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Count Down to Sunshine. Two Days to Go.

Count Down to Sunshine. Two Days to Go.

Posted on : Tuesday, July 30, 2013 by : StayinFront

The Sunshine Act is just two days away and, by now, everyone in the pharmaceutical industry knows it. There have been flurries of last minute activity getting systems in place to capture the data, and tussles with counsel about what beans fall into what buckets and education campaigns for everyone.

The CMS estimate of $268MM for the total cost to the industry of getting ready for the Act now looks laughably small. Despite this, most companies we’ve talked to are in reasonably good shape and have already started collecting data, aligning their expense management and CRM applications and are now putting it all the systems through their paces. A small number of companies are still unprepared, but working hard to get there.

While it seems that everyone has their heads in the weeds implementing the rules and combing through their data, now might be a good time to review the reasoning behind the Act and think about the intended and unintended consequences. This post will address the intended consequences of the rules – the next post will consider some of the possible unintended ones.

The key intended effect is to reduce Medicare/Medicaid spending. CMS was very clear in their discussion of the rules that they believe the evidence shows payments from pharmaceutical companies to doctors increase Medicare and Medicaid costs because doctors that receive payments write more prescriptions. Therefore, reducing/eliminating the payments will reduce the overall cost of medicine.

That is a two step dance –

1) You have to believe that the rules will slow down payments to doctors, and

2) You have to believe that this, in and of itself, will reduce the number of expensive prescriptions doctors write.

So let’s dance the first step – Will the rules reduce payments to doctors?

Well, the anecdotal evidence (which is all we have at this point), is that doctors are absolutely starting to refuse gifts and payments from pharmaceutical companies. Our customers’ field representatives are reporting that doctors are asking questions before accepting anything of value – questions like ‘Will this be reported?’ and ‘What is it worth?’ A strong minority are just refusing gifts as a rule. Doctors, in particular, appear to be sensitive to the possible personal and professional impact of being listed in the database as taking money from Pharmaceutical companies. This may be a very short term effect with doctors taking a ‘wait and see’ position – or it may actually be a real and lasting behavioral change. So the first step – at least in the early stