 
determine the identity of a covered recipient, but that the proposed 
definition of awareness meant that applicable manufacturers would have 
an affirmative duty. These commenters stated that an applicable 
manufacturer would be in reckless disregard, if it knew that a payment 
or other transfer of value went to a covered recipient, but did not 
specifically know the identity of the covered recipient.
    Similarly, some commenters also discussed the language in the 
proposed rule that attributes awareness of the identity of the covered 
recipient by an agent of the applicable manufacturer to the applicable 
manufacturer. Commenters both supported and opposed the proposal. Some 
of these commenters recommended that CMS provide additional information 
on how the agency interpreted ``agent.''
    Finally, many commenters also recommended that CMS apply some sort 
of time restriction on the awareness requirement. The proposed rule did 
not specify whether there was a specific time period for awareness of 
the identity of the covered recipient, so the commenter requested 
clarification. Many of the commenters recommended that an applicable 
manufacturer must be aware of the identity of a covered recipient at 
the time of payment. Whereas, other comments provided slight 
variations, such as awareness at the time the payment is committed or 
agreed upon, but in general the majority of commenters focused on the 
time of payment.
    Response: We appreciate the comments on alternative interpretations 
of the statutory tem ``unaware''; however, we have decided to finalize 
our proposed definition that an applicable manufacturer is ``unaware'' 
if it does not know the identity of a covered recipient, and that 
``know'' means that the manufacturer has actual knowledge of the 
identity or acts in deliberate ignorance or reckless disregard of the 
identity. We appreciate the concerns about the knowledge standard, but 
we are concerned that the actual knowledge standard suggested by 
several commenters is too limiting. An actual knowledge standard could 
potentially allow applicable manufacturers to direct payments to a 
limited category or subset of individuals and avoid the reporting 
requirements by not knowing the names of the specific covered 
recipients and claiming a lack of actual knowledge. We believe that by 
clarifying that applicable manufacturers must only report indirect 
payments or other transfers of value that they direct or instruct third 
parties to pay to covered recipients, we will address some of the 
commenters' concerns about the broader knowledge standard. Therefore, 
if a payment meets the definition of an indirect payment or other 
transfer of value in Sec.  403.902, then the payment can only be 
excluded from the reporting requirements if the applicable manufacturer 
did not ``know'' the identity of the covered recipient, as defined in 
Sec.  403.902. However, we want to clarify that, for purposes of this 
rule only, we will not consider an applicable manufacturer to be acting 
in deliberate ignorance or reckless disregard of a covered recipient's 
identity in situations when the reason a payment or other transfer of 
value is being made through a third party is that the identity of the 
covered recipient remains anonymous. For example, an applicable 
manufacturer may hire a market research firm to conduct a double-
blinded market research study, which includes paying physicians $50 for 
responding to a set of questions. The applicable manufacturer clearly 
intends a portion of the payment to be provided to physicians, but 
given that the reason for the third party's involvement is specifically 
to maintain the anonymity of the respondents and sponsor, we do not 
intend this to be considered a reportable indirect payment or other 
transfer of value.
    We recognize that by finalizing the proposed definition, applicable 
manufacturers may still feel they have an affirmative duty to determine 
the identity of covered recipients. However, our intention with this 
definition is to prevent applicable manufacturers from directing 
payments to a discrete set of covered recipients whose identities the 
manufacturer may not actually know, but could easily ascertain. For 
example, we believe that a manufacturer that directs a third party to 
make payments to the top billing cardiologists in a certain city or the 
chiefs of staff of a certain class of hospitals should be required to 
report these payments, even though they do not have actual knowledge of 
the identities of such individuals. However, we do not require 
reporting of every payment that an applicable manufacturer makes 
through a third party that is ultimately provided to a covered 
recipient; rather, the intent is to require reporting of indirect 
payments where applicable manufacturers know or should know the 
identity of the covered recipients who receive them.
    We appreciate the comments regarding awareness of an agent of an 
applicable manufacturer of the identity of a covered recipient; 
however, we have finalized the requirements as proposed. We understand 
that awareness by an agent is somewhat different than awareness of the 
applicable manufacturer, but believe the reporting of indirect payments 
in this situation is warranted. Otherwise, applicable manufacturers 
could structure their business model, so that

[[Page 9491]]

payments are funneled through an agent that selects the recipients. 
However, we do not intend the concept of an agent of the applicable 
manufacturer to be merely any third party with a connection to the 
applicable manufacturer. Instead, we intend the term to refer to legal 
agents acting on behalf of the applicable manufacturer.
    Finally, we agree that applicable manufacturers should not be 
responsible for tracking and reporting indirect payments or other 
transfers of value indefinitely. However, we do not agree that the time 
period for awareness of the identity of the covered recipient should be 
limited to the time the applicable manufacturer made the payment to the 
third party. We are concerned that this would allow applicable 
manufacturers to funnel payments or other transfers of value to third 
parties, and thereafter direct them to specific covered recipients, 
thus potentially avoiding the reporting requirements. Additionally, we 
believe there are multiple dates which could be reported, such as the 
date the applicable manufacturer decides to make the payment, or the 
date the payment is sent to or received by the third party, making it 
difficult to standardize a policy. After reviewing the comments, we 
will finalize that for the purposes of this exclusion, an applicable 
manufacturer must be unaware of the identity of a covered recipient 
during the reporting year and the second quarter of the subsequent year 
following the transfer of the payment from the third party to the 
covered recipient. Therefore, if an applicable manufacturer becomes 
aware of the identity of a covered recipient on or before June 30th of 
the year following the year in which the payment is made by the third 
party to the covered recipient, then the payment or other transfer of 
value must be reported. For example, an applicable manufacturer makes a 
payment to a medical professional society in March 2013 with 
instructions to use the money to provide grants to physicians. This 
payment meets the definition of an indirect payment, since the 
applicable manufacturer earmarked the payment for the physician grants. 
The professional society selects and makes payments to the grantees in 
April 2013 and alerts the sponsoring applicable manufacturer to the 
grant recipients in June 2013. Since the applicable manufacturer became 
aware of the identity of the covered recipients receiving the grants 
during the reporting year in which the payment was made, the payment or 
other transfer of value must be reported. Similarly, if the payment was 
made in November 2013, and the professional society provided the names 
of the grantees to the applicable manufacturer in April 2014, the 
payment would be reportable as part of the applicable manufacturer's 
report for CY 2014.
    In determining this standard, we sought a definite time period, 
since the applicable manufacturer may not know the selection and 
payment process of the third party making the actual payment to the 
covered recipient. We also sought a uniform cut off point for all 
payments or other transfers of value in a reporting year, rather than a 
rolling time period, which would be based on the date of payment (such 
as 6 or 12 months after the date of payment). We believe a rolling date 
would be difficult due to the reasons outlined previously regarding 
inconsistency in the date of payment, as well as due to operational 
difficulties for both CMS and applicable manufacturers to track the 
awareness standard for each payment or other transfer of value. In 
order to set a date which applied to an entire year, we needed to set a 
date beyond the end of the reporting calendar year (December 31), which 
allows some time for indirect payments or other transfers of value made 
late in the year to be finalized. However, we did not want to set a 
time period which was too long and would require applicable 
manufacturers to report indirect payments that were made several years 
prior. We believe that two quarters beyond the end of the payment 
reporting year is sufficient for payments or other transfers of value 
made late in the year.
    Comment: Several commenters questioned the process for reporting 
indirect payments, which was not addressed in detail in the proposed 
rule. A few commenters suggested that applicable manufacturers should 
be required to label all payments as direct or indirect and report the 
entity paid. Similarly, some commenters recommended that CMS clarify 
the amount of information that a third party should be required to 
provide to applicable manufacturers regarding indirect payments or 
other transfer of value. These commenters expressed that it would be 
burdensome for third parties to provide detailed information to 
applicable manufacturers regarding the recipients of payments made 
using the manufacturer's funding. Finally, a few commenters also 
inquired about the process for reporting payments when multiple 
applicable manufacturers contribute to a specific payment or other 
transfer of value. For example, multiple applicable manufacturers may 
fund a single speaker.
    Response: We appreciate the comments and agree that providing more 
detail is necessary. However, we do not believe it is necessary to 
significantly change the reporting requirements for indirect payments. 
Given the unfavorable comments submitted regarding the proposal to 
classify research payments as direct or indirect, we believe that it 
would be similarly confusing to classify all payments or other 
transfers of value as either direct or indirect. Additionally, we do 
not believe it is necessary or appropriate for CMS to provide any 
requirements on the information third parties should or should not 
report. Applicable manufacturers will need to work with the third 
parties through which they make payments to covered recipients to 
ensure that the third parties are taking the appropriate steps to track 
the indirect payments. We recognize that this will, in some cases, 
require the third parties to put in place new tracking systems, but we 
believe that in many cases, such tracking systems already exist. For 
example, we believe that physician professional societies generally 
keep track of the physicians to whom they provide industry-funded 
grants and may not need to put new accounting systems in place in order 
for applicable manufacturers to be able to comply with the reporting 
requirements of this rule. Finally, we seek to clarify the situation 
when multiple applicable manufacturers provide a payment or other 
transfer of value to a covered recipient through a third party. We 
intend to allow for flexibility because we want to ensure that no 
payment or other transfer of value is captured twice. Applicable 
manufacturers and third parties may work together to determine the best 
method for reporting the payment or other transfers of value, as long 
as the payment or other transfer of value gets reported. We believe 
payments or other transfers of value made through a third party to a 
covered recipient using funds from multiple applicable manufacturers 
will be limited, since the companies will be required to report only 
those payments or other transfers of value directed to covered 
recipients and not unrestricted, non-earmarked payments.
    Comment: Numerous commenters questioned the reporting on indirect 
payments or other transfers of value for education, particularly 
accredited or certified continuing education (both CME and continuing 
dental education). A large number of these commenters recommended that 
accredited or certified continuing education payments

[[Page 9492]]

to speakers (and payments for supporting materials) should not be 
reported because there are safeguards already in place, and they are 
not direct payments or other transfers of value to a covered recipient. 
Many of these commenters also stated that requiring that the reporting 
of payments or other transfers of value related to continuing education 
would be detrimental to continuing education and would reduce the 
funding for and attendance at continuing education programs. 
Additionally, some of these commenters also strongly indicated that 
they believe that Congress did not intend to require applicable 
manufacturers to report payments related to accredited or certified 
continuing education programs. However, we did receive some comments 
supporting the reporting of accredited or certified continuing 
education-related payments or other transfers of value, particularly 
when the sponsor provides suggestions to the CME vendor for potential 
faculty or speakers at a CME program. No commenters recommended that 
payments made to subsidize the costs of attendees of continuing 
education programs (as opposed to payments for faculty or speakers) 
should be reported.
    Beyond accredited or certified continuing education, these comments 
were mixed on whether unaccredited and non-certified speaking 
engagements should be reported. A few commenters also addressed other 
types of education, such as Risk Evaluation and Mitigation Strategies 
(REMS), suggesting that since they were required by FDA, sponsorship of 
REMS education should be exempted from the reporting requirements.
    Response: We appreciate the comments and agree that industry 
support for accredited or certified continuing education is a unique 
relationship. The accrediting and certifying bodies, including ACCME, 
AOA, AMA, AAFP, and ADA CERP, and the industry standards for commercial 
support, create important and necessary safeguards prohibiting the 
involvement of the sponsor in the educational content. However, we 
believe that even with this separation, the sponsor may still influence 
the selection of faculty by offering suggestions to the accredited or 
certified continuing education provider; although the continuing 
education provider may not be required to follow these suggestions, we 
believe that it may often be impossible to distinguish when a 
suggestion is influential and when it is not.
    We have finalized at Sec.  403.904(g)(1) that an indirect payment 
made to a speaker at a continuing education program is not an indirect 
payment or other transfer of value for the purposes of this rule and, 
therefore, does not need to be reported, when all of the following 
conditions are met: (1) The program meets the accreditation or 
certification requirements and standards of the ACCME, AOA, AMA, AAFP 
or ADA CERP; (2) the applicable manufacturer does not select the 
covered recipient speaker nor does it provide the third party vendor 
with a distinct, identifiable set of individuals to be considered as 
speakers for the accredited or certified continuing education program; 
and (3) the applicable manufacturer does not directly pay the covered 
recipient speaker. We believe that when applicable manufacturers 
suggest speakers, they are directing or targeting their funding to the 
speakers, so these payments will be considered indirect payments for 
purposes of this rule. Conversely, when they do not suggest speakers, 
they are allowing the continuing education provider full discretion 
over the CME programming, so the payment or other transfer of value 
will not be considered an indirect payment for purposes of these 
reporting requirements. Additionally, since industry support of CME 
programs that meets all three requirements discussed previously will 
not be considered indirect payments or other transfers of value for the 
purposes of reporting, the awareness standards for indirect payments 
are not applicable to such support. We believe that this approach will 
greatly reduce the number of payments to speakers at accredited or 
certified continuing education programs that must be reported. 
Applicable manufacturers will not be responsible for reporting payments 
made to CME vendors that are used to subsidize attendees' tuition fees 
for continuing education events. However, as explained in the 
discussion of the nature of payment categories, payments or other 
transfers of value associated with attendance of an event (such as 
travel and meals) must be reported as required.
    With regard to unaccredited and non-certified education, we believe 
that since this type of education program does not require the same 
safeguards as an accredited and certified program, payments or 
transfers of value should be reported as required for any other payment 
or other transfer of value. If the payment or other transfer of value 
is made indirectly, it will be subject to the same reporting 
requirements for all indirect payments. The details for how to report 
both accredited or certified, and unaccredited or non-certified 
continuing education payments or other transfers of value are discussed 
in section II.B.1.h. of this final rule, dedicated to nature of payment 
categories.
    Finally, we do not agree with comments that payments related to 
REMS with elements to assure safe use that require prescriber education 
should have a blanket exclusion from the reporting requirements. We 
recognize that REMS are required by FDA for some prescription drug 
products to ensure that the benefits of a drug outweigh the risks and 
that REMS often requires a sponsor to inform or educate health care 
providers about the risks associated with a product. However, we 
believe that payments made in connection with prescriber education 
required by REMS should be reportable on the same basis as other 
education payments. For example, if a sponsor directs the choice of a 
program speaker, or pays for covered recipients' meals or 
transportation to a REMS educational program, such payments would be 
reportable. However, applicable manufacturers are not required to 
report the provision of written materials that have been approved by 
FDA for distribution to physicians, such as Dear Healthcare Provider 
letters. Other REMS educational materials may be excluded if they fall 
within the exclusion for materials intended for patient use described 
in Sec.  403.904(i)(4).
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. In the proposed rule, we 
proposed that applicable GPOs were only required to report under 
section 1128G(a)(2) of the Act.
    Comment: A few commenters suggested that Congress intended 
applicable GPOs to report under section 1128G(a)(1) of the Act, as well 
as under section 1128G(a)(2) of the Act. These commenters supported 
their interpretation with the introductory language of section 
1128G(a)(2) stating that ``[i]n addition to the requirement under 
paragraph (1)(A)'' regarding reporting of payments to covered 
recipients, applicable manufacturers and applicable GPOs must report 
information regarding physician ownership and investment interests.

[[Page 9493]]

    Response: We appreciate the comment but do not agree that 
applicable GPOs are required to report under section 1128G(a)(1) of the 
Act. While the phrasing in section 1128(a)(2) could be phrased more 
clearly, we do not believe it suggests that applicable GPOs need to 
report under both sections. Applicable GPOs are not mentioned in 
section 1128G(a)(1) at all, indicating that Congress did not intend for 
them to be subject to the requirements of that section. Additionally, 
other sections of the statute, such as the definition of payment or 
other transfer of value (section 1128G(e)(10) of the Act), only refer 
to applicable manufacturers when discussing payments or other transfers 
of value separately from ownership of investment interests.
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 also required to include 
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.''
    We proposed 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 proposed 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, arrange 
for or negotiate the purchase of covered drugs, devices, biologicals, 
or medical supplies for resale or distribution to others. Additionally, 
we also interpreted the statute to encompass not only more traditional 
GPOs that negotiate contracts for their members, but also entities that 
purchase covered drugs, devices, biologicals, and medical supplies for 
resale or distribution to groups of individuals or entities. These 
interpretations would include, for example, physician owned 
distributors (PODs) of covered drugs, devices, biologicals, and medical 
supplies.
    Comment: A number of commenter supported the definition of 
``applicable GPOs,'' particularly the inclusion of PODs. However, some 
commenters suggested revisions to the definition in order to capture 
additional PODs. For example, these comments included removing the 
reference to ``group'' in the definition, as well as limiting the 
exclusion for entities that purchase the products for their own use to 
only those entities that are the end users of the device based on 
billing under the same provider or supplier number as the entities that 
purchased the product. The commenters suggested that this would capture 
both fee-based and buy-and-sell POD models. Finally, a few commenters 
recommended that CMS issue a few clarifications, including allowing 
reselling in case of shortages and explicitly including commonly owned 
entities purchasing together as ``own use.''
    Response: We appreciate the comments, but do not agree with the 
recommended changes to the definition to include additional PODs. While 
we appreciate the need to include as many PODs as possible, we are 
concerned that removing the word ``group'' from the definition would be 
contrary to the statutory phrase ``group purchasing organization'' 
which clearly implies that in order to be a GPO, the entity must be 
purchasing for a group. Therefore, we are not going to remove the word 
``group'' from the definition. We are also concerned that hospitals and 
large group practices may not always purchase under the same provider 
or supplier number with which they bill, making it difficult to 
determine the end user by billing number. Therefore, we will not be 
changing the language in the definition to require use of the same 
provider or supplier number. Based on these considerations, we have 
decided to finalize the proposed definition. We recognize that this 
definition may not include every POD model; however, we intend for it 
to capture as many PODs as possible, while still aligning with the 
statutory language. Finally, we do not intend our definition to apply 
to rare and circumstantial resale of a product in response to a 
documented drug shortage. Similarly, we believe that bulk purchasing of 
covered products for commonly owned entities, which will be used only 
by those entities, would be considered ``own use.''
b. Physician Owners or Investors
    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,'' we proposed that 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. We did not receive any comments on this 
interpretation, and we will finalize it.
    Additionally, as required by statute, ownership and investment 
interests of immediate family members of physicians must also be 
reported under this provision. In the proposed rule, we defined 
immediate family member 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.
    In the proposed rule, we also stated that in cases when the 
ownership or investment interest is held by an immediate family member 
of a physician, applicable manufacturers 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 considered whether to require the 
reporting of the immediate family member's relationship to the 
physician, as well as the immediate family member's name, but did not 
propose to require it.

[[Page 9494]]

    Comment: A few commenters recommended that ownership or investment 
interests held by immediate family members of physicians should not be 
reported at all. Similarly, a few other commenters advocated that CMS 
employ a narrower definition of ``immediate family member.''
    Response: We appreciate the comments; however, both the requirement 
to report ownership or investment interests of immediate family members 
of physicians, as well as the proposed definition of immediate family 
member, are required by statute. Section 1128G(a)(2) requires the 
reporting of ownership or investment interests held by an immediate 
family member of a physician and states that ``immediate family 
member'' is defined as it is for purposes of section 1877(a) of the 
Act, which is codified at 42 CFR 411.351. Given the statutory 
requirements, we have finalized the definition as proposed.
    Comment: Many commenters supported not reporting the name and 
relationship of the immediate family member. However, a few commenters 
suggested that applicable manufacturers should not be required to 
report the name or relationship of immediate family members, but 
applicable GPOs should be required to report the information. 
Additionally, some commenters requested that CMS clarify expectations 
for how applicable manufacturers and applicable GPOs should obtain 
ownership or investment interest information. A few commenters also 
recommended that CMS should not require physicians to disclose this 
information and applicable manufacturers may rely on the 
representations by owners or investors regarding immediate family 
members. Finally, a few commenters recommended that in the event that 
multiple family members hold an ownership or investment interest in a 
specific entity, then the applicable manufacturer or applicable GPO 
should only report the ownership or investment interest in aggregate.
    Response: We appreciate the comments and agree that applicable 
manufacturers and applicable GPOs should not report the name and 
relationship of immediate family members of physicians holding 
ownership or investment interests in such entities. However, we do not 
agree that this standard should be applied differently for applicable 
manufacturers and applicable GPOs since we believe the privacy for 
immediate family members is the same regardless of the entity at issue.
    Regarding the requirements for obtaining information on ownership 
or investment interests, we have revised the definition to help clarify 
situations when the applicable manufacturer or applicable GPO does not 
know that a reportable ownership or investment interest exists. We do 
not have the authority to require physicians or owners or investors to 
report this information; however, we believe that an applicable 
manufacturer or applicable GPO may inquire about these relationships. 
These situations are discussed more fully in the section on the 
definition of ``ownership or investment interests.''
    Finally, we also agree that applicable manufacturers and applicable 
GPOs may report a specific ownership or investment interest in 
aggregate across multiple family members. Since we are finalizing that 
applicable manufacturers and applicable GPOs do not need to report the 
name or relationship for an immediate family member holding an 
ownership or investment interest in such entity, we do not believe the 
reported interests need to be on the individual level and instead can 
be aggregated across multiple immediate family members. However, we 
intend that applicable manufacturers and applicable GPOs can only 
aggregate interests when multiple immediate family members have 
ownership or investment interests with the same terms (as reported 
pursuant to Sec.  403.906(b)(5)) and the value reported includes the 
total value of all the immediate family member's interests.
c. Ownership or Investment Interests
    We proposed to define an ownership or investment interest in an 
applicable manufacturer or applicable GPO in a similar manner as in the 
physician self-referral regulation (42 CFR 411.354(b)). Specifically, 
we proposed to define an ownership or investment interest as one that 
may be direct or indirect, and through debt, equity, or other means. We 
further proposed that 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. As required by 
statute, we proposed that 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, we proposed that ownership or investment interest must 
not include the following:
     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;
     Stock options and convertible securities received as 
compensation, until the stock options are exercised or the convertible 
securities are converted to equity;
     An unsecured loan subordinated to a credit facility.
    Comment: Some commenters recommended that CMS only require that 
applicable manufacturers and applicable GPOs report direct ownership or 
investment interests, rather than both direct and indirect interests. 
However, the commenters also recommended a few limitations in the event 
the agency decided to require reporting of indirect ownership or 
investment interests. These recommendations included setting a minimum 
threshold amount for ownership interests, following the knowledge 
requirements in the physician self-referral regulation, and requiring 
that the physician has sole control of the interest. Beyond indirect 
ownership interests, a few commenters also recommended that CMS require 
reporting of stock options as ownership or investment interests when 
they are granted, rather than only when exercised. Similarly, a few 
commenters recommended that CMS not distinguish between ownership or 
investment interests arising from a retirement plan and stock options 
once exercised.
    Response: We appreciate the comments. However, we do not agree that 
applicable manufacturers and applicable GPOs should only report direct 
ownership or investment interests. Section 1128G(a)(2) of the Act 
requires that applicable manufacturers and applicable GPOs report ``any 
ownership or investment interest * * * held by a physician.'' We 
believe that ``any ownership or investment interest'' encompasses both 
direct and indirect interests, since indirect ownership or investment 
interests are also true interests. However, we do agree that there 
should be some limitation on indirect ownership or investment 
interests. We appreciate the comments on ways to limit reporting of 
indirect ownership or investment interests. We believe that limiting 
ownership or investment interests to those when the

[[Page 9495]]

physician has sole control and right to receive the proceeds is too 
narrow. We believe this will eliminate a significant number of 
ownership or investment interests, greatly reducing those reported. 
Similarly, we believe that setting a threshold for indirect ownership 
or investment interest creates an incentive to structure relationships 
to remain below the threshold. However, we do understand that there 
should be some limitations. We have decided to finalize the 
recommendation that aligns with the physician self-referral rule in 
that applicable manufacturers and applicable GPOs will not have to 
report ownership or investment interests held by physicians or their 
immediate family members if they did not know about such interests. We 
agree that this limitation is warranted, since it is impossible for an 
applicable manufacturer or applicable GPO to report an indirect 
ownership or investment interest that is unknown to it. Additionally, 
we believe that many stakeholders are already familiar with this 
standard from the physician self-referral regulation. Therefore, we 
have finalized that applicable manufacturers and applicable GPOs do not 
have to report indirect ownership or investment interests held by 
physicians or immediate family members of physicians about which they 
do not know (as defined for the purposes of this rule).
    Finally, we understand the concerns regarding stock options 
received as compensation and requiring reporting of options when 
granted, rather than when exercised. However, we believe that stock 
options before they are exercised are traditionally considered 
compensation, rather than an ownership or investment interest, so we do 
not believe that we should require them to be reported as held 
ownership or investment interests. This is consistent with the 
definition in the physician self-referral regulation. However, we note 
stock options will need to be reported when granted under sections 
1128G(a)(1) and 1128G(a)(2)(C) of the Act as a payment or other 
transfer of value. Reporting under sections 1128G(a)(1) and 
1128G(a)(2)(C) may not include all stock options that are granted to 
physicians. For example, stock options that are granted to a physician 
who is an employee of the applicable manufacturer and is not already an 
existing owner or investor of that entity would not be reported; 
however, we believe reporting under sections 1128G(a)(1) and 
1128G(a)(2)C) will capture a significant portion of stock options when 
granted.
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)).
    As required in section 1128G(a)(2) of the Act, we proposed that the 
applicable manufacturer or applicable GPOs should report the name, 
address, NPI, and specialty of the physician owner or investor, as well 
as the dollar amount invested and the value and terms of the ownership 
or investment interest. Section 1128G(a)(2)(C) of the Act requires the 
reporting of ``[a]ny payment 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 proposed that applicable manufacturers and applicable 
GPOs follow the procedures outlined in this preamble for reporting 
payments and other transfers of value.
    We also noted that there was some overlap between the requirements 
for reporting payments or other transfers of value and reporting 
ownership or investment interests. In order to help manage the overlap, 
we proposed that applicable manufacturers submit one report 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 proposed that applicable manufacturers 
report the payments or other transfers of value provided to physician 
owners or investors (regardless of whether the physician owner is a 
covered recipient) in the report for 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.
    Since applicable GPOs are not subject to the reporting requirements 
in section 1128G(a)(1) of the Act, we believe there is less of a 
potential for duplicative reporting. However, we proposed that when an 
applicable GPO has payments or other transfers of value to report for 
physician owners or investors, the applicable GPOs should use the data 
elements outlined in section II.B.1.f. of the final rule on payments 
and other transfers of value report contents.
    Comment: A few commenters discussed the content of physician 
ownership or investment interest reports. The commenters specifically 
recommended that CMS not require the reporting of the ``terms'' of the 
ownership or investment interest.
    Response: We appreciate the comments. However, we are unable to 
waive reporting of the terms of an ownership or investment interest, 
since it is a statutory requirement. Because we did not receive any 
comments on other aspects, we will finalize these provisions to align 
with the reporting requirements for payments or other transfers of 
value reports to the extent the requirements overlap. For example, 
applicable manufacturers and applicable GPOs should report both 
physician NPI and State professional license number(s) for at least one 
State where the physician maintains a license (including the name of 
the applicable State) to ensure that the agency is able to attribute 
ownership and investment interests to the appropriate physician. 
Similarly, requirements for reporting name, primary business address 
and specialty should also be the same as described for reporting 
payments or other transfers of value. Finally, as described in the 
section on the assumptions document, both applicable manufacturers and 
applicable GPOs may submit an assumptions document including 
information on their assumptions and methodologies when reporting 
payments or other transfers of value, or ownership or investment 
interests.
    Comment: We also received a few comments concerning the potential 
for duplicative reporting due to the overlap between the two sections. 
The comments requested clarification of the proposed rule but did not 
have any specific recommendation or advocate any particular changes.
    Response: We appreciate the comments and seek to clarify as much as 
possible; however, we have finalized these provisions as proposed. 
Applicable manufacturers must report all payments or other transfers of 
value to covered recipients and physician owners or investors, 
including the provision of ownership and investment interests. In the 
event that a physician receives an ownership or investment interest in 
a given year, an applicable manufacturer should report it as a payment 
or other transfer of value (under section 1128G(a)(1) of the Act), as 
well as a standing ownership or

[[Page 9496]]

investment interest (under section 1128G(a)(2) of the Act).
    Additionally, an individual may be both a covered recipient and a 
physician owner or investor, so an applicable manufacturer should only 
report a payment or other transfer of value once, regardless of whether 
the individual is a covered recipient, a physician owner or investor, 
or both. The payment or other transfer of value and all the additional 
required information must be reported in the ``payments or other 
transfers of value'' reporting template; however for physician owners 
or investor (regardless of whether the physician is a covered 
recipient) the applicable manufacturer should mark that that payment or 
other transfer of value was provided to a physician owner or investor. 
All payments or other transfer of value should only be reported once 
regardless of whether it is required to be reported under section 
1128G(a)(1) and/or section 1128G(a)(2)(C) of the Act.

C. Report Submission and Review

    The statute requires the Secretary to establish procedures for 
applicable manufacturers and applicable GPOs to submit the required 
information and for the Secretary to make such information submitted 
available to the public. We recognize that these regulations require 
applicable manufacturers and applicable GPOs to collect and submit 
large amounts of new data, so we have tried to finalize flexible 
processes for data collection and submission. However, we also 
recognize that in order to accept and aggregate the data effectively 
and efficiently, there needs to be system standardization.
1. Prior to Submission
    In the proposed rule, we considered that prior to submission of 
data to CMS, applicable manufacturers and applicable GPOs would provide 
each covered recipient or physician owner or investor with information 
regarding the information that the applicable manufacturer plans to 
report to CMS on the covered recipient's or physician owner or 
investor's behalf. While we did not propose to require this type of 
pre-review, we recommended that applicable manufacturers and applicable 
GPOs provide it.
    Comment: Several commenters supported the pre-submission review. 
However, the commenters were divided over whether to require it or 
leave it voluntary. Many commenters stated that there simply was not 
time between the end of the data collection year and the data of 
submission to facilitate the review; whereas some commenters 
recommended it, stating it would greatly reduce disputes and 
inaccuracies in the data.
    Response: We appreciate the comments and agree that pre-submission 
review would help ensure the accuracy of the data. However, we have 
finalized that CMS will not administer or manage a pre-submission 
review process and will not make it mandatory. We recommend that 
applicable manufacturers voluntarily provide covered recipients the 
opportunity to review the data prior to submission to CMS, but doing so 
is not mandatory. We understand that the processes and systems of 
applicable manufacturers and applicable GPOs may not allow for a review 
of this capacity. Similarly, since there is a post-submission review 
period, we do not believe that it is worth the additional burden for 
applicable manufacturers and applicable GPOs to make significant system 
changes in order to provide a pre-submission review. However, we do 
believe a pre-submission review could be extremely useful and recommend 
that applicable manufacturers and applicable GPOs consider ways that 
they could administer a pre-submission review external to CMS. Because 
CMS is not requiring the review, we do not feel it is appropriate for 
CMS to prescribe the process and standardize it; nevertheless, we 
believe that ongoing notice throughout the year of any reportable 
interactions would be ideal.
2. Report Submission
    Applicable manufacturers and applicable GPOs are statutorily 
required to submit their reports for the preceding calendar year 
electronically to CMS on March 31, 2013 and on the 90th day of each 
calendar year thereafter. We proposed 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 did not receive any comments on this 
interpretation and have finalized it as proposed; however, as discussed 
in the timing section, because of the publication date of this final 
rule, reports including 2013 data will not be due until March 31, 2014.
a. Registration
    In the proposed rule, we proposed 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. Similarly, we 
proposed that only applicable GPOs with physician owners or investors 
would be required to register and submit information. For applicable 
manufacturers and applicable GPOs that did have information to 
disclose, we proposed that applicable manufacturers and applicable GPOs 
register with us prior to submission to facilitate communication. We 
proposed the 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. 
Alternatively, we considered requiring that all applicable 
manufacturers and applicable GPOs register with CMS, regardless of 
whether they had information to report, in order help us better 
understand the extent of these relationships and ensure compliance with 
the reporting requirements.
    Comment: Many commenters supported the registration requirement, 
but disagreed on which entities should be required to register. Some 
commenters supported the proposal to require registration only by those 
entities with payments or other transfers of value or ownership or 
investment interests to report; other commenters recommended that CMS 
employ the alternative and require all entities that meet the 
definition of applicable manufacturer or applicable GPOs to register.
    Response: Given the comments received, we believe that we do not 
need to require all entities that meet the definition of applicable 
manufacturer or applicable GPO to register and have finalized the 
position as proposed. Because the statute only requires the reporting 
of payments or other transfers of value, we will not require action by 
entities without payments or other transfers of value to report. All 
applicable manufacturers with payments or other transfers of value to 
report under paragraph 1 of the definition must register individually, 
regardless of whether they intend to be part of a consolidated report 
being submitted by another applicable manufacturer. We believe this 
will better allow CMS to ensure that applicable manufacturers required 
to report are reporting under the reporting requirements. However, 
applicable manufacturers that are submitting data as a part of a 
consolidated report under another applicable manufacturer may indicate 
during registration that they intend to be part of the consolidated 
report to be submitted by another

[[Page 9497]]

applicable manufacturer, allowing CMS to approximate the number of 
consolidated reports to anticipate. Additionally, as stated in the 
applicable manufacturer section, the reporting entity submitting a 
consolidated report must indicate all the applicable manufacturers for 
which it is reporting. Similarly, applicable manufacturers that are 
reporting separately must each register individually.
    Comment: A few commenters discussed reporting of the point of 
contact, specifically recommending that two points of contact be 
provided for a single applicable manufacturer or applicable GPO.
    Response: We agree that establishing and maintaining appropriate 
points of contact are important because it is essential that we be able 
to contact applicable manufacturers and applicable GPOs in the event 
that questions arise regarding their submission. We believe that 
requiring a second point of contact to serve as a backup will be 
beneficial and ensure that CMS can contact applicable manufacturers and 
applicable GPOs. We are finalizing that applicable manufacturers and 
applicable GPOs must indicate two points of contact when they register 
to allow for a primary and backup point of contact for each reporting 
entity. In order to ensure that the points of contact are up to date in 
the CMS system, applicable manufacturers and applicable GPOs will be 
able to change them as appropriate (subject to CMS user security 
protocols).
    We did not receive any comments on our proposed timing for 
registration, so we have finalized those provisions as proposed. We 
proposed that applicable manufacturers or applicable GPOs with payments 
or other transfers of value to report must register prior to the 
deadline for data submission for data for the preceding calendar year 
for every annual reporting cycle. We intend applicable manufacturers 
and applicable GPOs to register sufficiently prior to the deadline in 
order to allow registration to be completed appropriately. Applicable 
manufacturers or applicable GPOs will be able to choose to submit the 
data immediately after completing the registration process 
successfully. We proposed 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; however, we may 
open registration earlier to allow additional time.
b. File Format
    We also received several comments of the format of the data and 
process for submission to CMS. We proposed that applicable 
manufacturers and applicable GPOs submit their data electronically in a 
comma-separated value (CSV) format and solicited comments on and 
suggestions for alternatives to that format. Additionally, we proposed 
that 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 we proposed the applicable manufacturer or 
applicable GPO could submit as many files as necessary to provide the 
entirety of its data.
    Comment: Many commenters recommended that CMS create a standardized 
format and template and allow stakeholders an opportunity to review. 
Additionally, a few commenters supported the use of CSV files, whereas 
a few other commenters recommended using Pipe Line Delineated files 
rather than CSV files. These commenters explained that since some 
numbers are presented with comma separators (for example, $100,000), 
CSV files may be problematic. Similarly, a few commenters recommended 
that CMS establish a uniform naming system for applicable 
manufacturers.
    Besides the format of the report, we also received comments on the 
organization and submission of the data. A few commenters recommended 
that CMS accept submission of data multiple times throughout the year, 
such as quarterly or ongoing, and allow extensions. Conversely, other 
commenters recommended allowing applicable manufacturers to submit 
multiple reports, organized by topic or individual. Finally to receive 
the data, a few commenters recommended that CMS develop a data exchange 
and data portal to accept files.
    Response: We appreciate the comments and agree that CMS should 
provide applicable manufacturers and applicable GPOs with reporting 
templates and more details on reporting. However, we do not believe it 
is necessary or beneficial to provide this information in regulation, 
in order to allow the agency more flexibility to make changes in 
response to feedback from stakeholders. If we intend to make changes to 
the reporting template or other details for reporting (which we 
envision could happen particularly as the program evolves in early 
years), we will provide them at least 90 days prior to first day of 
data collection for the next reporting year. In providing revised 
templates, we will also comply with the requirements of the Paperwork 
Reduction Act to seek public comments on the proposed changes to the 
information collections, as required by law. This will allow applicable 
manufacturers and applicable GPOs to make any necessary changes to 
prepare for the next reporting year. This is the same time as the date 
by which we will publish the list of teaching hospitals.
    We appreciate the comments on the organization of the submitted 
files, but per the statute, we will only allow submission of a single 
report consisting of the entire reporting period (for example CY 2014). 
We will only be collecting and staging data for public posting in 
accordance with annual submissions, so we will not be accepting ongoing 
or quarterly submissions. We believe that not only is annual 
publication sufficient for end users, but also allows for a single 
review and dispute period prior to publicly publishing the data, which 
is operationally easier for all parties. In addition, submission 
extensions will not be granted. After receiving all the submitted data, 
we will need to process all the data to aggregate across manufacturers 
and applicable GPOs and provide a single review and dispute period to 
correct submitted data prior to public posting. Late data will be 
considered failure to report and may be subject to penalties. 
Similarly, as required in the regulations, applicable manufacturers and 
applicable GPOs should not aggregate any payments or other transfers of 
value, or ownership or investment interests (except as described for 
small payments or other transfers of value). All reported transactions 
must be at the individual payment or other transfer of value, or 
ownership or investment interest level and do not intend applicable 
manufacturers or applicable GPOs to organize or group specific 
transactions. Finally, we appreciate the comments regarding a data 
exchange portal and agree that CMS should create an electronic system 
for accepting the data. We plan to publish additional information along 
with greater detail on the submission process.
c. Attestation Process
    In the proposed rule, we proposed 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 timeliness, accuracy, and completeness of 
the data submitted to the best of the

[[Page 9498]]

signer's knowledge and belief. We specified that such attestations must 
be signed by the chief executive officer, chief financial officer or 
chief compliance officer.
    Comment: The majority of commenters supported the attestation 
requirement. However, a few commenters recommended revising the 
attestation to certify that the entity made a reasonable effort to 
ensure that data meets regulatory requirements. These commenters 
explained that the reporting requirements are, in their view, 
complicated, so it would be impossible to know whether the data 
submitted was accurate. Similarly, a few commenters suggested that CMS 
allow other officers (at the discretion of the reporting entity) to 
attest.
    Response: We appreciate the comments, but we continue to believe 
that applicable manufacturers and applicable GPOs can and should be 
confident that the data is accurate. We recognize that the reporting 
requirements require significant data to be collected, but the majority 
of comments supported the language without revision, suggesting that 
reporting entities can be confident in their data. Additionally, the 
penalties are significantly less for unknowing errors, so the statute 
provides safeguards for unexpected errors. Finally, we do understand 
that applicable manufacturers and applicable GPOs may have different 
business structures. We do not want to confine applicable manufacturers 
and applicable GPOs with regard to which officers must attest, so we 
have finalized that other officers will be allowed to attest, as 
designated by the company.
    We also seek to clarify the timing of the attestation requirement. 
Applicable manufacturers and applicable GPOs must provide an 
attestation for their data at the time of original submission for it to 
be considered submitted; however, they will also be required to provide 
an attestation any time the data is changed or updated. The most recent 
data for which there is an attestation will be considered the official 
data submission from the applicable manufacturer or applicable GPO. 
Data without such attestation will not be considered an official 
submission for purposes of reporting under section 1128G of the Act. 
This is discussed in more detail in the section on dispute resolution. 
However, we believe this may alleviate some of the concerns of 
applicable manufacturers regarding the difficulty in knowing whether 
the data submitted originally will be appropriately amended during the 
review and correction period.
    Finally, as discussed in the section on applicable manufacturers, 
applicable manufacturers for which covered drugs, devices, biologicals, 
or medical supplies represent less than 10 percent of total (gross) 
revenue for the preceding year that have payments or other transfers of 
value to report, as a part of the attestation process, must attest that 
less than ten percent of total (gross) revenue in the immediately 
preceding year came from covered drugs, devices, biological, or medical 
supplies. We also note that for consolidated reports, the applicable 
manufacturer that submitted the consolidated report will be required to 
attest on behalf of all the entities included in the consolidated 
report. Applicable manufacturers that have reportable payments or other 
transfers of value that are submitted through a consolidated report by 
another applicable manufacturer will be required to register with CMS, 
but will not be required to attest. Accordingly we encourage applicable 
manufacturers considering submitting a consolidated report to fully 
consider the ramifications of doing so, particularly the applicable 
manufacturer actually attesting on behalf of all the entities included 
in the consolidated report.
3. Report Content
    We have outlined the fields of information to be included when 
reporting payments or other transfers of value and physician ownership 
and investment interests. Some changes have been made below based on 
comments submitted; however, these decisions and changes are discussed 
throughout the final rule. The asterisks indicate the additional 
information that we will require under the discretion provided by the 
statute.
    For each payment and other transfer of value, the following 
information is required:
     Applicable manufacturer's name.
     Covered recipient's--
    ++ Name (for physicians only, provide name as listed in NPPES, 
including first and last name, and middle initial and suffix (if 
applicable));
    ++ Specialty (for physicians only);
    ++ Primary business street address (practice location);
    ++ NPI (for physicians only, as listed in NPPES);
    ++ State professional license number(s) for at least one State 
where the physician maintains a license, including the applicable State 
where the license(s) is held; *
     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(s) of the related covered drug, device, biological, 
or medical supply, as applicable.
     NDCs of related covered drugs and biologicals, if any. *
     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).
     Statement providing additional context for the payment or 
other transfer of value (optional). *
    For each research-related payment or other transfer of value, the 
following information is required:
     Applicable manufacturer's name.
     Name of research institution/entity receiving payment.
     Total amount of research payment.
     Name of study.
     Name(s) of related covered drug, device, biological or 
medical supply (same requirements as for all payments or other 
transfers of value).
     NDCs of related covered drugs and biologicals, if any. *
     Principal investigator(s) (including name (as listed in 
NPPES), NPI (as listed in NPPES), State professional license number(s) 
for at least one State where the physician maintains a license 
including the applicable State where the license(s) is held, specialty 
and primary business address).
     Context of research (optional).
     ClinicalTrials.gov identifier (optional).
     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's or applicable GPO's name.
     Physician owner or investor's--
    ++ Name (as listed in NPPES, including first and last name, middle 
initial, and suffix (if applicable));
    ++ Specialty;
    ++ Primary business street address (practice location);
    ++ NPI (as listed in NPPES);
    ++ State professional license number for at least one State where 
the physician maintains a license including

[[Page 9499]]

the applicable State where the license(s) is held; * and
     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 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(s) of related covered drugs, devices, biologicals, or 
medical supplies.
    ++ NDCs of related covered drugs and biologicals, if any. *
    ++ Name of entity that received the payment or other transfer of 
value, if not provided to the physician owner or investor directly. *
    ++ Statement providing additional context for the payment or other 
transfer of value (optional).*
4. 45-Day Review Period for Applicable Manufacturers, Applicable GPOs, 
Covered Recipients, and Physician Owners or Investors
    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. This section outlines the comments received on 
the processes for and length of this review and correction period.
a. Notification of Review and Correction Period
    In the proposed rule, we stated that we would notify covered 
recipients and physician owners or investors about the review and 
correction period in a few ways. We proposed 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 proposed to notify physicians and hospitals 
through CMS's list-serves and by posting the information publicly (for 
example: on the CMS Web site or in the Federal Register). We also 
considered 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 received numerous 
comments on this which are described later in this section.
    Finally, we proposed that the notification to physicians and 
teaching hospitals would be provided annually to announce the review 
and correction period, and would include the specific instructions for 
performing this review. We did not receive any comments on this 
provision, so we have decided to finalize it as proposed.
    Comment: Many commenters addressed how to notify physicians and 
teaching hospitals of the opportunity to review payments or other 
transfers of value or ownership or investment interests that were 
attributed to them in reports submitted by applicable manufacturers or 
applicable GPOs. Some of these commenters supported the methods 
outlined in the proposed rule and provided other suggestions. Many 
commenters requested that physicians and teaching hospitals be notified 
personally of the processes for review and correction. Some of these 
commenters recommended the alternative method of collecting contact 
information (applicable manufacturers and applicable GPOs providing 
preferred method of communication), while others recommended another 
method or simply stated that CMS should notify physicians and teaching 
hospitals, but supported flexibility in the notification method. 
Conversely, many other commenters indicated that the proposed 
alternative would be overly burdensome, and recommended that CMS notify 
physicians and teaching hospitals in another manner. Finally, some 
commenters recommended more ongoing approaches to notification and 
allowing review to happen multiple times throughout the year.
    Response: We appreciate the comments and have tried to balance the 
necessity to notify physicians and teaching hospitals with the desire 
to avoid adding any additional burden on applicable manufacturers and 
applicable GPOs. We have also considered what is operationally possible 
and concluded that we will notify physicians and teaching hospitals, as 
proposed, using email list serves, online postings (including both on 
the CMS Web site and the Federal Register) and directly (likely by 
email) to any physicians or teaching hospitals that have registered 
with CMS ahead of time. We strongly recommend that all covered 
recipients and physician owners or investors register. Although 
registration is not mandatory for these entities, in order for covered 
recipients to be able to review the data attributed to them, they will 
be required to register so we can appropriately match them to their 
data. In addition to the methods proposed, we plan to work with 
physician professional societies and provide the information to 
applicable manufacturers and applicable GPOs to provide voluntarily to 
covered recipients and physician owners or investors. We understand 
that these methods do not constitute direct, personal notification, but 
believe that these methods are sufficient and significantly more cost 
effective for both CMS, and applicable manufacturers and applicable 
GPOs.
    Finally, we note that since applicable manufacturers and applicable 
GPOs only submit data for the previous calendar year to CMS once 
annually, the agency may not provide ongoing notifications to covered 
recipients or physician owners or investors for data submitted on their 
behalf outside of the formal period (such as in response to a dispute). 
Similarly, we will only provide for one formal review and correction 
period prior to the publication of that year's data. We discuss our 
plans to allow for updates to submitted data or submission of data 
previously omitted, as well as additional time to review and dispute, 
later in this section, but the formal review and correction period will 
only happen once annually prior to the next publication on the public 
Web site.
b. Length of Review and Correction Period
    Section 1128G(c)(1)(D) of the Act requires that CMS provide a 
review and correction period of ``not less than 45 days.'' We proposed 
a 45-day review period to maximize the time for the agency to aggregate 
and publish the data. Additionally to facilitate the review, we 
proposed that applicable manufacturers, applicable GPOs, covered 
recipients, and physician owners and investors would sign into a secure 
Web site to view the data submitted. We proposed that only the current 
and previous years would be available for review and correction. For 
example, during the 45-day review period in 2015, applicable 
manufacturers, applicable GPOs, covered recipients, and physician 
owners or investors would be able to

[[Page 9500]]

review and amend the data submitted for 2013 and 2014. During the 2016 
review, 2014 and 2015 would be available for changes.
    Comment: Many commenters requested a longer review period, 
particularly to allow for additional time to resolve disputes. Many of 
these commenters recommended a 60- or 90-day review period and asked 
that the review period include a distinct phase to resolve disputes. 
These commenters stated that this was particularly important for 
disputes which may be initiated towards the end of the review and 
correction period.
    Response: We appreciate the comments and are sympathetic to the 
need to provide time for review and correction and tried to maximize 
the time as much as possible. However, time constraints restrict 
flexibility in this area given the statutory date for publication of 
the submitted data on the public Web site. In finalizing the proposal, 
we tried to balance providing appropriate time for review which allows 
us sufficient time to process the data for review and publication. 
Following the first year of reporting, in which we must publish the 
data within approximately 6 months of receiving the data, we must 
thereafter publish the data within 90 days of the last day for data 
submission (March 31), so a 90-day review period is not feasible. 
Similarly, we also believe that a 60-day review period would not leave 
us enough time to aggregate the data and prepare it for publication 
within 90 days of data submission. Nevertheless, we do agree that there 
should be a distinct phase for correcting data to resolve disputes 
since we recognize that it is not practical to resolve disputes 
initiated at the end of the review and correction period, within the 
time allotted. We believe that there should be a distinct period after 
the review and correction period specifically for correcting data to 
resolve potential disputes.
    Given these constraints, we have finalized a 45-day review and 
correction period, during which covered recipients and physician owners 
and investors may register and then sign into the CMS secure Web site 
and review the data submitted by applicable manufacturers and 
applicable GPOs on their behalf and choose to dispute certain payments 
or other transfers of value, or ownership of investment interests. As 
soon as a dispute is initiated, applicable manufacturers or applicable 
GPOs may begin resolving the dispute and correcting the data. Following 
the end of the review and correction period, applicable manufacturers 
and applicable GPOs will have an additional 15 days to correct data for 
purposes of resolving disputes, and after which they may submit (and 
provide attestation for) updated data to CMS to finalize their data 
submission. Undisputed data will be finalized for publication after the 
close of the annual 45-day review and correction period. Regarding the 
15-day period for resolving and correcting disputes following the 45-
day review period, we recognize that 15 days is not much time for 
applicable manufacturers and applicable GPOs to resolve disputes 
submitted late in the review and correction period. Because we do not 
believe that we have the authority to shorten the period when covered 
recipients and physician owners and investors can review and submit 
corrections to the data, the 15-day period to correct data and resolve 
disputes must be after the 45-day review and correction period. 
Extending the 15-day dispute resolution period would not allow us 
sufficient time to prepare for public posting and we cannot delay 
public posting for the review and correction period. Only data changes 
initiated during the 45-day review and correction period and resolved 
by the end of the 15-day period for dispute resolution will be captured 
in the initial publication of the current reporting year of data on the 
public Web site. Disputes submitted earlier in the review and 
correction period will have more time to be resolved. In order to try 
to maximize the successful resolution of disputes and have more 
accurate data for publication, we plan to encourage covered recipients 
and physician owners and investors to register with the CMS system, 
review their data and if necessary, initiate disputes as soon as 
possible within the 45-day review and correction period to maximize the 
likelihood of successful resolution and accurate data available for 
publication.
    We also note that covered recipients and physicians owners and 
investors will have the opportunity to review and submit corrections 
for data updated by applicable manufacturers and applicable GPOs 
(either in response to a dispute, omission, or other error). There is 
no limit to the number of times a particular transaction can be 
reviewed and disputed.
    Comment: Many commenters also discussed the processes for the 
review and correction period, including what data would be available 
during the 45-day period. The majority of these commenters supported 
the secure Web site to view the data and recommended that CMS determine 
a process to validate the identities of the applicable manufacturers. 
Regarding the data available, many commenters recommended that CMS 
allow review and correction of more data, beyond the 2 previous years. 
Additionally, a few commenters recommended that for data granted 
delayed publication, CMS should allow review and correction of the data 
in the year the data is submitted, rather than the year it will be 
published. These commenters explained that it will be easier for 
covered recipients and physician owners and investors to review and 
correct the data immediately after the payment was made, rather than up 
to four years later.
    Response: We appreciate the comments on the review and correction 
process and what data should be available for review during the review 
and correction period. Regarding the review and correction process, we 
have finalized our proposal of facilitating the process on a CMS-secure 
Web site. We are working to develop a system to allow secure 
registration, data submission, data review and submission of 
corrections processes. Applicable manufacturers and applicable GPOs 
will only be able to access and review the data they submitted or that 
was submitted for them within a consolidated report submitted by 
another covered entity; covered recipients and physician owners and 
investors will only be granted access to data regarding payments or 
other transfers of value and/or ownership or investment interests 
submitted on their behalf. We agree that we will need to validate the 
identities of individuals signing on to the Web site and plan to employ 
a system that will allow for secure user identification and 
authorization. We also plan to allow physicians and teaching hospitals 
to register prior to the start of the annual formal review and 
correction period to establish their profile, allowing them immediate 
access to the information at the beginning of the formal review and 
correction period. The secure user-based authentication requires that 
the actual individual register and interact with the system to ensure 
the utmost security of the data. The registration process will also 
help us collect additional information from the covered recipients and 
physician owners or investors to ensure that only the appropriate data 
is available to them and able to be aggregated and presented to the 
appropriate individual.
    Beyond the process for accessing the information, we do not agree 
that more than 2 years of data should be available for review and 
correction. While we believe that covered recipients and physician 
owners and investors should have appropriate opportunity to review the 
data, we believe that the data should

[[Page 9501]]

be finalized and no longer open to disputes and updates after a certain 
time period. As discussed later in this section, we have worked to 
improve the review and correction processes to allow covered recipients 
and physician owners and investors the opportunity to review and 
correct their data and resolve disputes with applicable manufacturers 
and applicable GPOs throughout the year. Given this increased 
flexibility, we believe that allowing only the review of the previous 
year's data (submitted in that year) provides covered recipients and 
physician owners and investors sufficient time to review and, if 
necessary, correct disputes.
    Additionally, we agree that all data from the previous reporting 
year, including data granted delayed publication should be available 
for review during the review and correction period following the 
reporting year. For example, a payment or transfer of value granted 
delayed publication, but made in 2014 and reported in 2015, would be 
made available to the covered recipient for review and correction in 
2015, but would not be published until the appropriate time for 
release. We believe covered recipients and physician owners and 
investors, as well as applicable manufacturers and applicable GPOs will 
be better able to review and correct the data during the period of time 
immediately following the transaction, rather than years afterward when 
the data is about to be published. Finally, we intend to provide 
additional information and guidance on the reporting requirements and 
timing of data review and correction to help applicable manufacturers, 
applicable GPOs, covered recipients and physician owners or investors 
understand how transactions should be reported.
c. Dispute Resolution
    In the proposed rule, we provided information on the public 
presentation of disputed, but unresolved transactions. We proposed that 
if an applicable manufacturer or applicable GPO, and covered recipient, 
or physician owner or investor have contradictory information that 
cannot be resolved by the parties involved, then 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 also proposed that 
for aggregation purposes, we would use the contradictory data, as 
corrected by the covered recipient or physician owner or investor, for 
any aggregated totals.
    We also received numerous comments on the proposed process for 
dispute resolution. In the proposed rule, we stated 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. We proposed that covered recipients, and physician owners or 
investors may request from us 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 resolve the dispute with the applicable manufacturer or applicable 
GPO. We proposed 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.
    Regarding the timing for submitting disputes, we proposed 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 we have made or noted them 
all, we proposed 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 also proposed 
that applicable manufacturers, applicable GPOs, covered recipients, or 
physician owners or investors alert us as soon as possible regarding 
any errors or omissions, but these changes may not be made until the 
data is updated for the following reporting year. At that time, all 
parties would once again have an opportunity to review and amend the 
data. However, we proposed that we would have the option to make 
changes to the data at any time (for example, to correct mathematical 
mistakes).
    Comment: Commenters had mixed reactions to the proposal that CMS 
not play a central role in mediating disputes. Many commenters stated 
that CMS should manage the process to ensure it is standardized and 
intervene in situations when disputes cannot be resolved. Conversely, 
many other commenters supported that CMS should not be involved and 
that it should be at the discretion of the disputing parties. Many 
commenters also recommended options for resolution, such as engaging a 
third party to mediate the disputes or developing an appeals process.
    Several commenters recommended that CMS allow applicable 
manufacturers and applicable GPOs discretion over which payments or 
other transfers of value or ownership or investment interests to 
resolve. A few of these commenters noted that the statute only requires 
that CMS grant a review and correction period, but not that all 
disputes must be resolved. Conversely, a few commenters recommended 
that CMS impose a materiality threshold, and applicable manufacturers 
and applicable GPOs would not be required to resolve disputes below the 
threshold. Additionally, a few commenters recommended that applicable 
manufacturers and applicable GPOs should be responsible for reporting 
the resolution of disputes to CMS since they are subject to penalties 
for incorrect reporting. Most of these commenters recommended that 
applicable manufacturers and applicable GPOs should be allowed to re-
certify the data after the dispute resolution. Finally, a few 
commenters discussed how the post-submission review process would 
interact with a pre-submission review.
    Response: We appreciate the comments and agree that effective and 
accurate resolution of disputes is essential to the program. After 
reviewing the comments, we believe that we do have a responsibility to 
facilitate the capability for correcting the data and resolving 
disputes among the parties. However, we maintain that we should not be 
actively engaged in mediating dispute resolutions. The relationship 
exists between the applicable manufacturer or applicable GPO, and the 
covered recipient or physician owner or investor, so these parties 
should be involved in the resolution of the dispute, not CMS. We 
believe that we are not the appropriate party to mediate the disputes. 
However, we do plan to provide the opportunity for covered recipients, 
or physician owners or inventors to review and correct the data 
submitted on their behalf. We also plan to monitor the rate of disputes 
and resolutions, including whether an applicable manufacturer or 
applicable GPO has an abnormally high number of disputes or has an 
abnormally high rate of unresolved disputes.
    When covered recipients and physician owners or investors register 
and sign on to the secure CMS Web site,

[[Page 9502]]

all payments or other transfers of value, and all ownership or 
investment interests, submitted on their behalf will be available for 
review. The covered recipient or physician owner or investor will be 
responsible for reviewing each payment or other transfer of value, or 
ownership or investment interest, and will be able to initiate a 
dispute on a particular transaction, if he/she chooses. If a covered 
recipient or physician owner or investor decides to initiate a dispute, 
he or she will be directed to fill out electronic fields detailing the 
dispute, including the proposed corrections. The system will 
automatically flag that the transaction was disputed and the system 
will notify the appropriate applicable manufacturer or applicable GPO 
of the dispute, detailing the information submitted by the disputing 
covered recipient or physician owner or investor. The applicable 
manufacturer or applicable GPO and physician or teaching hospital will 
then be responsible for resolving the dispute, after which the 
applicable manufacturer or applicable GPO will be responsible for 
submitting corrected data and re-attesting to the new data by the end 
of the 15-day resolution period. If a dispute cannot be resolved in 
this time, the parties may and should continue to work to reach 
resolution and update the data. However, we will continue to move 
forward with publishing the original and attested data, but will mark 
it as disputed.
    If an applicable manufacturer or applicable GPO submits updated 
data to resolve dispute(s), the applicable manufacturer or applicable 
GPO must re-attest to the timeliness, accuracy, and completeness of the 
data, as required during the original data submission. If an applicable 
manufacturer or applicable GPO does not update its data at the end of 
the correction period, then its original attestation will be used. We 
recognize that this requirement adds a second attestation for 
applicable manufacturers and applicable GPOs that submit updated data, 
but we believe it is important that all the data presented on the 
public Web site be subject to the same attestation requirements. We 
also believe applicable manufacturers and applicable GPOs will 
appreciate the opportunity to re-attest in response to any updates to 
the data changed during the review and correction period.
    Additionally, we do not agree that the statute does not require 
applicable manufacturers and applicable GPOs to resolve disputes. We 
believe that by requiring a review and correction period, Congress 
intended any disputes identified to be resolved; however, we do 
recognize that there may be situations when the cost of initiating and 
resolving a dispute may not be worth the potential benefits. We intend 
to monitor the volume and terms of disputes and resolutions, and plan 
to provide additional guidance regarding situations when the cost of 
resolving a dispute may outweigh the benefits. Finally, since we are 
neither requiring, nor managing the pre-submission review process, we 
do not believe there should be any connection between any pre-
submission processes and the CMS processes for data submission and 
review and correction. For example, we will not restrict a physician 
who reviewed and approved a payment in the pre-submission review from 
disputing such payment or other transfer of value during the CMS 
process for review and correction, since we will not know whether the 
physician received an opportunity to pre-review the payments or the 
result of his/her pre-review.
    Comment: Numerous commenters opposed CMS's proposed approach for 
presenting disputed data. Many commenters stated that it would be 
misleading to end users of the data to include both accounts. However, 
they differed in their preferred options for presenting unresolved 
transactions. Several commenters recommended that disputed transactions 
should be flagged as disputed, but only one account of the transaction 
be included. The majority of these commenters suggested that the 
information, as submitted by the applicable manufacturer or applicable 
GPO, should be the account of the transaction published, since they are 
the entities with the reporting requirements and subject to penalties. 
Other commenters recommended that the unresolved data should not be 
published until it has been resolved. Beyond the data reported, a few 
commenters recommended that CMS outline incentives for resolving 
disputes in order to ensure that applicable manufacturers, applicable 
GPOs, covered recipients and physician owners and investors participate 
in the dispute resolution process.
    Response: We appreciate the comments and agree that publishing both 
accounts of a disputed transaction would be misleading. Although we 
believe publishing both accounts would provide the details of the 
dispute thereby providing the greatest transparency, we believe that 
this level of detail would not be useful for end users of the data. We 
also agree that any disputed transactions that have not yet been 
resolved should be labeled as such, but that only a single account of 
the transaction should be listed on the public Web site.
    We also do not agree that disputed transactions should not be 
published publicly until they are resolved. We believe that this method 
would potentially create an incentive for covered recipients and 
physician owners or investors to dispute each transaction of the public 
Web site to prevent them from being made public. We also believe that 
publication of disputed transactions will incentivize the parties to 
resolve disputes in a timely manner. We do not believe that any 
additional incentives are necessary. We believe that the interest to 
only publish accurate and undisputed information will push all parties 
to actively resolve disputes.
    Therefore, we will finalize that on the public Web site, payments 
or other transfers of value or ownership or investment interests that 
cannot be resolved by the end of the 15-day resolution period will be 
marked as ``disputed,'' but the applicable manufacturer's or applicable 
GPO's most recent attested data subject to the dispute will be the only 
account of the information published. We believe publishing the most 
recent attested account by the applicable manufacturer or applicable 
GPO (rather than the corrected account provided by the covered 
recipient or physician owner or investor during the review and 
correction period) is appropriate because applicable manufacturers and 
applicable GPOs are responsible for collecting, reporting, and 
attesting to the accuracy of the information and are subject to 
penalties for failure to report. The parties may continue to resolve 
disputes after the close of the resolution period and after the data 
has been published publicly, or may leave the data as disputed; 
however, we discouraged leaving data as disputed and advocate for 
timely dispute resolution.
    Comment: Several commenters did not support the 45-day review 
period being the only opportunity to review and correct the data and 
recommended that review and correction be available more frequently. 
Many commenters also recommended that CMS allow for changes to be made 
more than once annually to ensure that mistakes are identified and 
corrected on the public Web site as soon as possible. Finally, a few 
commenters also recommended that applicable manufacturers, applicable 
GPOs, covered recipients, and physician owners or investors should not 
have to report mistakes immediately, but allow time to investigate the 
mistake internally.

[[Page 9503]]

    Response: We appreciate the comments on updating the public Web 
site and agree that we have a responsibility to allow for updates to 
the data more frequently than once a year during the formal 45-day 
review and correction period and 15-day resolution period, particularly 
given the short time period for the data to be reviewed and updated. We 
believe that some disputes will not be resolved in time for updated 
data to be included in the public data release for that reporting year, 
but will be resolved and require changes thereafter. These should not 
be incorrectly listed on the Web site for a whole year, when they have 
in fact been resolved. Nevertheless, we also believe that we do not 
have the resources to make continual changes to the Web site and should 
not be required to continually update the data. We will update the 
current and a previous year's data at least once annually, beyond the 
initial data publication following the submission of the data.
    Similarly, we also believe that covered recipients, and physician 
owners or investors should be allowed to review and dispute the 
contents of the public Web site throughout the year. After registering 
with the CMS system, physicians and teaching hospitals, and physician 
owners and investors may sign in to the system to review or dispute 
officially submitted and attested transactions any time during the 
year. However, any disputes and subsequent updates initiated and 
resolved outside the 45-day review and correction period and 15-day 
resolution period may not be reflected on the public Web site until the 
next update of the data. We believe this fairly allows covered 
recipients and physician owners or investors control over reviewing and 
correcting their data at all times, but does not require us to make 
continual changes to the published data. This system will also allow 
covered recipients and physician owners and investors the opportunity 
to easily and efficiently review (and dispute, if necessary) data 
updated and re-submitted by an applicable manufacturer or applicable 
GPO.
    Finally, we also understand applicable manufacturers, applicable 
GPOs, covered recipients, and physician owners or investors may want to 
investigate errors internally before notifying CMS of errors or 
omissions. However, we believe that errors and changes need to be 
reported to us as soon as possible so that we have the most accurate 
information possible. We believe that covered recipients and physician 
owners or investors should use the CMS review and correction processes 
to report errors and begin to resolve them with applicable 
manufacturers and applicable GPOs as quickly as possible. It will be 
the responsibility of the applicable manufacturer or applicable GPO 
that submitted and attested to the data to submit any updates, 
including errors and omissions, immediately after confirming that an 
update is needed or an error needs to be corrected; failure to do so 
may be considered incomplete reporting and may give rise to penalties.

D. 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. Given the timing of the final rule, no data will be 
collected for CY 2012, so the first data publication will be in 2014 
for data collected in 2013.
    In the proposed rule, we noted that 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 requested comment on how to structure this Web site 
for ultimate usability and proposed, as required by statute, 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.
    Comment: Numerous commenters provided feedback on the public Web 
site, particularly the development of the Web site. Many commenters 
called upon CMS to solicit stakeholder assistance in the development of 
the public Web site and that stakeholders should be given the 
opportunity to comment on the Web site content prior to it being 
finalized. A few commenters also recommended various methods to better 
develop the Web site, such as reviewing existing Web sites with similar 
information as examples. Finally, a few other commenters requested that 
CMS provide more information on the public Web site in the final rule.
    Response: We appreciate the comments and agree that stakeholder 
input is essential to the success of the public Web site. We plan to 
engage stakeholders regarding the content of the Web site, since we 
recognize that stakeholders and the public must be a part of the 
development process. We agree that it is important that the final Web 
site is user-friendly and provide accurate and understandable 
information to the public. In order to regain flexibility over the 
details of the Web site and allow the opportunity to work with 
stakeholders on development, we have only provided general information 
on the public Web site in the final rule. We believe that it is 
important that we have flexibility to make changes to the Web site as 
they are identified, but do plan to engage the public on the future 
development. We intend to release additional information about the Web 
site through education and outreach to the stakeholder community.
    Comment: In response to our request for comment on the structure of 
the public Web site, we received numerous comments recommending 
specific information to be included, as well as the Web site's 
capabilities. Some commenters recommended that specific information and 
research should be included on the Web site as background or contextual 
information, particularly including details of the reporting 
requirements and the benefits of relationships between manufacturers 
and physicians and teaching hospitals. Additionally, some other 
commenters recommended that CMS link to other Web sites, such as 
physician codes of conducts or a manufacturer's published data.
    Regarding the capabilities of the Web site, some commenters 
recommended that the data should be easily searchable and downloadable. 
Other commenters recommended specific file structures and details for 
the data, for public use, as well as use by researchers, including 
allowing researchers to obtain information that is not publicly 
available.
    Response: We appreciate the comments and agree that both the 
information included and capabilities of the Web site are extremely 
important. We support many of the recommendations and have provided 
general plans for the information to be presented, as well as the 
capabilities of the Web site. We plan to ensure that the public Web 
site accurately and completely describes the nature of relationships 
between physicians and teaching hospitals, and the industry, including 
an explanation of beneficial interactions. In addition, we plan to 
provide information to stakeholders regarding the data submission, 
review, dispute, dispute resolution and other

[[Page 9504]]

applicable operational processes. As proposed, the Web site will 
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 appreciate the support of this language and plan to emphasize it on 
the Web site. We also plan to provide Frequently Asked Questions (FAQs) 
and other methods to help users find and understand this important 
contextual information.
    While we appreciate that there is similar information available 
from industry and stakeholders that may be beneficial to include on the 
public Web site, we also want to try to reduce the promotional or 
company specific information on the Web site, so we will need to assess 
the best way to include this information, if at all. Finally, we are 
also cognizant that the Web site will include a significant amount of 
information and are considering the best way to provide sufficient 
context without overwhelming the consumer.
    As required by statute, we plan to aggregate the data submitted and 
publish the data on a Web site that is searchable across multiple 
fields and available for downloads. In addition, we plan to establish 
mechanisms for researchers who may want information that is not 
publicly available. We believe that the data included in the database 
is primarily important for consumers, but understand that it also 
provides numerous opportunities for research on provider-industry 
relationships. We plan to provide opportunities to download the data 
that support researchers, as well as consumers, since we believe that 
research on this information is an important benefit of any 
transparency initiative.
1. Data Elements
    In the proposed rule, we listed the data elements that would be 
available on the public Web site. We did not receive any comments on 
these, so we have finalized them as proposed. As required by statute, a 
physician's NPI will not be published on the public Web site. In these 
lists, we have included any necessary changes as required by other 
sections of the final rule. The asterisks indicate the additional 
information that we will publish under the discretion provided by the 
statute. As required in section 1128G(c)(1)(C)(ii) of the Act, at a 
minimum 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's name.
     Covered recipient's--
    ++ Name;
    ++ Specialty (physician only); and
    ++ Primary business street address (practice location).
     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(s) of the related covered drugs, devices, 
biologicals, or medical supplies, as applicable.
     NDCs of related covered drugs and biologicals, if any.*
     Name of the entity that received the payment or other 
transfer of value, if not provided to the covered recipient directly.
     Statement providing additional context for the payment or 
other transfer of value (optional).*
    For research payments or other transfers of value, at a minimum the 
following research related information will be available on the public 
Web site:
     Name of research institution/entity receiving payment.
     Total amount of research payment.
     Name of study.
     Name(s) of the related covered drugs, devices, biologicals 
or medical supplies.
     NDCs of related covered drugs and biologicals, if any.*
     Principal investigator(s) (including name, specialty and 
primary business address).
     Context of research.
     ClinicalTrials.gov identifier (optional).
    For physician ownership and investment interests, at a minimum 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's or applicable GPO's name.
     Physician owner or investor's--
    ++ Name;
    ++ Specialty; and
    ++ Primary 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 or investor, 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(s) of the related covered drugs, devices, biologicals, or 
medical supplies, as applicable.
    ++ NDCs of related covered drugs and biologicals, if any.*
    ++ Name of the entity that received the payment or other transfer 
of value, if not provided to the physician directly.
    ++ Statement providing additional context for the payment or other 
transfer of value (optional).*

E. Delayed Publication for Payments Made Under 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 certain kinds of product 
research or development agreements and in connection with clinical 
investigations. This provision seeks to balance the need for 
confidentiality of proprietary information with the need for public 
transparency of payments to covered recipients that could affect 
prescribing habits or research outcomes.
    In the proposed rule, we proposed that payments or other transfers 
of value would be granted delayed publication only if they were made in 
the context of a relationship for bona fide research or clinical 
investigation activities. We proposed that the ``product research or 
development agreement'' referenced in the statute included a written 
statement or contract between the applicable manufacturer and covered 
recipient, as well as a written research protocol.
    Section 1128G(c)(1)(E) of the Act provides specific situations when 
delayed publication of payments or other transfers of value is 
appropriate, including the following:
     Research in connection with a potential new medical 
technology or a new application of an existing medical technology.
     The development of a new drug, device, biological, or 
medical supply.
     In connection with a clinical investigation regarding a 
new drug, device, biological, or medical supply.
    In the proposed rule, we noted the difficulty in separating medical 
technology from the definition of covered drug, device, biological or 
medical supply and proposed to

[[Page 9505]]

consider ``medical technology'' broadly to include any drug, device, 
biological, or medical supply. Similarly, due to the overlap between 
the terms ``research'' and ``development,'' we proposed to treat them 
similarly in this provision. In the proposed rule, we noted that the 
definition of clinical investigations in section 1128G(e)(3) of the Act 
is distinct from both ``research'' and ``development'' for the purposes 
of section 1128G the Act. We noted that this definition may also differ 
from those that applicable manufacturers may be familiar with in 21 CFR 
312.3 and 812.3.
    Given these interpretations, we proposed 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 proposed limiting delayed publication for payments in connection 
with clinical investigations to new drugs, devices, biologicals, or 
medical supplies, but not new applications of existing drugs, devices, 
biologicals, or medical supplies.
    Finally, the statute also 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 or other transfer of value.
    Comment: Numerous commenters provided input on these 
interpretations and proposals. Some commenters recommended that CMS 
expand the situations when a payment or other transfer of value may be 
granted delayed publication. For example, a few commenters suggested 
that all research-related payments or other transfers of value should 
be granted a delay in publication, regardless of the product under 
consideration. Some commenters also explained that research on non-
covered products should also be granted delayed publication, including 
pre-clinical research, which is often not expressly connected to a 
product. Conversely, other commenters recommended that CMS narrow the 
situations when a payment or other transfer of value is granted delayed 
publication. For example, a few commenters suggested interpreting 
medical technology as a subset of covered drugs, devices, biologicals 
or medical supplies, which would include only devices or even only a 
subset of devices. A few commenters also recommended that CMS not allow 
any delayed publication for payments or other transfers of value 
related to new applications of existing products. Finally, a few other 
commenters requested that CMS allow for delayed publication of 
sensitive payments or other transfers of value that are not related to 
research, such as business development activities.
    Response: We appreciate these comments. However, we believe that 
our proposal strikes a good balance for granting certain payments or 
other transfers of value a delay in publication. In order to provide 
additional context to stakeholders, we seek to clarify our 
interpretation of the proposed requirements for delayed publication.
    All payments or other transfers of value that are related to 
research, as defined in Sec.  403.902, and are made pursuant to a 
written research agreement for research related to new products will be 
granted a delay. However, payments or other transfers of value related 
to research for new applications of products already on the market will 
be treated differently due to the statutory distinction between new 
products and new applications of existing products. Pursuant to the 
statute, payments related to research on new applications of existing 
products will be granted a delay only if the research does not meet the 
definition of ``clinical investigation.'' We recognize that clinical 
investigations are a subset of research; however, we believe that the 
statute clearly differentiates them for purposes of delayed publication 
from research and development, and indicates that payments or other 
transfers of value made in connection with clinical investigations (as 
defined in section 1128G(e)(3) of the Act) related to new applications 
of existing products should not be granted a delay. Given the broad 
scope of the statutory definition of ``clinical investigation,'' we 
believe this includes Phases I through IV clinical research for drugs 
and biologicals, and approval trials for devices (including medical 
supplies). We also amended the regulatory definition to include 
biologicals and medical supplies, as well as drugs and devices, since 
all product types should be treated similarly.
    We recognize that the interpretation of the meaning of a new 
product (as opposed to a new application of an existing product) for 
the purposes of section 1128G of the Act may differ from other 
definitions, such as the definition of new drug in 21 U.S.C. 355. For 
purposes of determining eligibility for delayed publication under 
section 1128G(c)(1)(E) of the Act, new generic products will be 
considered new products, including drugs receiving approval under an 
Abbreviated New Drug Application, and devices under the 510(k) process.
    Finally, while we recognize the potentially sensitive nature of 
business development activities, we do not believe that the statute 
grants us the ability to granted delays for payment types other than 
research.
    Regarding the written agreement and research protocol, we discussed 
numerous comments on these requirements earlier in the research 
section, particularly regarding the requirement that a research study 
must be subject to both a written agreement and a research protocol. We 
have finalized the same requirements for payments or other transfers of 
value granted delayed publication. In general, a payment or other 
transfer of value can only be granted delayed publication if the 
payment meets the definition of research and could be reported under 
the ``research'' nature of payment category. Any related payments or 
other transfers of value that would not be reported as a part of the 
research nature of payment category, pursuant to the discussion in 
section II.B.1.i. of this final rule, will not be granted delayed 
publication.
    Comment: Commenters specifically recommended that 4 years is not 
enough time for full development of a product, and that payments should 
only be published after FDA approval, licensure or clearance.
    Response: We appreciate the comments, but the timelines are clearly 
delineated in section 1128G(c)(1)(E) of the Act. We do not have the 
authority to alter them. Additionally, we believe Congress clearly 
intended that all payments should be included on the public Web site, 
even if a product never received FDA approval, licensure or clearance.
1. Process for Reporting Payments or Other Transfers of Value Granted 
Delayed Publication
    We received numerous comments on our proposed method for 
notification to CMS which payments or other transfers of value are 
eligible for delayed publication on the public Web site, as well as 
additional methods for reporting the information to CMS. We proposed 
that applicable manufacturers should indicate on their reports whether 
or not a payment or other transfer of value should be granted a delay 
from publication. In addition, we proposed that payments or other 
transfers of value

[[Page 9506]]

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 proposed 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. Finally, we 
proposed that 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.
    Comment: A few commenters requested clarification on whether 
applicable manufacturers would be required to indicate that a payment 
or other transfer of value should be granted delayed publication. Other 
commenters provided alternative methods for reporting payments or other 
transfers of value eligible for delayed publication. For example, some 
commenters recommended that applicable manufacturers should only report 
the payment or other transfer of value to CMS in the year it was made 
and then again in the year it is to be published. Similarly, other 
commenters recommended that applicable manufacturers should only report 
payments or other transfers of value in the year they are to be 
published. In addition, a few commenters expressed concern about 
confidentiality and recommended that applicable manufacturers should 
not be required to report the identifying details of the payment or 
other transfer of value until the payment was scheduled to be 
published. Beyond identifying details, some commenters recommended that 
CMS allow applicable manufacturers to report ``research and 
development'' for the product name, rather than the product, in order 
to better protect proprietary interests. Similarly, commenters 
recommended that CMS never require the collection of research protocols 
in order to ensure a payment or other transfer of value should be 
granted delayed publication.
    Response: We appreciate the comments and agree that applicable 
manufacturers are not required to indicate that payments or other 
transfers of value are eligible for delayed publication and may instead 
choose not to indicate eligibility for the delay. However, if a 
manufacturer does not indicate that a payment or other transfer of 
value is eligible for delayed publication, it will be published 
immediately on the next publication date.
    We also appreciate the comments regarding alternative methods for 
reporting payments or other transfers of value granted delayed 
publication; however, we believe that the proposed method is 
preferable. We believe that continual reporting is beneficial because 
it will allow us to ensure that payments or other transfers of value 
made more than four years earlier will be published appropriately. 
Otherwise, payments or other transfers of value from the same 
applicable manufacturer may be stored in various places. Additionally, 
we believe it will be difficult for us to enforce and audit payments or 
other transfers of value eligible for delayed publication if they are 
not reported until they are scheduled to be published. Nevertheless, we 
understand the confidentiality concerns, particularly for new products 
that have not yet been granted FDA approval, licensure, or clearance. 
However, after reviewing the comments, we believe that allowing 
applicable manufacturers to report in a different manner and allowing 
special considerations for certain research payments or other transfers 
of value makes the reporting requirements significantly more 
complicated. Additionally, section 1128G(c)(1)(E)(ii) of the Act 
requires CMS to keep the information submitted confidential prior to 
publication. We believe that creating separate requirements is too 
burdensome particularly when the statute and regulations already 
provide for confidentiality. We do not intend applicable manufacturers 
to provide research protocols or other such agreements to CMS for 
verification. Finally, 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.

F. 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 the regulations. If an applicable manufacturer or applicable GPO 
fails to submit the required information, then the applicable 
manufacturer or applicable GPO will 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 total 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 
total CMP with respect to each annual submission for a knowing failure 
to report is $1,000,000.
    In the proposed rule, we outlined the penalty amounts as required 
by statute for failure to report and knowing failure to report. In 
addition, we proposed that 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 proposed that the procedures in 42 CFR 
part 402 subpart A would apply with regard to imposition and appeal of 
CMPs. Similarly, we defined the term ``knowingly'' based on the meaning 
in the False Claims Act, 31 U.S.C. 3729(b), as required by statute. 
Finally, we also proposed that a CMP may be imposed for failure to 
report information in a timely, accurate, or complete manner.
    In the proposed rule, we outlined the factors that we would 
consider when determining the amount of a CMP, as well as when the 
maximum CMP would be imposed. We did not receive any comments on these 
factors, so we have decided to finalize these provisions as proposed. 
The factors to be considered include, but are not limited to, the 
following:
     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.
    Finally, we proposed that in order to facilitate audits and 
enforcement, 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

[[Page 9507]]

GPO's compliance with the requirements in section 1128G of the Act and 
the implementing regulations. We proposed 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.
    Comment: A few commenters discussed the proposed penalties for 
failure to report. These commenters generally supported higher CMP 
amounts for knowing failures to report. However, a few of these 
commenters suggested that the penalties were too low. The commenters 
also recommended that penalties should be imposed for inaccurate 
reporting, as well as omitted transactions.
    Beyond the structure of the penalties, a few commenters also 
requested additional information on how CMS planned to enforce the 
program. They requested information on which agencies would be 
responsible for enforcement, as well as the enforcement mechanisms. 
Finally, a few commenters requested clarification on when the maximum 
penalty would be imposed and recommended that errors corrected during 
the review and correction period would not be subject to penalties.
    Response: We appreciate the comments. However, we cannot change the 
amount or terms of the penalties, since they were authorized by 
statute. Section 1128G(b) of the Act outlines the CMP amounts and 
requires that they are imposed and collected in the same manner as 
those in section 1128A of the Act. Nevertheless, we do agree that the 
penalties should be imposed for inaccurate reporting. We have finalized 
our proposal that a CMP may be imposed for failure to report 
information in a timely, accurate, or complete manner. This includes 
failure to report timely or accurately an entire transaction, as well 
as failure to report timely or accurately certain fields related to a 
transaction. For example, this could entail reporting an erroneous 
payment amount or not reporting that an ownership or investment 
interest was held by an immediate family member of a physician. In 
order to clarify this, we have revised the regulation text in 42 CFR 
402.105 to include the same text regarding reporting in a timely, 
accurate, or complete manner. In addition, we have revised the 
regulation text at Sec.  402.105 and Sec.  403.912 to clarify that the 
penalties imposed for failures to report and knowing failures to report 
will be aggregated separately and are subject to separate aggregate 
totals, with a maximum combined annual total of $1,150,000. Finally, we 
also realized that in the proposed rule we did not refer to the 
procedures for collection of CMPs in 42 CFR part 402 subpart B, so we 
are clarifying in this final rule that the procedures in 42 CFR part 
402 subpart A and subpart B will apply with regard to imposition, 
appeal, and collection of CMPs.
    Regarding corrections made during the review and correction, and 
dispute resolution periods, we want applicable manufacturers and 
applicable GPOs to correct any errors they have submitted without fear 
of alerting CMS to errors that will be subject to penalties; however, 
we do not want to allow applicable manufacturers to submit grossly 
inaccurate or incomplete data by the original submission date without 
risk of sanction. Therefore, we are requiring applicable manufacturers 
and applicable GPOs to attest the timeliness, accuracy, and 
completeness of their original submission to CMS prior to the review 
and correction period. Applicable manufacturers and applicable GPOs 
should make a good faith effort to ensure that the original data 
submitted to CMS is correct. We do not intend that errors corrected 
during the review and correction, and dispute resolution periods will 
be subject to penalties for failure to report in instances when the 
original submission was made in good faith. As noted earlier, 
applicable manufacturers and applicable GPOs will be required to re-
attest after the submission of updated or new data. Outside this 
period, any errors or omissions will be considered failures to report 
timely, accurately, or completely, and will be subject to penalties. 
Additionally, both CMS and the HHS OIG are authorized to impose CMPs 
and both agencies will have the ability to investigate failures to 
report timely, accurately or completely.
    Finally, in light of the increased flexibility for consolidated 
reports, we have clarified how penalties will be enforced for 
applicable manufacturers submitting consolidated reports. As explained 
previously, for consolidated reports, the applicable manufacturer that 
submitted the consolidated report will be required to attest on behalf 
of all the entities included in the consolidated report. Therefore, the 
applicable manufacturer actually submitting the consolidated report and 
signing the attestation will be subject to the maximum penalties (based 
on unknowing and knowing failures to report) for each individual 
applicable manufacturer included in the consolidated report. For 
example, an applicable manufacturer submitted a consolidated report for 
itself (Company A) and two other applicable manufacturers (Subsidiary B 
and C). We discover six instances of a failure to report a payment or 
other transfer of value in Company A's submission (each penalized at 
$10,000), seven instances of a knowing failure to report in Subsidiary 
B's submission (each penalized at $100,000) and finally nine knowing 
instances of failure to report (each penalized at $100,000) in 
Subsidiary C's submission. Company A, as the submitter and attester of 
the data, would be subject to a penalty of $60,000 for Company A's 
failure to report, $700,000 for Subsidiary B and $900,000 for 
Subsidiary C. To be clear, Company A would be subject to the penalties 
for knowing failure to report from both Subsidiary B's and Subsidiary 
C's submissions even though the penalties together exceed $1,000,000, 
because we interpret the maximum to apply individually to each 
applicable manufacturer's submission, even if the submission is 
contained within a consolidated report. We believe this appropriately 
handles the penalty requirements for applicable manufacturers 
submitting consolidated reports, since each applicable manufacturer 
should be subject to the same maximum penalties regardless of whether 
it submits individually, or as a part of a consolidated report. Two 
applicable manufacturers submitting a consolidated report should not be 
subject to lower penalties than two applicable manufacturers not 
submitting a consolidated report. Additionally, because the applicable 
manufacturer submitting the consolidated report is the entity attesting 
to the data, we believe it is fair that it be subject to the CMPs for 
each applicable manufacturer included in the consolidated report. 
Therefore, as noted previously we encourage applicable manufacturers 
considering consolidated reports to fully assess the requirements and 
potential penalties.
    Comment: A few commenters discussed the retention period; in 
particular, many of them stated that the 5-year retention period was 
too long. A few other commenters recommended that the 5 years should 
begin on the date of first submission, rather than the date of 
publication. These commenters explained that retention based on date of 
publication would require applicable manufacturers and applicable GPOs 
to retain some records for longer than 5 years. Finally, a few 
commenters questioned whether the 5-year retention requirement was 
considered absolute in terms of liability.

[[Page 9508]]

    Response: We appreciate the comments, but do not agree that 5 years 
is too long. We believe that 5 years is sufficient, since it is less 
than other retention requirements with which applicable manufacturers 
and applicable GPOs may be familiar. In addition, we believe that the 
retention period should begin at the date of publication. While we 
understand this policy may require the records to be retained for up to 
9 years, we believe this information is essential for audits, and given 
the confidentiality requirements for data granted delayed publication, 
these activities may not be possible until after the data is published. 
If the date of retention began when the data was reported, in some 
cases there may be less than a year between when the data was published 
and the end of the retention period, which we do not believe is 
sufficient time to allow for audits, penalties, and appeals. Given 
these decisions, we have finalized the retention requirements as 
proposed. Finally, the requirements set forth in this final 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.

G. Annual Reports

    We are required to submit annual reports to the Congress and the 
States. The Report to Congress is due annually on April 1st, beginning 
April 1, 2013, and shall include aggregated information on each 
applicable manufacturer and applicable GPO submitted during the 
preceding calendar year, as well as any enforcement action taken and 
any penalties paid. Similarly, we must report information submitted 
during the previous year to States annually by September 30, 2013 and 
June 30 for each year thereafter. In the preamble to the proposed rule, 
we explained that 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 proposed that we report 
to the Congress information submitted by applicable manufacturers and 
applicable GPOs during the preceding year.
    Finally, we proposed that the State 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 
proposed that the reports would include data collected during the 
previous calendar year which was submitted in the current year. We also 
proposed that neither the Congressional nor State reports will 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. We did not receive any comments on these provisions and have 
finalized them as proposed.
    Comment: A few commenters did not support the proposed timing for 
the Congressional report and instead recommended that CMS publish the 
Congressional report along with the publication of the data. 
Additionally, a few commenters recommended that CMS provide more 
information on the content of the Congressional reports. Particularly, 
they recommended that the report provides aggregate spending across 
applicable manufacturers and applicable GPOs, including aggregate 
spending for payments or other transfers of value granted delayed 
publication. Finally, a few commenters also recommended that CMS 
establish a process for sharing information across government agencies, 
such as OIG and the Department of Justice (DOJ).
    Response: We appreciate the comments. We agree that the annual 
Congressional report should include summary statistics on the annual 
aggregate totals across applicable manufacturers and applicable GPOs. 
We also agree that inclusion of the aggregate total of payments or 
other transfers of value would be useful for oversight of the program. 
We plan to include this information in our annual Congressional report; 
however, in general we believe that we should not include specific 
details in the final rule to allow us flexibility to include and 
present information as appropriate. We also plan to work closely with 
other Federal agencies, since we recognize that other agencies are 
involved in similar activities. However, the purpose of this program is 
not to prosecute reporting entities, but to promote transparency.
    Regarding the timing of the Congressional report, we recognize the 
awkwardness of the timing, but note that the report could be submitted 
early since it is only required by April 1st. We do not believe we have 
the authority to change the statutory deadline in regulation, but will 
try to publish the report as soon as possible.
    Based on the timing of the publication of the final rule we have 
finalized that the Report to Congress will be submitted annually on 
April 1st, beginning April 1, 2015, and will include aggregated 
information submitted by each applicable manufacturer and applicable 
GPO submitted during the preceding calendar year (that is, data 
collected in CY 2013 and submitted in March of 2014), as well as any 
enforcement actions taken and any penalties paid.

H. 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.
    Comment: A few commenters discussed the relation of section 1128G 
of the Act to relevant State laws. These commenters strongly supported 
preemption, but requested information on how CMS interpreted the 
timing, given the missed statutory deadline. Many commenters also 
requested that CMS identify what elements of current State laws will be 
preempted. Additionally, these commenters recommended clarifying the 
statutory language to prevent preemption from being applied too 
narrowly to successfully consolidate reporting. A few commenters 
explained that a broad interpretation of the exceptions to preemption, 
particularly ``other public health purposes or health oversight 
purposes'' could require applicable manufacturers and applicable GPOs 
to report the same information to States, as well as the Federal 
program. These commenters recommended that CMS clarify these terms to 
prevent them from being interpreted so broadly to not allow for any 
preemption.
    Response: We appreciate the comments and acknowledge that the 
statute seems to provide that preemption of State or local transparency 
and disclosure laws is effective for payments or other transfers of 
value made on or after January 1, 2012. We understand that the delay in 
publication of the rule implementing section 1128G of the Act, which 
was to be published by October 1, 2011, has led to uncertainty 
regarding when preemption actually becomes effective. We urge 
manufacturers to continue to report under State or local disclosure 
laws until the requirements under the Federal rule take effect.

[[Page 9509]]

    We also seek to provide some additional guidelines to clarify the 
preemption requirements; however, we note that preemption 
determinations will need to be analyzed on a case-by-case basis.
    We interpret ``type of information'' for purposes of the preemption 
clause at 1128G(d)(3)(A) of the Act, to refer to the categories of 
information for each payments or other transfer of value required to be 
reported under the statute at 1128G(a)(1)(A)(i) through (viii) of the 
Act and Sec.  403.904(c) of the regulations. We believe this is 
consistent with the statutory exception from preemption in section 
1128G(d)(3)(B)(i) of the Act pertaining to the reporting to States and 
localities of information not of the type required to be disclosed 
under Federal law. Thus, State and local entities may require reporting 
of nonrequired categories of information for payments or other 
transfers of value reported to CMS, which are not required under 
Federal law. This includes payment categories excluded by the Federal 
law (including those listed at section 1128G(e)(10)(B) of the Act), 
with the exception of those that do not meet the minimum dollar 
threshold set forth in section 1128G(e)(10)(B)(i) of the Act. In 
addition, States and localities may require reporting of payments or 
other transfers of value not required to be reported at all under the 
Federal law. For example, they may require the reporting of payments to 
non-covered recipients or by nonapplicable manufacturers. We believe 
this is consistent with the statutory exceptions from preemption in 
section 1128G(d)(3)(B)(iii) of the Act.
    Finally, we understand the concern over other public health and 
oversight activities; however, this language is required by statute, so 
we cannot expressly change it. However, these exceptions cannot be used 
to avoid preemption. If a Federal, State or local government agency 
seeks to collect information reportable under this regulation for 
public health and/or oversight purposes and specifically needs the 
information for a purpose other than transparency, then such collection 
will not be preempted. However, if the purpose of the collection does 
not meet this exception and in actuality seeks to achieve the same 
transparency goal as the collection required under section 1128G of the 
Act, we believe such a collection would be preempted, and the States or 
localities can obtain the information they want from the Federal 
program.
    We have finalized the proposed discussion of public health 
agencies. We intend such agencies to 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.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 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. The 
information collections contained in this rulemaking are numerous and 
somewhat complex. We plan to obtain approval for the information 
collections in a step-wise fashion as we develop our system for 
receiving and displaying the required information and for allowing 
covered recipients and physician owners or investors to review the 
reported data prior to display on our Web site. Below, we provide an 
outline of the information collections and the current status of our 
requests for OMB approval.

A. Recordkeeping and Reporting of Payments or Other Transfers of Value 
and Physician Ownership and Investment Interests (Sec.  403.904, Sec.  
403.906, Sec.  403.908(a),(b),(d),(f) and (g), Sec.  403.912(e))

    Section 403.904 requires 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). This includes special 
reporting rules for research-related payments. Section 403.906 requires 
applicable manufacturers and applicable GPOs 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. Annually, under 
Sec.  403.908(g) applicable manufacturers and applicable GPOs will be 
able to review and correct the data provided in any reporting period 
during the 45 day period to review and correction period. Under Sec.  
403.912(e), applicable manufacturers and applicable GPOs must retain 
records to support their reports for 5 years from the date when the 
information is publicly posted on the CMS Web site. This is, in some 
cases, a recordkeeping requirement of at most about 9 years for 
payments or other transfers of value eligible for delayed publication. 
In our proposed rule, we requested comment on the information required 
in the proposed regulation, but did not include all the data elements 
we expected applicable manufacturers and applicable GPO's to report, 
nor did we include detailed information about the mechanism for 
submission, amendment, or correction. For this reason, we are 
publishing a 60-day notice elsewhere in today's Federal Register 
seeking public comment on the information collection. As part of the 
process, we will be seeking public comment on templates that contain 
the data specifications for the system we will be building.

B. Registration for Applicable Manufacturers and Applicable GPOs (Sec.  
403.908(c))

    As required by Sec.  403.908(c), any applicable manufacturer or 
applicable GPO that is required to report under this subpart must 
register with CMS within 90 days of the end of the calendar year for 
which a report is required. During registration, two points of contact 
must be provided, as well as other information. Registration is 
required once, but upon filing the annual reports the system will 
prompt applicable manufacturers and applicable GPOs to confirm that the 
registration information (for example, points of contact) is still 
accurate. If it is not accurate, the applicable manufacturers and 
applicable GPOs will be prompted to provide updated information. We 
have yet to seek OMB approval for the information collections 
associated with these provisions. We plan to seek public comment 
consistent with the requirement of the Paperwork Reduction Act and 
request OMB approval at a later date. Consistent with 5 CFR part 1320, 
these provisions will not be effective until OMB approves the 
collection of information.

C. Attestation (Sec.  403.908(e))

    As required by Sec.  403.908(e), each report, including 
corrections, must include a certification that the information reported 
is timely, accurate, and complete. We have yet to seek OMB approval for 
the information collections associated with these provisions. We plan 
to seek public comment consistent with the requirement of the Paperwork 
Reduction Act and request OMB approval at a later date. Consistent with 
5 CFR part 1320, these provisions will not be effective until OMB 
approves the collection of information.

[[Page 9510]]

D. Assumptions Document (Sec.  403.908(f))

    Under (Sec.  403.908(f)), applicable manufacturers and applicable 
GPOs may submit an assumptions document with their reports. This 
document can set out the assumptions and methodologies used to produce 
the reports. It will not be made available to the public, covered 
recipients or physician owners or investors, but it will provide CMS 
with information to help identify areas where additional guidance and 
clarity is needed. This is a voluntary collection and CMS does not plan 
to request that it be submitted in any particular way. We have yet to 
seek OMB approval for the information collections associated with these 
provisions. We plan to seek public comment consistent with the 
requirement of the Paperwork Reduction Act and request OMB approval at 
a later date. Consistent with 5 CFR part 1320, these provisions will 
not be effective until OMB approves the collection of information.

E. Information Collections Regarding Review and Correction by 
Physicians and Teaching Hospitals (Sec.  403.908(g))

    As required by section 1128G of the Act, applicable manufacturers, 
applicable GPOs, 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. To accomplish this 
review, we plan to ask covered recipients and physician owners and 
investors that would like to review the information to register with 
CMS using the CMS Enterprise Portal and associated identity and access 
management system. Once registered, they will be able to access a 
secure Web site that allows them to submit or review data securely. We 
have yet to seek OMB approval for the information collections 
associated with these provisions. We plan to seek public comment 
consistent with the requirement of the Paperwork Reduction Act and 
request OMB approval at a later date. Consistent with 5 CFR part 1320, 
these provisions will not be effective until OMB approves the 
collection of information.

F. Notice of Resolved Disputes by Applicable Manufacturers and 
Applicable GPOs (Sec.  403.908(g)(4))

    Under Sec.  403.908(g)(4), applicable manufacturers and applicable 
GPOs must notify CMS of resolved disputes. We have not yet established 
the content or form of this notice, and therefore we have yet to seek 
OMB approval for the information collections associated with these 
provisions. We plan to seek public comment consistent with the 
requirement of the Paperwork Reduction Act and request OMB approval at 
a later date. Consistent with 5 CFR part 1320, these provisions will 
not be effective until OMB approves the collection of information.

G. Notice of Errors or Omissions (Sec.  403.908(h))

    Under Sec.  403.908(h), applicable manufacturers and applicable 
GPOs must notify CMS immediately upon discovering errors or omissions 
in their reports. We have not yet established the content or form of 
this notice, and therefore we have yet to seek OMB approval for the 
information collections associated with these provisions. We plan to 
seek public comment consistent with the requirement of the Paperwork 
Reduction Act and request OMB approval at a later date. Consistent with 
5 CFR part 1320, these provisions will not be effective until OMB 
approves the collection of information.

IV. Regulatory Impact Analysis

A. Statement of Need

    This final 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 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 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.'' \5\ While a few comments discussed the reliability of 
the data used for the MedPAC report, we believe that the overall 
conclusions of the report are valid and continue to see the report's 
findings as a reason to promote transparency.
---------------------------------------------------------------------------

    \5\ All quotes from pages 315-316 of ``Public reporting of 
physicians' financial relationships'' at http://www.medpac.gov/chapters/Mar09_Ch05.pdf.
---------------------------------------------------------------------------

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 solicited comments on all assumptions and estimates in 
this regulatory impact analysis, including some assumptions and 
estimates that were presented in the Collection of Information 
Requirements section of the proposed rule. As is standard practice in

[[Page 9511]]

meeting these various requirements for regulatory analysis, this 
section of the final rule addresses all of them together.
    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 organizations or governmental 
jurisdictions with a population of less than 50,000. We did not receive 
any comments on these aspects of the RFA, so have finalized it as 
proposed. 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. According to the Small Business Administration 
size standards \6\ 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 final 
rule, we assume 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 
$80,000 in the first year (the sum of 0.25 FTEs of compliance officer 
at $48 hourly rate and 1 administrative support FTE at $26 hourly rate 
times 40 hours and 52 weeks) 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 
$80,000 would be less than 0.5 percent of the revenues. Firms this 
small would potentially face costs considerably less than $80,000, and 
hence an even lower effect.
---------------------------------------------------------------------------

    \6\ http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf.
---------------------------------------------------------------------------

    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 1 hour from the 
individual physicians and 5 hours for the supporting staff to perform 
the duty to maintain records and review the reports annually. For 
teaching hospitals, it is estimated that on average 40 hours of 
compliance officer and 80 hours of supporting staff would needed. 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.'' 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, as stated in the proposed rule, 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 604 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. In the 
proposed rule, we stated that we did not believe that any of the 
affected teaching hospitals are small rural hospitals, so did not 
believe that the rule had a significant impact on the operations of 
small rural hospitals. We did not receive any comments on this, so we 
have determined that this final 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 early 
2013, that threshold is approximately $139 million. The estimates 
presented in this section of this 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 final rule. Reporting under 
section 1128G of the Act is required by law, so we are limited as to 
policy options. Section IV.D. of this final 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 final 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 Sec.  
403.914 of this final 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 final rule. We estimate a total cost of about $269 
million for the first year of reporting, followed by about $180 million 
in the second year and annually thereafter.
1. Effects on Applicable Manufacturers and Applicable GPOs
    For applicable manufacturers, only those that made reportable 
payments or other transfers of value, or have physicians (or immediate 
family members of physicians) holding ownership and investment 
interests, will 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

[[Page 9512]]

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, whereas the number of device manufacturers is 
based on reporting in Massachusetts and Vermont, since Minnesota does 
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, so we increased the State 
reporting numbers by 50 percent. For device manufacturers, we also used 
data from the FDA to identify the total number of manufacturers to use 
as a ceiling for our estimate, combining the two data sources we 
increased the State reporting numbers by 75 percent. We believe that 
device manufacturers are often smaller and more region specific, which 
is why we increased the State estimates by a greater percentage. We did 
not receive comments on the number of reporting entities, except for 
information on the number of device manufacturers reporting in Vermont, 
where the legislature amended the transparency scheme in 2009 to 
include reporting by device manufacturers, so have finalized these 
assumptions.
    It is difficult to establish with precision the number of GPOs, as 
proposed, because the definition of GPO includes some 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.\7\. 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 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 did not receive comments on the number of GPOs, so have 
finalized these assumptions.
    In the public comments, we received comments on the estimated costs 
of the reporting requirements, but not the individual activities 
associated with them. Given these comments, we have revised the 
estimates, but have not revised the activities the FTEs will be 
required to perform, since we believe they accurately portray the 
requirements. 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 required in this 
final 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), 
train appropriate staff, 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 and re-attest to certain disputed 
information (if necessary). Finally, it also includes any time required 
to maintain records, as required. However, we believe that much of this 
information will be collected and stored already for financial reasons, 
so we do not anticipate a significant burden. It allows for time 
applicable manufacturers and applicable GPOs may sometimes use for 
``pre-submission'' 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 a downward adjustment to 
reflect the potential time savings that would accrue to applicable 
manufacturers who register with the CMS system and thus have the 
ability to query CMS, receive informal guidance through a listserv or 
other methods of providing technical assistance, and ultimately obtain 
useful information on low cost methods of compliance.
    Comment: Several commenters stated that the current cost estimation 
for applicable manufactures and applicable GPOs to comply with the 
reporting requirements are too low, and CMS should increase the FTE 
estimates.
    Response: We agree with the comment and have increased our 
estimates of the average FTE burden associated with the manufacturer 
and GPO reporting requirements. However, we believe that applicable 
manufacturers and applicable GPOs vary in their readiness to comply 
with the reporting requirements. Some companies have existing reporting 
systems in place, which can be used to comply with the government 
requirements. These systems track the wide range of financial 
interactions between the company, and physicians and teaching 
hospitals. Additionally, the efforts and workload varies with the size 
of the company as larger manufacturers will have more transactions, so 
may need more FTEs accordingly. As in the proposed rule, we estimated 
the impact based on all sizes of companies, recognizing that there are 
a few very large companies for which this would be a low estimate, but 
there are small companies which may need fewer FTEs. Additionally, we 
also took into account the finalized provisions that applicable 
manufacturers with less than 10 percent of gross revenues coming from 
covered products would only have to report payments or other transfers 
of value related to covered products, rather than all products. This 
will greatly reduce the reporting burden for these manufacturers, so we 
have considered them small companies for reporting purposes. Finally, 
we separated the FTE estimates to include a full time compliance 
officer, as well as multiple support staff for bookkeeping, accounting, 
and auditing; this change in approach yields a lower average cost per 
FTE than we estimated in the PRA.
    We estimate that, for year 1, on average, smaller applicable 
manufacturers will have to dedicate 25 percent of an FTE employee 
(mainly in the range of zero to 50 percent), whereas larger applicable 
manufacturers may have to dedicate 1 to 10 FTE employees to comply with 
the reporting requirements (we assume 2 FTEs on average). Furthermore, 
we estimated that reporting activities will be conducted by the 
managerial staff and supporting staffs, the compliance or similar level 
of staffs will oversee the reporting activities, which will largely be 
supported by staff involved with bookkeeping, accounting and auditing. 
Since there are many more small companies, we estimate that on average, 
0.5 FTEs of compliance officer and 2 FTEs of supporting staff would be 
needed for each applicable manufacturer in the first year (2 FTEs of

[[Page 9513]]

compliance officer and 8 FTEs of supporting staffs in 150 larger firms 
and 0.25 FTEs of compliance officer and 1 FTE of supporting staffs in 
1,000 smaller firms). We appreciate that this is considerable 
simplification of a far more complex distribution of firms, but we 
believe that it captures 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 dollars 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.
    Therefore, for applicable manufacturers, the revised cost 
estimation assumes a compliance officer (0.5 full-time equivalents 
(FTEs)) and 2 FTEs of bookkeeping, accounting and auditing staff 
support in the first year. In the second year and thereafter, we 
reduced the estimates, since we believe the system will be more 
automated. In year 2 and thereafter we assumed 0.375 FTEs (780 hours) 
of a compliance officer and 1.5 FTEs (3,120 hours) of bookkeeping, 
accounting, and auditing support. Compared with the estimates we 
provided in the proposed rule, the total first-year FTE increased from 
1.74 to 2.5 FTEs for applicable manufacturers. It should be noted that 
this is an average cost while the large manufacturers may need more and 
the small manufacturers may need less FTEs.
    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 0.375 
FTEs of compliance officer and 1.5 FTEs of support staff 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 essentially 
meet the proposed requirements or that could do so with minimal effort.
    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. 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 (208 hours) of compliance officer and 0.25 FTEs (520 hours) 
of support staff to reporting under this section for year 1, followed 
by 25-percent reductions in both the compliance officer's time and 
support staff's time for year 2 and annually thereafter. Compared with 
the estimates we provided in the proposed rule, the total first-year 
FTE estimates increased from 0.1 FTE (208 hours) to 0.35 (728 hours) 
for GPOs.
    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 the support 
staff and overseen by a compliance officer. According to the Bureau of 
Labor Statistics Occupational Employment Statistics, in May 2011, the 
average hourly rates for a compliance officer and bookkeeping, 
accounting and auditing staff in the pharmaceutical and medicine 
manufacturing field was $35.75 and $19.84, respectively. We applied a 
33 percent increase to this amount to account for fringe benefits, 
making the total hourly compensation $47.55 and $26.39, respectively. 
The total number of hours for applicable manufacturers (including the 
hours for compliance officers and support staff) during year 1 would be 
5,980,000 (1,150 applicable manufacturers x 100 hours (2.5 FTEs) x 52 
weeks). For year 2 and subsequent years, we estimate a total of 
4,485,000 hours (1,150 applicable manufacturers x 75 hours (1.875 FTEs) 
x 52 weeks). On average, this equals 4,983,333 hours annually for all 
applicable manufacturers for the first 3 years. The total number of 
hours for applicable GPOs (including the hours for compliance officers 
and support staff) for year 1 would be 305,760 (420 applicable GPOs x 
14 hours (0.35 FTE) x 52 weeks) and for year 2 would be 229,320 hours 
(420 applicable GPOs x 10.5 hours (0.2625 FTEs) 52 weeks). For the 
first 3 years in total, applicable GPOs will spend on average 254,800 
hours annually.
    The following tables provide our total cost estimates for 
applicable manufacturers and applicable GPOs to comply with the data 
collection requirements in section 1128G of the Act such as collecting 
information, responding to inquiries, developing reports, and 
submitting reports to CMS. In total, we estimate that for applicable 
manufacturers and applicable GPOs required to report, it will cost 
$193,037,104 for year 1 and will cost $144,777,828 for year 2 and 
annually thereafter. For the first 3 years, this averages to a cost of 
$160,864,253 annually. All estimates are in 2011 dollars.
    We note that Tables 1A and 1B contain revised estimated labor 
costs. The original cost estimates were included in the December 19, 
2011 proposed rule (76 FR 78742).

                                 Table 1A--Year 1 Estimated Labor Costs for Applicable Manufacturers and Applicable GPOs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Estimated      Estimated hours                      Average total
                                                                    reporting       per reporting      Hourly rate        cost per         Total cost
                                                                  organizations     organization                        organization
--------------------------------------------------------------------------------------------------------------------------------------------------------
Compliance officer in AM......................................             1,150             1,040               $48           $49,452       $56,869,800
Supporting staffs in AM.......................................             1,150             4,160                26           109,782       126,249,760
Compliance officer in Applicable GPOs.........................               420               208                48             9,890         4,153,968

[[Page 9514]]

 
Supporting staffs in Applicable GPOs..........................               420               520                26            13,723         5,763,576
                                                               -----------------------------------------------------------------------------------------
    Total.....................................................  ................  ................  ................  ................       193,037,104
--------------------------------------------------------------------------------------------------------------------------------------------------------


                       Table 1B--Year 2 and Subsequent Year Estimated Labor Costs for Applicable Manufacturers and Applicable GPOs
                                                                        [Annual]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Estimated      Estimated hours                      Average total
                                                                    reporting       per reporting      Hourly rate        cost per         Total cost
                                                                  organizations     organization                        organization
--------------------------------------------------------------------------------------------------------------------------------------------------------
Compliance officer in AM......................................             1,150               780               $48           $37,089       $42,652,350
Supporting staffs in AM.......................................             1,150             3,120                26            82,337        94,687,320
Compliance officer in Applicable GPOs.........................               420               156                48             7,418         3,115,476
Supporting staffs in Applicable GPOs..........................               420               390                26            10,292         4,322,682
                                                               -----------------------------------------------------------------------------------------
    Total.....................................................  ................  ................  ................  ................       144,777,828
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In addition to FTE costs, we also assume that there would be some 
infrastructure costs associated with the reporting requirements under 
section 1128G of the Act. We acknowledge a substantial amount of 
uncertainty in these estimates. For example, we do not know how many 
companies will be using existing systems and technology to comply with 
the requirements and how many will be obtaining new equipment and 
technology; in both cases, there will be opportunity costs of using the 
systems for the reporting required by this rule, but with new systems, 
there might be higher-set-up costs. We also envision that companies of 
varying size will have different infrastructure needs, so have selected 
an average amount based on CMS infrastructure estimates of the 
requirements. We estimate that in year 1 the infrastructure costs for 
applicable manufacturers will be $10,000. This represents an average of 
$4,000 for small companies (estimated to be 1000 companies) and $50,000 
for large companies (estimated to be 150 companies). We assume that the 
majority of these costs will be infrastructure costs, such as 
purchasing equipment and initial training, but assume that some costs 
will be required to maintain the systems. Therefore, we estimate that 
in year 2 and annually thereafter, applicable manufacturers will spend 
about $1,000 annually to maintain their systems. This represents 10 
percent of the original infrastructure, which we believe is reasonable 
given CMS's experience with system maintenance. We note that this only 
covers the system and equipment maintenance and not the staff time to 
comply with the reporting requirements.
    For applicable GPOs, we assume the infrastructure costs associated 
with the reporting requirements will be lower than that for applicable 
manufacturers. We assume that the applicable GPO costs will be roughly 
20 percent of those for applicable manufacturers. This is based on the 
fact that estimated FTE costs for applicable GPOs are roughly 20 
percent of that of applicable manufacturers. Therefore, we estimate 
that in year 1 the infrastructure costs for applicable GPOs will be 
$2,000. Similarly, we estimate that maintenance costs will be 10 
percent of the initial cost, so in year 2 and beyond the maintenance 
costs for applicable GPOs will be $200. Table 2A and 2B contain the 
estimated infrastructure costs for applicable manufacturers and 
applicable GOPs in year 1 and year 2 and thereafter, respectively. We 
further assume that the combined infrastructure and maintenance costs 
per burden hour will be the same for physicians and teaching hospitals 
as for GPOs.
    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 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 as we estimated earlier in this section to comply 
with the requirements in section 1128G of the Act. 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 any lessened burden for entities already reporting.
    Because applicable manufacturers have some influence in getting 
their products on a Part D plan formulary, obtaining billing codes, or 
getting Medicaid coverage, they have some control over whether 
Medicare, Medicaid and CHIP payments are available for their products. 
If applicable manufacturers were to stop accepting such payments so as 
to avoid reporting requirements, it would reduce the rule-induced cost 
that they bear themselves, but might negatively affect the well-being 
of Medicare, Medicaid and CHIP patients who no longer have coverage for 
a full range of medical products. However, because these public 
programs represent a very large patient population, we do not 
anticipate that applicable manufacturers will refrain from 
participating in the programs just to avoid reporting requirements.

[[Page 9515]]



        Table 2A--Year 1 Estimated Infrastructure Costs for Applicable Manufacturers and Applicable GPOs
----------------------------------------------------------------------------------------------------------------
                                                              Organizations      Annual cost       Total cost
----------------------------------------------------------------------------------------------------------------
Large Applicable Manufacturers............................               150           $50,000        $7,500,000
Small Applicable Manufacturers............................              1000             4,000         4,000,000
Applicable GPOs...........................................               420             2,000           840,000
                                                           -----------------------------------------------------
    Total.................................................  ................  ................        12,340,000
----------------------------------------------------------------------------------------------------------------


 Table 2B--Year 2 and Subsequent Year Estimated Infrastructure Costs for Applicable Manufacturers and Applicable
                                                      GPOs
                                                    [Annual]
----------------------------------------------------------------------------------------------------------------
                                                              Organizations      Annual cost       Total cost
----------------------------------------------------------------------------------------------------------------
Large Applicable Manufacturers............................               150            $5,000          $750,000
Small Applicable Manufacturers............................              1000               400           400,000
Applicable GPOs...........................................               420               200            84,000
                                                           -----------------------------------------------------
    Total.................................................  ................  ................         1,234,000
----------------------------------------------------------------------------------------------------------------

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. The statute uses the definition 
of physician in section 1861(r) of the Act, which includes doctors of 
medicine and osteopathy, dentists, dental surgeons, 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 897,700 physicians. However, we believe 
that not all physicians will have relationships with applicable 
manufacturers or applicable GPOs. In the proposed rule, we assumed that 
roughly 75 percent of physicians would have relationships. However, 
based on feedback we received from stakeholders, including a private 
firm with data of roughly 50 companies currently reporting, we now 
estimate that less than 50 percent of the physicians have transactions 
with industry. We assume that 50 percent of physicians have no 
relationships with applicable manufacturers or applicable GPOs, which 
reduces our universe of affected physicians to approximately 448,850. 
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 448,850 physicians will review the report, which reduces our 
universe of affected physicians to 224,425 for year 1. For year 2, we 
anticipate that there would be a further reduction in the number of 
physicians choosing to review the data because they would be familiar 
with the type of information on the database, so we reduced the number 
of physicians reviewing by another 25 percent, to 168,319 physicians. 
We also reduced the amount of time it would take the physicians 
choosing to review the information, since we believe they will be 
familiar with the review, correction and dispute process. 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.
    See the Table 3 for a breakdown of this calculation. In the 
proposed rule, we mistakenly omitted dental surgeons from the table, so 
have added estimates for them in the final rule. The definition of 
physician at section 1861(r) of the Act explicitly includes them.

                  Table 3--Number of Physicians by Type
------------------------------------------------------------------------
                     Physician type                           Number
------------------------------------------------------------------------
Doctor of Medicine/Doctor of Osteopathy.................         660,000
Doctor of Dental Medicine...............................         155,700
Doctor of Podiatric Medicine............................          12,000
Doctor of Optometry.....................................          35,000
Licensed Chiropractors..................................        * 35,000
                                                         ---------------
    Total...............................................         897,700
------------------------------------------------------------------------
Adjustment for Physicians with no reports (only 50% had          448,850
 transaction with industry).............................
Adjustment for Physicians who do not review reports              224,425
 (Year 1--reduction by 50%).............................
Adjustment for Physicians who do not review reports              168,319
 (Year 2--reduction by 25%).............................
------------------------------------------------------------------------
* Reduced from 50,000 in BLS to account for licensure.


[[Page 9516]]

    We received numerous comments on the cost estimations for 
physicians and teaching hospitals, and have responded to them and 
revised our cost estimates accordingly.
    Comment: Several commenters questioned the time and cost estimation 
for physicians. Specifically, the commenters stated that the time 
allotted for the physicians to review the data is too short, since 
physicians will need to maintain records in order to review the 
information submitted on their behalf accurately. Similarly, several 
commenters noted that the current hourly rate for the physician ($75) 
is low.
    Response: We agree with commenters that the physicians and teaching 
hospitals may need to maintain ongoing records of the activities for 
verification purposes, so have increased the time dedicated to the 
physician and teaching hospital review. However, we assume that most of 
these recordkeeping activities will fall on the duty of the office 
assistants, but the physician may need to review the records. The hours 
of bookkeeping are added in the revised cost estimation for physician 
and teaching hospital accordingly. Additionally, we agree that the 
physician hourly rate should be increased. The hourly rate for 
physicians in the final rule is updated to $137 per hour, which is 
based on the most recent data from Bureau of Labor Statistics (BLS).
    Comment: A few commenters questioned CMS's cost estimate of 10 
hours of compliance officer in teaching hospitals, which state that 
teaching hospitals will need more time to review the transactions and 
maintain records to facilitate the review.
    Response: We agree with commenters that teaching hospitals will 
likely need more time for their review. The hospital compliance 
officer's annual hours have been increased from 10 hours to 40 hours. 
In addition, we revised the cost estimation to include 80 hours of 
administrative supporting staff at teaching hospitals to maintain the 
records. The role of the compliance officer will be review and 
oversight, while the administrative supporting staff will conduct the 
recordkeeping.
    In response to the comments, even though there is no requirement 
for physician and teaching hospitals to review the reports or maintain 
records of interaction, we estimated the covered recipients may 
maintain records to facilitate reviews. In the final rule, we estimated 
the supporting staffs such as bookkeeping, accounting, and auditing 
would perform the tasks while the compliance officer would oversee the 
review process.
    When reviewing the information reported, physicians and teaching 
hospitals are allowed to review the information attributed to them by 
applicable manufacturers and applicable GPOs that submitted data to 
CMS. A number of commenters suggested that physicians and teaching 
hospitals would spend some time during the year maintaining records to 
facilitate their review. In response to this feedback, we added 
estimates for recordkeeping for physicians and teaching hospitals and 
assumed that support staff would perform these functions. We estimate 
that on average, physicians would need 1 hour annually 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. In addition, we also estimated 5 hours annually of supporting 
staff for each physician to help them to maintain records to facilitate 
the review. We believe that teaching hospitals will 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, such as a compliance officer, from a teaching hospital 
40 hours annually to review the submitted data, ranging from 10 hours 
for small teaching hospitals that receive few payments or other 
transfer of value, to 200 hours for teaching hospitals that have 
lengthy disputes. In addition, we also estimated 80 hours annually of 
administrative support staff for each teaching hospital to help them 
maintain their records.
    The Bureau of Labor Statistics Occupational Employment Statistics 
publishes data on hourly compensation for Healthcare Practitioners and 
Technical Occupations in physicians' offices. The average hourly rate 
for physicians and surgeons is $103.32,\8\ which rises to $137 with 33-
percent fringe benefits. This average includes physicians, who account 
for about half of the employment in this category. In the proposed 
rule, we used an estimate for the hourly wage that included other 
provider types, but having received numerous comments that the 
resulting wage was too low, we increased the estimate for this final 
RIA. The average hourly rate for the supporting staff is $16.35 which 
rises to $21.75 with 33 percent fringe benefits. The total number of 
hours for physicians (including supporting staffs in physician offices) 
would be 1,346,550 (224,425 x 6 hours) for year 1 and 757,436 hours 
(168,319 x 4.5 hours) for year 2, which averages to 953,807 hours 
annually for the first 3 years. The total estimated cost for the review 
and correction period for physicians and the supporting staffs in year 
1 is $55,152,444. For year 2 and annually thereafter, the estimated 
cost for physician and supporting staffs to conduct review and 
correction is $31,023,250. For the first 3 years, the average cost for 
all physicians review and correction will be $39,066,314 annually.
---------------------------------------------------------------------------

    \8\ http://www.bls.gov/oes/current/naics4_621100.htm.
---------------------------------------------------------------------------

    For teaching hospitals, as explained, we expect a compliance 
officer to review the payments and other transfers of value with 
supporting staff to maintain any necessary records. 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 compliance officer in 
hospitals is $32.94 or $43.81 when fringe benefit costs are applied. 
The average hourly rate for the supporting staff in a teaching hospital 
is $16.22 which rises to $21.57 with 33 percent fringe benefits. For 
year 1, the total number of hours would be 132,000 (1,100 x 120 hours). 
For year 2 this would decrease to 99,000 hours (1,100 x 90 hours). For 
the first 3 years, the average number of hours for teaching hospitals 
will be 110,000 annually. The total estimated cost for the review and 
correction period for teaching hospitals is $3,825,800 for year 1 and 
$2,869,350 for year 2 and annually thereafter. On average, the cost for 
all teaching hospitals will be $3,188,167 annually for the first 3 
years.
    We note that Tables 4A and 4B contain revised cost estimates. The 
original cost estimates were included in the proposed rule (76 FR 
78742).

[[Page 9517]]



                                         Table 4A--Year 1 Estimated Costs for Physicians and Teaching Hospitals
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Estimated number
                                                                   of entities     Estimated hours     Hourly rate      Average total      Total cost
                                                                    reviewing        for review                        cost per entity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Physicians....................................................           224,425              1.00              $137              $137       $30,746,225
Physicians Support staffs.....................................           224,425              5.00                22               109        24,406,219
Compliance officer, Teaching Hospitals........................             1,100             40.00                44             1,752         1,927,640
Administrative supporting staffs in teaching Hospitals........             1,100             80.00                22             1,726         1,898,160
                                                               -----------------------------------------------------------------------------------------
    Total.....................................................  ................  ................  ................  ................        58,978,244
--------------------------------------------------------------------------------------------------------------------------------------------------------


                               Table 4B--Year 2 and Subsequent Year Estimated Costs for Physicians and Teaching Hospitals
                                                                        [Annual]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Estimated number
                                                                   of entities     Estimated hours     Hourly rate      Average total      Total cost
                                                                    reviewing        for review                        cost per entity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Physicians....................................................           168,319              0.75              $137              $103       $17,294,751
Physicians Support staffs.....................................           168,319              3.75                22                82        13,728,498
Compliance officer, Teaching Hospitals........................             1,100             30.00                44             1,314         1,445,730
Administrative supporting staffs in teaching Hospitals........             1,100             60.00                22             1,294         1,423,620
                                                               -----------------------------------------------------------------------------------------
    Total.....................................................  ................  ................  ................  ................        33,892,600
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For purposes of analysis, we also include estimates of the 
infrastructure costs for physicians and teaching hospitals, which may 
need to purchase and maintain equipment for internal tracking purposes. 
We assume that the combined infrastructure and maintenance costs for 
teaching hospitals will be the same as those for GPOs. For physicians, 
we assume a total cost of $2 million in the first year, and 10 percent 
thereafter.

              Table 5A--Year 1 Estimated Infrastructure Costs for Physicians and Teaching Hospitals
----------------------------------------------------------------------------------------------------------------
                                                                 Number          Annual cost       Total cost
----------------------------------------------------------------------------------------------------------------
Physicians................................................           224,425  ................        $2,000,000
Teaching Hospitals........................................             1,100             2,000         2,200,000
                                                           -----------------------------------------------------
    Total.................................................  ................  ................         4,200,000
----------------------------------------------------------------------------------------------------------------


    Table 5B--Year 2 and Subsequent Year Estimated Infrastructure Costs for Physicians and Teaching Hospitals
----------------------------------------------------------------------------------------------------------------
                                                                 Number          Annual cost       Total cost
----------------------------------------------------------------------------------------------------------------
Physicians................................................           168,319  ................          $200,000
Teaching Hospitals........................................             1,100              $200           220,000
                                                           -----------------------------------------------------
    Total.................................................  ................  ................           420,000
----------------------------------------------------------------------------------------------------------------

3. Effects of Third Parties
    We also received some comments on including estimates for entities 
that were not included in the proposed rule. We have provided the 
comment, as well as our response.
    Comment: Many commenters suggested that the costs of recordkeeping 
for third parties, such as contract research organizations or 
professional associations that receive indirect payments or other 
transfers of value, should be included in the cost estimation.
    Response: In the final rule, we have clarified the requirements for 
third parties which received payments at the request of, or on behalf 
of, covered recipients (Sec.  403.904(c)(10)), as well as the 
requirements for third parties which receive and make indirect payments 
to covered recipients (Sec.  403.904(i)(1)). We believe these revisions 
will help clarify and minimize any reporting requirements that third 
parties viewed as burdensome to them, but we maintain that the 
requirements in section 1128G of the Act do not impose significant 
burden on third parties, since they are neither required to report nor 
review. However, we recognize that some business models may require 
third parties to report recipients of payments back to applicable 
manufacturers, so we have included in the final rule estimates on the 
burden for third parties. We estimate that 58 third parties will incur 
costs under this final rule. We assume that there will be significantly 
fewer third parties than applicable manufacturers affected by these 
provisions, so we reduced the number of applicable manufacturers by 95 
percent to obtain the number of third

[[Page 9518]]

parties as 5 percent the number of applicable manufacturers. Given the 
range of entities that could be third parties, we believe it is 
difficult to estimate the hourly rate for these entities. We assume 
that the role will be similar to that of compliance officers in 
applicable manufacturers and applicable GPOs, since it may require them 
to track similar relationships. Therefore, we estimate the hourly rate 
for third parties will be $47.55 ($35.75, plus a 33 percent increase 
for fringe benefits), which is the same hourly rate described in 
section IV.C.1. the final rule for a compliance officer at an 
applicable manufacturer or applicable GPO. As described, we do not 
believe these requirements set significant burden on third parties, 
since they are neither required to report nor review. We estimate that 
third parties may need to spend 40 hours in year 1 on tasks that are 
associated with the reporting requirements. Similarly to other 
estimates, we decreased this estimate by 25 percent in year 2 (for a 
total of 30 hours) to account for increased familiarity with the 
systems. In total, third parties will dedicate 2,320 hours in year 1 
and 1,740 hours in year 2 with a total cost of $110,316 in year 1 and 
$82,737 in year 2.
    In summary, the first year and subsequent year annual costs are 
presented in the following tables.

                                     Table 6A--Total Year 1 Estimated Costs
----------------------------------------------------------------------------------------------------------------
                                                                               Infrastructure
                                                            Labor costs  ($)     costs  ($)      Total cost  ($)
----------------------------------------------------------------------------------------------------------------
Applicable Manufacturers..................................       183,119,560        11,500,000       194,619,560
Applicable GPOs...........................................         9,917,544           840,000        10,757,544
Third-Parties.............................................           110,316  ................           110,316
Physicians................................................        55,152,444         2,000,000        57,152,444
Teaching Hospitals........................................         3,825,800         2,200,000         6,025,800
                                                           -----------------------------------------------------
    Total.................................................       252,125,664        16,540,000       268,665,664
----------------------------------------------------------------------------------------------------------------


                               Table 6B--Total Costs, Year 2, and Subsequent Years
                                                    [Annual]
----------------------------------------------------------------------------------------------------------------
                                                                               Infrastructure
                                                            Labor costs  ($)     costs  ($)      Total cost  ($)
----------------------------------------------------------------------------------------------------------------
Applicable Manufacturers..................................       137,339,670         1,150,000       138,489,670
Applicable GPOs...........................................         7,438,158            84,000         7,522,158
Third-Party Recordkeeping.................................            82,737  ................            82,737
Physicians................................................        31,023,250           200,000        31,223,250
Teaching Hospitals........................................         2,869,350           220,000         3,089,350
                                                           -----------------------------------------------------
    Total.................................................       178,753,165         1,654,000       180,407,165
----------------------------------------------------------------------------------------------------------------

4. Effects on the Medicare, Medicaid, and CHIP
    Although the Department proposes to administer this program through 
the CMS, the final rule would have no direct effects on the Medicare, 
Medicaid, and CHIP. Reporting is required for 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. We will incur some costs in administering the 
program. However, as required by statute, we will be able to use any 
funds collected from the CMPs assessed under this rule to support the 
program, decreasing the agency funding required.
5. Benefits
    We outlined numerous benefits in the proposed rule and received 
numerous comments supporting these benefits. We appreciate these 
comments. 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.
    Both the Institute of Medicine and other experts, such as MedPAC, 
have noted the recent increases in both the amount and scope of 
industry involvement in medical research, education, and clinical 
practice has led to considerable scrutiny and 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

[[Page 9519]]

discourage inappropriate conflicts of interest.\9\
---------------------------------------------------------------------------

    \9\ Information on the IOM recommendations may be found here: 
http://www.iom.edu/Reports/2009/Conflict-of-Interest-in-Medical-Research-Education-and-Practice.aspx.
---------------------------------------------------------------------------

    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. 
Although a few States do have similar reporting requirements, 
determining the benefits based on their experiences is difficult. 
Transparency does not identify which relationships are conflicts of 
interests or whether public reporting dissuaded a relationship from 
forming, making it difficult to assess the benefits of public 
reporting. We plan to continue considering methods to use the data 
collected to identify any changes in these relationships as a result of 
public reporting. However, we observe, that the costs 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 to comply 
with a single set of reporting requirements for this information, 
lessening the potential for multiple, conflicting State requirements. 
This benefit may also lead to potential cost-savings, since a single 
reporting system for reporting this information is less burdensome than 
multiple programs.

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 statutorily 
permissible option for obtaining this transparency and achieving the 
intentions of this provision. In developing this final 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 and in response to public comment.
    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 note the following:
     We did not require the submission of an assumptions 
document for nature of payment categories, but allow applicable 
manufacturers and applicable GPOs to submit this voluntarily.
     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 based on the comments that this would be 
burdensome, we did not finalize it. In order to reduce the burden 
further, we could have not added any additional reporting categories 
(such as requiring State professional license number or NDC (if any)); 
however, we believe that all the additional reporting elements are 
necessary for the successful administration of the program and have 
tried to provide sufficient explanation of each decision.
     We limited the definition of covered drug, device, 
biological, and medical supply to reduce the number of entities meeting 
the definition of applicable manufacturer and applicable GPO. We 
proposed limiting covered drugs and biologicals to those that require a 
prescription to be dispensed and limiting covered devices (including 
medical supplies that are devices) to those that require premarket 
approval by or notification to the FDA. The comments strongly supported 
these limitations, so we have finalized them in the final rule.
     In the proposed rule, we defined ``common ownership'' as 
covering any ownership portion of two or more entities, but are 
finalizing 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. Additionally, we provided further 
guidance on the phrase ``assistance and support'' in order to limit the 
number of entities under common ownership reporting. We could have 
employed a higher threshold of common ownership to further lower the 
burden; however, as explained in section II.B.1.a.(3). of this final 
rule, we believe that 5 percent is a standard threshold.
     In the proposed rule, we considered 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 the 
approach could also cause confusion if the additional information is 
not captured in a consistent manner. We received numerous comments on 
this provision and finalized the reporting of State professional 
license number for all physician covered recipients. The comments and 
rationale for this decision is discussed in section II.B.1.d.(1) of the 
preamble to this final rule.
     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. 
Therefore, we 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 received numerous comments on this 
proposal and finalized the definition as proposed (see section 
II.B.2.a.(2). of the preamble of this final rule).
     We also finalized limitations that will reduce the 
reporting requirements for applicable manufacturers that only 
manufacture a few covered products. Applicable manufacturers with less 
than 10 percent of revenues from covered products do not need to report 
all payments or other transfers of value as proposed. This will greatly 
reduce the

[[Page 9520]]

burden of reporting for these entities, allowing them greater 
flexibility. We could have lowered the burden by including additional 
limitations to reporting by certain applicable manufacturers, but 
believe that the statute did not provide much flexibility to do so.
     We have finalized, 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. In response to the comments, 
we have considered the best methods to administer this review, as well 
as any dispute resolution processes. We have finalized a dispute 
resolution system which will allow covered recipients and physician 
owners or investors to more easily review the information submitted on 
their behalf and a more streamline process to initiate disputes, as 
necessary.
    Finally, it is important to evaluate and monitor if the changes 
reflected in this rule achieve the goal of improving transparency and 
accountability between health care providers and drug manufacturers. We 
will evaluate over time, and encourage others to evaluate, the effects 
of this rule on Medicaid enrollment, on Federal, State, and enrollee 
costs, and on health outcomes.

E. Accounting Statement

    The Office of Management and Budget, in Circular A-4, requires an 
accounting Statement for rules with significant economic impacts. The 
table that follows shows the estimated costs annualized over a 10-year 
period. The estimated costs are $269 million in year 1 and $180 million 
in year 2. We assume that future outlay costs may be similar to those 
costs experienced in year 2. 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.

                                          Table 7--Accounting Statement
----------------------------------------------------------------------------------------------------------------
                                                                                Discount rate
                Category                  Primary estimate    Year dollars        (percent)      Period covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Costs..............              $192              2011                 7         2013-2022
                                                       190              2011                 3         2013-2022
                                         -----------------------------------------------------------------------
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 
$269 million for the first year of reporting, and $180 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 solicited comment on the analysis and assumptions 
provided throughout this preamble and in the alternatives section of 
the regulatory impact analysis in particular.
    Many of the comments received discuss our assumptions for the costs 
of collecting this information. Because this rule involves the 
collection of data, the vast majority of the financial impact is 
included in the collection of information requirements. Therefore 
earlier in the preamble of this final rule, we summarize and respond to 
the comments regarding our cost assumptions.
    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 amends 42 CFR chapter IV as set forth below:

PART 402--CIVIL MONEY PENALTIES, ASSESSMENTS, AND EXCLUSIONS

Subpart A--General Provisions

0
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).

0
2. Section 402.1 is amended as follows:
0
A. In paragraph (c) introductory text, by removing the reference 
``(c)(33)'' and adding the reference ``(c)(34)'' in its place.
0
B. Adding a new paragraph (c)(34).
    The addition reads as follows:


Sec.  402.1  Basis and scope.

* * * * *
    (c) * * *
    (34) Section 1128G (b) (1) and (2)- Any applicable manufacturer or 
applicable group purchasing organization that fails to timely, 
accurately, or completely report a payment or other transfer of value 
or an ownership or investment interest to CMS, as required under part 
403, subpart I, of this chapter.
* * * * *

0
3. Section 402.105 is amended as follows:
0
A. In paragraph (a), by removing the reference to ``paragraphs (b) 
through (g)'' and adding the reference ``paragraphs (b) through (h)'' 
in its place.
0
B. Adding paragraphs (d)(5) and (h).
    The additions read as follows:


Sec.  402.105  Amount of penalty.

* * * * *

[[Page 9521]]

    (d) * * *
    (5) CMS or OIG may impose a penalty of not more than $10,000 for 
each failure of an applicable manufacturer or an applicable group 
purchasing organization to report timely, accurately, or completely a 
payment or other transfer of value or an ownership or investment 
interest (Sec.  402.1(c)(34)). The total penalty imposed with respect 
to failures to report in an annual 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 or an 
applicable group purchasing organization to report timely, accurately 
or completely a payment or other transfer of value or an ownership or 
investment interest (Sec.  402.1(c)(34)). The total penalty imposed 
with respect to knowing failures to report in an annual submission of 
information will not exceed $1,000,000.

PART 403--SPECIAL PROGRAMS AND PROJECTS

0
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).

0
5. A new 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


Sec.  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 provided to covered recipients, 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 in such entities.


Sec.  403.902  Definitions.

    For purposes of this subpart, the following definitions apply:
    Applicable group purchasing organization means an entity that:
    (1) Operates in 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, but not solely for use by the entity itself.
    Applicable manufacturer means an entity that is operating in the 
United States and that falls within one of the following categories:
    (1) An entity that is engaged in the production, preparation, 
propagation, compounding, or conversion of a covered drug, device, 
biological, or medical supply, but not if such covered drug, device, 
biological or medical supply is solely for use by or within the entity 
itself or by the entity's own patients. This definition does not 
include distributors or wholesalers (including, but not limited to, 
repackagers, relabelers, and kit assemblers) that do not hold title to 
any covered drug, device, biological or medical supply.
    (2) An entity 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.
    Assistance and support means providing a service or services that 
are necessary or integral to the production, preparation, propagation, 
compounding, conversion, marketing, promotion, sale, or distribution of 
a covered drug, device, biological or medical supply.
    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, which is not provided 
in exchange for any goods, items or services.
    Charity care means services provided by a covered recipient 
specifically for a patient who is unable to pay for such services or 
for whom payment would be a significant hardship, where the covered 
recipient neither receives, nor expects to receive, payment because of 
the patient's inability to pay.
    Clinical investigation means any experiment involving one or more 
human subjects, or materials derived from human subjects, in which a 
drug, device, biological or medical supply is administered, dispensed 
or used.
    Common ownership refers to circumstances where the same individual, 
individuals, entity, or entities directly or indirectly own 5 percent 
or more total ownership of two entities. 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 (such as 
through a fee schedule) or as part of a bundled payment (for example, 
under the hospital inpatient prospective payment system or the hospital 
outpatient prospective payment system) and which is of the type that, 
by law, requires premarket approval by or premarket notification to the 
Food and Drug Administration (FDA).
    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 (such as 
through a fee schedule or formulary) or as part of a bundled payment 
(for example, under the hospital inpatient prospective payment system 
or the hospital outpatient prospective payment system) and which is of 
the type that in the case of a--
    (1) Drug or biological, by law, requires a prescription to be 
dispensed; or
    (2) Device (including a medical supply that is a device), by law, 
requires premarket approval by or premarket notification to the FDA.
    Covered recipient means-- (1) Any physician, except for a physician 
who is a bona fide employee of the applicable manufacturer that is 
reporting the payment; 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

[[Page 9522]]

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.
    Indirect payments or other transfers of value refer to payments or 
other transfers of value made by an applicable manufacturer (or an 
applicable group purchasing organization) to a covered recipient (or a 
physician owner or investor) through a third party, where the 
applicable manufacturer (or applicable group purchasing organization) 
requires, instructs, directs, or otherwise causes the third party to 
provide the payment or transfer of value, in whole or in part, to a 
covered recipient(s) (or a physician owner or investor).
    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
    (2) Requires no proof of a specific intent to defraud.
    NPPES stands for the National Plan & Provider Enumeration System.
    Operating in the United States means that an entity--
    (1) Has a physical location within the United States or in a 
territory, possession, or commonwealth of the United States; or
    (2) Otherwise conducts activities within the United States or in a 
territory, possession, or commonwealth of the United States, either 
directly or through a legally-authorized agent.
    Ownership or investment interest--(1) Includes, but is not limited 
to the following:
    (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.
    (3) Exceptions. The following are not ownership or investment 
interests for the purposes of this section:
    (i) An ownership or investment interest in a publicly traded 
security or mutual fund, as described in section 1877(c) of the Act.
    (ii) 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.
    (iii) Stock options and convertible securities received as 
compensation, until the stock options are exercised or the convertible 
securities are converted to equity.
    (iv) An unsecured loan subordinated to a credit facility.
    (v) An ownership or investment interest if an applicable 
manufacturer or applicable group purchasing organization did not know, 
as defined in this section, about such ownership or investment 
interest.
    Payment or other transfer of value means a transfer of anything of 
value.
    Physician has the same meaning given that term in section 1861(r) 
of the Act.
    Related to a covered drug, device, biological, or medical supply 
means that a payment or other transfer of value is made in reference to 
or in connection with one or more covered drugs, devices, biologicals, 
or medical supplies.
    Research includes a systematic investigation designed to develop or 
contribute to generalizable knowledge relating broadly to public 
health, including behavioral and social-sciences research. This term 
encompasses basic and applied research and product development.
    Third party means another individual or entity, regardless of 
whether such individual or entity is operating in the United States.


Sec.  403.904  Reports of payments or other transfers of value to 
covered recipients.

    (a) General rule. (1) Direct and indirect payments or other 
transfers of value provided by an applicable manufacturer to a covered 
recipient during the preceding calendar year, and direct and indirect 
payments or other transfers of value provided to a third party at the 
request of or designated by the applicable manufacturer on behalf of a 
covered recipient during the preceding calendar year, must be reported 
by the applicable manufacturer to CMS on an annual basis.
    (2) For CY 2013, only payments or other transfers of value made on 
or after August 1, 2013 must be reported to CMS.
    (b) Limitations. Certain limitations on reporting apply in the 
following circumstances:
    (1) Applicable manufacturers for whom total (gross) revenues from 
covered drugs, devices, biologicals, or medical supplies constituted 
less than 10 percent of total (gross) revenue during the fiscal year 
preceding the reporting year are only required to report payments or 
other transfers of value that are related to one or more covered drugs, 
devices, biologicals or medical supplies.
    (2) Applicable manufacturers under paragraph (2) of the definition 
in Sec.  403.902 are only required to report payments or other 
transfers of value that are related to a covered drug, device, 
biological, or medical supply for which they provided assistance or 
support to an applicable manufacturer under paragraph (1) of the 
definition.
    (3) Applicable manufacturers under either paragraph (1) or (2) of 
the definition in Sec.  403.902 that have separate operating divisions 
that do not manufacture any covered drugs, devices, biologicals, or 
medical supplies (for example, animal health divisions) are only 
required to report payments to covered recipients related to the 
activities of these separate divisions if those payments or other 
transfers of value are related to a covered drug, device, biological, 
or medical supply. This includes reporting of payments or other 
transfers of value that are related to covered drugs, devices, 
biologicals, or medical supplies made by applicable manufacturers to 
covered recipients through these operating divisions.
    (4) Applicable manufacturers that do not manufacture a covered 
drug, device, biological, or medical supply except when under a written 
agreement to manufacture the covered drug, device, biological, or 
medical supply for another entity, do not hold the FDA approval, 
licensure, or clearance for the covered drug, device, biological, or 
medical supply, and are not involved in the sale, marketing, or 
distribution of the product, are only required to report payments or 
other transfers of value that are related to one or more covered drugs, 
devices, biologicals, or medical supplies.
    (c) Required information to report. A report must contain all of 
the following information for each payment or other transfer of value:

[[Page 9523]]

    (1) Name of the covered recipient. For physician covered 
recipients, the name must be as listed in the National Plan & Provider 
Enumeration System (if applicable) and include first and last name, 
middle initial, and suffix (for all that apply).
    (2) Address of the covered recipient. Primary business address of 
the covered recipient, including all the following:
    (i) Street address.
    (ii) Suite or office number (if applicable).
    (iii) City.
    (iv) State.
    (v) ZIP code.
    (3) Identifiers for physician covered recipients. In the case of a 
covered recipient who is a physician, the following identifiers:
    (i) The specialty.
    (ii) National Provider Identifier (if applicable and as listed in 
the NPPES). If a National Provider Identifier cannot be identified for 
a physician, the field may be left blank, indicating that the 
applicable manufacturer could not find one.
    (iii) State professional license number(s) (for at least one State 
where the physician maintains a license), and the State(s) in which the 
license is held.
    (4) Amount of payment or other transfer of value. A payment or 
other transfer of value made to a group of covered recipients should be 
distributed appropriately among the individual covered recipients who 
requested the payment, on whose behalf the payment was made, or who are 
intended to benefit from the payment or other transfer of value.
    (5) Date of payment or transfer of value. The date of each payment 
or other transfer of value.
    (i) For payments or other transfers of value made over multiple 
dates (rather than as a lump sum), applicable manufacturers may choose 
whether to report each payment or other transfer of value as separate 
line item using the dates the payments or other transfers of value were 
each made, or as a single line item for the total payment or other 
transfer of value using the first payment date as the reported date.
    (ii) For small payments or other transfers of value reported as a 
single line item, applicable manufacturers must report the date that 
the first bundled small payment or other transfer of value was provided 
to the covered recipient.
    (6) Form of payment or transfer of value. The form of each payment 
or other transfer of value, as described in paragraph (d) of this 
section.
    (7) Nature of payment or transfer of value. The nature of each 
payment or other transfer of value, as described in paragraph (e) of 
this section.
    (8) Related covered drug, device, biological or medical supply. The 
name(s) of the related covered drugs, devices, biologicals, or medical 
supplies, unless the payment or other transfer of value is not related 
to a particular covered drug, device, biological or medical supply. 
Applicable manufacturers may report up to five covered drugs, devices, 
biologicals or medical supplies related to each payment or other 
transfer of value. If the payment or other transfer of value was 
related to more than five covered drugs, devices, biologicals, or 
medical supplies, the applicable manufacturer should report the five 
covered drugs, devices, biologicals, or medical supplies that were most 
closely related to the payment or other transfer of value.
    (i) For drugs and biologicals, applicable manufacturers must report 
the name under which the drug or biological is or was marketed and the 
relevant National Drug Code(s), if any. If the marketed name has not 
yet been selected, the applicable manufacturer must indicate the name 
registered on clinicaltrials.gov.
    (ii) For devices and medical supplies, applicable manufacturers 
must report at least one of the following:
    (A) The name under which the device or medical supply is or was 
marketed.
    (B) The therapeutic area or product category for the device or 
medical supply.
    (iii) If the payment or other transfer of value is not related to a 
covered drug, device, biological or medical supply, but is related to a 
specific non-covered product, applicable manufacturers must indicate 
``non-covered product.''
    (iv) If the payment or other transfer of value is not related to 
any drug, device, biological, or medical supply (covered or not), 
applicable manufacturers must indicate ``none.''
    (v) If the payment or other transfer of value is related to at 
least one covered drug, device, biological, and medical supply and at 
least one non-covered drug, device, biological, or medical supply, 
applicable manufacturers must report the name(s) of the covered drug, 
device, biological or medical supply (as required by paragraphs 
(c)(8)(i) and (ii) of this section) and may indicate ``non-covered 
products'' in addition.
    (9) Eligibility for delayed publication. Applicable manufacturers 
must indicate whether a payment or other transfer of value is eligible 
for delayed publication, as described in Sec.  403.910.
    (10) Payments to third parties. (i) If the payment or other 
transfer of value was provided to a third party at the request of or 
designated on behalf of a covered recipient, the payment or transfer of 
value must be reported in the name of that covered recipient.
    (ii) If the payment or other transfer of value was provided to a 
third party at the request of or designated on behalf of a covered 
recipient, the name of the entity that received the payment or other 
transfer of value (if made to an entity) or indicate ``individual'' (if 
made to an individual). If a covered recipient performed a service, but 
neither accepted the offered payment or other transfer of value nor 
requested that it be made to a third party, the applicable manufacturer 
is not required to report the offered payment or other transfer of 
value unless the applicable manufacturer nonetheless provided it to a 
third party and designated such payment or other transfer of value as 
having been provided on behalf of the covered recipient.
    (11) Payments or transfers of value to physician owners or 
investors. Must indicate whether the payment or other transfer of value 
was provided to a physician or the immediate family of the physician 
who holds an ownership or investment interest (as defined Sec.  
403.902) in the applicable manufacturer.
    (12) Additional information or context for payment or transfer of 
value. May provide a statement with additional context for the payment 
or other transfer of value.
    (d) 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 of payment that best describes the form of the 
payment or other transfer of value, or separable part of that payment 
or other transfer of value.
    (1) Cash or cash equivalent.
    (2) In-kind items or services.
    (3) Stock, stock option, or any other ownership interest.
    (4) Dividend, profit or other return on investment.
    (e) 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 for the purposes of 
reporting under subpart I of this part.
    (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, with one of the 
categories listed in paragraphs (e)(2)(i) through (xvii) of this

[[Page 9524]]

section, 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.
    (i) Consulting fee.
    (ii) Compensation for services other than consulting, including 
serving as faculty or as a speaker at an event other than a continuing 
education program.
    (iii) Honoraria.
    (iv) Gift.
    (v) Entertainment.
    (vi) Food and beverage.
    (vii) Travel and lodging (including the specified destinations).
    (viii) Education.
    (ix) Research.
    (x) Charitable contribution.
    (xii) Royalty or license.
    (xiii) Current or prospective ownership or investment interest.
    (xiv) Compensation for serving as faculty or as a speaker for an 
unaccredited and non-certified continuing education program.
    (xv) Compensation for serving as faculty or as a speaker for an 
accredited or certified continuing education program.
    (xvi) Grant.
    (xvii) Space rental or facility fees (teaching hospital only).
    (f) Special rules for research payments. All payments or other 
transfers of value made in connection with an activity that meets the 
definition of research in this section and that are subject to a 
written agreement, a research protocol, or both, must be reported under 
these special rules.
    (1) Research-related payments or other transfers of value to 
covered recipients (either physicians or teaching hospitals), including 
research-related payments or other transfers of value made indirectly 
to a covered recipient through a third party, must be reported to CMS 
separately from other payments or transfers of value, and must include 
the following information (in lieu of the information required by Sec.  
403.904(c)):
    (i) Name of the research institution, individual or entity 
receiving the payment or other transfer of value.
    (A) If paid to a physician covered recipient, all of the following 
must be provided:
    (1) The physician's name as listed in the NPPES (if applicable).
    (2) National Provider Identifier.
    (3) State professional license number(s) (for at least one State 
where the physician maintains a license) and State(s) in which the 
license is held.
    (4) Specialty.
    (5) Primary business address of the physician(s).
    (B) If paid to a teaching hospital covered recipient, list the name 
and primary business address of teaching hospital.
    (C) If paid to a non-covered recipient (such as a non-teaching 
hospital or clinic), list the name and primary business address of the 
entity.
    (ii) Total amount of the research payment, including all research-
related costs for activities outlined in a written agreement, research 
protocol, or both.
    (iii) Name of the research study.
    (iv) Name(s) of any related covered drugs, devices, biologicals, or 
medical supplies (subject to the requirements specified in paragraph 
(c)(8) of this section) and for drugs and biologicals, the relevant 
National Drug Code(s), if any.
    (v) Information about each physician covered recipient principal 
investigator (if applicable) set forth in paragraph (f)(1)(i)(A) of 
this section.
    (vi) Contextual information for research (optional).
    (vii) ClinicalTrials.gov identifier (optional).
    (2) For pre-clinical studies (before any human studies have begun), 
only report the following information:
    (i) Research entity name (as required in paragraph (f)(1)(i) of 
this section).
    (ii) Total amount of payment (as required in paragraph (f)(1)(ii) 
of this section).
    (ii) Principal investigator(s) (as required in paragraph (f)(1)(v) 
of this section).
    (g) Special rules for payments or other transfers of value related 
to continuing education programs. (1) Payments or other transfers of 
value provided as compensation for speaking at a continuing education 
program are not required to be reported, if all of the following 
conditions are met:
    (i) The event at which the covered recipient is speaking meets the 
accreditation or certification requirements and standards for 
continuing education of one of the following:
    (A) The Accreditation Council for Continuing Medical Education.
    (B) The American Academy of Family Physicians.
    (C) The American Dental Association's Continuing Education 
Recognition Program.
    (D) The American Medical Association.
    (E) The American Osteopathic Association.
    (ii) The applicable manufacturer does not pay the covered recipient 
speaker directly.
    (iii) The applicable manufacturer does not select the covered 
recipient speaker or provide the third party (such as a continuing 
education vendor) with a distinct, identifiable set of individuals to 
be considered as speakers for the continuing education program.
    (2) Payments or other transfers of value that do not meet all of 
the requirements in paragraph (g)(1) must be reported as required by 
this section.
    (i) Payments or other transfers of value that meet the requirements 
in paragraph (g)(1)(i) of this section, but not also (g)(1)(ii) or 
(g)(1)(iii) of this section or both, must be reported under the nature 
of payment category ``Compensation for serving as faculty or as a 
speaker for an accredited or certified continuing education program.''
    (ii) Payments or other transfers of value that do not meet the 
requirements in paragraph (g)(1)(i) of this section should be reported 
under the nature of payment category ``Compensation for serving as a 
faculty or as a speaker for a unaccredited and non-certified continuing 
education program.''
    (iii) Payments or other transfers of value for speaking engagements 
not related to medical education should be reported under the nature of 
payment category ``Compensation for services other than consulting, 
including serving as a speaker at an event other than a continuing 
education program.''
    (h) Special rules for reporting food and beverage. (1) When 
allocating the cost of food and beverage among covered recipients in a 
group setting where the cost of each individual covered recipient's 
meal is not separately identifiable, such as a platter provided to 
physicians in a group practice setting, applicable manufacturers must 
calculate the value per person by dividing the entire cost of the food 
or beverage by the total number of individuals who partook in the meal 
(including both covered recipients and non-covered recipients, such as 
office staff). The per person value of the meal must be reported as a 
payment or other transfer of value only for covered recipients who 
actually partook in the food or beverage.
    (2) Applicable manufacturers are not required to report or track 
buffet meals, snacks, soft drinks, or coffee made generally available 
to all participants of a large-scale conference or similar large-scale 
event.
    (i) Exclusions from reporting. The following are excluded from the

[[Page 9525]]

reporting requirements specified in this section:
    (1) Indirect payments or other transfers of value (as defined in 
Sec.  403.902), where 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 Sec.  403.902) the identity 
of the covered recipient during the reporting year or by the end of the 
second quarter of the following reporting year.
    (2)(i) For CY 2013, payments or other 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 2014 and subsequent calendar years, to determine if 
transfers of value are excluded under this section, the dollar amounts 
specified in paragraph (i)(2)(i) of this section 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. CMS will publish 
the values for the next reporting year 90 days before the beginning of 
the reporting year.
    (iii) Payments or other transfers of value of less than $10 in CY 
2013 (or less than the amount described in paragraph (i)(2)(ii) of this 
section for CY 2014 and subsequent calendar years) provided at large-
scale conferences and similar large-scale events, as well as events 
open to the public, do not need to be reported nor included for 
purposes of the $100 aggregate threshold in CY 2013 (or the aggregate 
threshold calculated in accordance paragraph (i)(2)(ii) of this section 
for CY 2014 and subsequent calendar years), even if the aggregate total 
for a covered recipient exceeds the aggregate threshold for the 
calendar year.
    (iv) When reporting payments or other transfers of value under the 
$10 threshold for CY 2013 (or under the amount described in paragraph 
(i)(2)(ii) of this section for CY 2014 and subsequent calendar years) 
for covered recipients that exceed the aggregate threshold for the 
reporting year, applicable manufacturers may (but are not required to) 
report all small payments to a particular covered recipient that fall 
within the same nature of payment category as a single payment or other 
transfer of value.
    (3) Product samples, including coupons and vouchers that can be 
used by a patient to obtain samples, which are not intended to be sold 
and are intended for patient use.
    (4) Educational materials and items that directly benefit patients 
or are intended to be used by or with patients, including the value of 
an applicable manufacturer's services to educate patients regarding a 
covered drug, device, biological, or medical supply.
    (5) The loan of a covered device or a device under development, or 
the provision of a limited quantity of medical supplies for a short-
term trial period, not to exceed a loan period of 90 days or a quantity 
of 90 days of average daily use, to permit evaluation of the device or 
medical supply by the covered recipient.
    (6) Items or services provided under a contractual warranty 
(including service or maintenance agreements), whether or not the 
warranty period has expired, 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 physician covered 
recipient when the covered recipient is a patient, research subject or 
participant in data collection for research, 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 or directly reimburses for healthcare expenses, payments 
for the provision of health care to employees and their families.
    (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 non-medical 
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 an administrative proceeding, legal defense, prosecution, or 
settlement or judgment of a civil or criminal action and arbitration.
    (14) A payment or transfer of value to a covered recipient if the 
payment or transfer of value is made solely in the context of a 
personal, non-business-related relationship.


Sec.  403.906  Reports of physician ownership and investment interests.

    (a) General rule. (1) Each applicable manufacturer and applicable 
group purchasing organization must report to CMS on an annual basis all 
ownership and 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 
calendar year.
    (2) For CY 2013, only ownership or investment interests held on or 
after August 1, 2013 must be reported to CMS.
    (b) Identifying information. Reports on physician ownership and 
investment interests must include the following identifying 
information:
    (1) Name of the physician (as listed in the National Plan & 
Provider Enumeration System (if applicable), including first and last 
name, middle initial, and suffix (for all that apply), and an 
indication of whether the ownership or investment interest was held by 
the physician or an immediate family member of the physician.
    (2) Primary business address of the physician, including the 
following:
    (i) Street address.
    (ii) Suite or office number (if applicable).
    (iii) City.
    (iv) State.
    (v) ZIP code.
    (3) The following information for the physician (regardless of 
whether the ownership or investment interest is held by an immediate 
family member of the physician):
    (i) The specialty.
    (ii) National Provider Identifier (if applicable and as listed in 
NPPES).
    (iii) State professional license number(s) (for at least one State 
where the physician maintains a license), and the State(s) in which the 
license is held.
    (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) Direct and indirect payments or other transfers of value 
provided to a physician holding an ownership or investment interest, 
and direct and indirect payments or other transfers of value provided 
to a third party at the request of or designated by the applicable 
manufacturer or applicable group purchasing organization on behalf of a 
physician owner or investor, must be reported by the applicable 
manufacturer or applicable group purchasing organization in accordance 
with the requirements for reporting payments or other transfers of 
value in

[[Page 9526]]

Sec.  403.904(c) through (i). The terms ``applicable manufacturer and 
applicable group purchasing organization'' must be substituted for 
``applicable manufacturer,'' and ``physician owner or investor'' must 
be substituted for ``covered recipient'' in each place they appear.


Sec.  403.908  Procedures for electronic submission of reports.

    (a) File format. Reports required under this subpart must be 
electronically submitted to CMS by March 31, 2014, 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 
Sec.  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. (1) Applicable manufacturers that have reportable 
payments or other transfers of value, ownership or investment 
interests, or both, are required to report under this subpart and must 
register with CMS within 90 days of the end of the calendar year for 
which a report is required.
    (2) Applicable group purchasing organizations that have reportable 
ownership or investment interests are required to report under this 
subpart and must register with CMS within 90 days of the end of the 
calendar year for which a report is required.
    (3) During registration, applicable manufacturers and applicable 
group purchasing organizations must name two points of contact with 
appropriate contact information.
    (d) Other rules. (1) Consolidated reports. (i) An applicable 
manufacturer under paragraph (1) of the definition that is under common 
ownership with separate entities that are also applicable manufacturers 
under paragraph (1) of the definition may, but is not required to, file 
a consolidated report of all the payments or other transfers of value 
to covered recipients, and physician ownership or investment interests, 
for all of the entities.
    (ii) An applicable manufacturer under paragraph (1) of the 
definition of applicable manufacturer 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 all the payments or other transfers 
of value to covered recipients, and physician ownership or investment 
interests.
    (iii) If multiple applicable manufacturers (under paragraph (1) or 
(2) of the definition or both paragraphs of the definition) submit a 
consolidated report, the report must provide the names of each 
applicable manufacturer and entity (or entities) under common ownership 
that the report covers, and the report must identify the specific 
entity that provided each payment.
    (iv) A single payment or other transfer of value reported in a 
consolidated report must only be reported once by one applicable 
manufacturer.
    (v) The applicable manufacturer submitting a consolidated report on 
behalf of itself and other applicable manufacturers under common 
ownership, as permitted under this paragraph, is liable for civil 
monetary penalties imposed on each of the applicable manufacturers 
whose reportable payments or other transfers of value were included in 
the consolidated report, up to the annual maximum amount specified in 
Sec.  403.912(c) for each individual applicable manufacturer included 
in the report.
    (2) Joint ventures. 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) Attestation. Each report, including any subsequent corrections 
to a filed report, must include an attestation by the Chief Executive 
Officer, Chief Financial Officer, Chief Compliance Officer, or other 
Officer of the applicable manufacturer or applicable group purchasing 
organization that the information reported is timely, accurate, and 
complete to the best of his or her knowledge and belief. For applicable 
manufacturers choosing to submit a consolidated report in accordance 
with paragraph (d)(1) of this section, the applicable manufacturer 
submitting the consolidated report must attest on behalf of itself, in 
addition to each of the other applicable manufacturers included in the 
consolidated report.
    (f) Assumptions document. Applicable manufacturers and applicable 
group purchasing organizations may submit an assumptions document, 
explaining the reasonable assumptions made and methodologies used when 
reporting payments or other transfers of value, or ownership or 
investment interests. The assumptions documents will not be made 
available to covered recipients, physician owners or investors, or the 
public.
    (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 points of contact they 
identified during registration.
    (ii) Physicians and teaching hospitals--
    (A) Are notified using an online posting and notifications on CMS's 
listserves.
    (B) May also register with CMS to receive notification about the 
review processes.
    (iii) The 45-day review period begins on the date specified in the 
online notification.
    (3) Process. (i) An applicable manufacturer, applicable group 
purchasing organization, covered recipient or a physician owner or 
investor may log into a secure Web site to view only the information 
reported specifically about itself.
    (ii) Covered recipients and physician owners or investors are able 
to review

[[Page 9527]]

data submitted about them for the previous reporting year.
    (iii) 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.
    (iv) If a covered recipient or physician owner or investor 
disagrees with the information reported, the covered recipient or 
physician owner or investor can initiate a dispute, which is sent to 
the appropriate applicable manufacturer or applicable group purchasing 
organization to be resolved between the parties.
    (v) Covered recipients and physician owners or investors may 
initiate disputes at any time after the 45-day period begins, but 
before the end of the calendar year, but any changes resulting from 
disputes initiated outside the 45-day period, may not be made until the 
next time the data is refreshed.
    (4) Data disputes. (i) In order to be corrected prior to the 
publication of the data, applicable manufacturers and applicable group 
purchasing organizations must notify CMS of resolved disputes and 
changes to the information submitted by no later than 15 days after the 
end of the 45-day period (that is, 60 days after the 45-day review 
period begins).
    (ii) Disputes which are not resolved by 15 days after the end of 
the review and correction period, may still be resolved, but any 
changes resulting from the disputes may be made until the next time the 
data is refreshed.
    (iii) If the dispute is not resolved by 15 days after the end of 
the 45-day review and correction period, CMS publicly reports and 
aggregates 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, but marks the payment or other 
transfer of value or ownership or investment interest as disputed.
    (h) Errors or omissions. (1) 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 confirmation of the error or omission.
    (2) Upon receipt, CMS notifies the affected covered recipient or 
physician owner or investor that the additional information has been 
submitted and is available for review. CMS updates the Web site at 
least once annually with corrected information.


Sec.  403.910  Delayed publication for payments made under product 
research or development agreements and clinical investigations.

    (a) General rule. Certain research payments or other transfers of 
value made to a covered recipient by an applicable manufacturer under a 
product research or development agreement 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, a research protocol, or 
both between the applicable manufacturer and covered recipient.
    (c) Date of publication. Payments or other transfers of value 
eligible for delayed publication must be reported to CMS (in the manner 
required in Sec.  403.904(f)) 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 FDA.
    (2) Four calendar years after the date the payment or other 
transfer of value was made.
    (d) Notification of delayed publication. (1) An applicable 
manufacturer must indicate on its research 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 will result 
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, licensure, or clearance of the new 
drug, device, biological or medical supply to which the payment or 
other transfer of value is related, is pending.
    (3) An applicable manufacturer must notify CMS during subsequent 
annual submissions, if the new drug, device, biological or medical 
supply, to which the payment is related (or the new application of the 
existing drug, device, biological, or medical supply), is approved by 
the FDA.
    (4) 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.
    (5) 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.
    (e) Confidentiality. Information submitted and eligible for delayed 
publication is considered confidential and will not be subject to 
disclosure under 5 U.S.C. 552, or any similar Federal, State, or local 
law, until on or after the date on which the information made available 
to the public as required in this section.


Sec.  403.912  Penalties for failure to report.

    (a) Failure to report. (1) Any applicable manufacturer or 
applicable group purchasing organization that fails to timely, 
accurately or completely report the information required in accordance 
with the rules established under this subpart 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 timely, accurately, or completely.
    (2) The total amount of civil monetary penalties imposed on each 
applicable manufacturer or applicable group purchasing organization 
(regardless of whether the applicable manufacturer was a part of a 
consolidated report) with respect to failures to report in an 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 
timely, accurately or completely report the information required in 
accordance with the rules established under this subpart 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 timely, accurately, or completely.
    (2) The total amount of civil monetary penalties imposed on each 
applicable manufacturer or group purchasing organization (regardless of 
whether the applicable manufacturer was a part of a consolidated 
report) with respect to knowing failures to report in an annual 
submission of information will not exceed $1,000,000.

[[Page 9528]]

    (c) Total annual civil monetary penalties. The amount of civil 
monetary penalties imposed on each applicable manufacturer or 
applicable group purchasing organization under paragraphs (a)(1) and 
(b)(1) of this section are--
    (1) Aggregated separately;
    (2) Subject to separate aggregate totals under paragraphs (a)(2) 
and (b)(2) of this section, with a maximum combined annual total of 
$1,150,000.
    (d) 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 or applicable group purchasing 
organization 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.
    (e) 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 timely, accurately or 
completely submit information in accordance with the rules established 
under this subpart.
    (ii) The items described in paragraph (e)(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, 
investigate 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 timely, accurately or completely submit information in 
accordance with the rules established under this subpart.
    (3) The 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.
    (f) Use of funds. Funds collected by the Secretary as a result of 
the imposition of a civil monetary penalty under this section must be 
used to carry out the operation of this subpart.
    (g) Notice, hearings, appeals, and collection. Civil monetary 
penalties imposed under this section are subject to the provisions set 
forth in subparts A and B of part 402 of this chapter, including those 
pertaining to notice, opportunity for a hearing, appeals procedures, 
and collection of penalties.


Sec.  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: July 2, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: January 23, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-02572 Filed 2-1-13; 4:15 pm]
BILLING CODE 4120-01-P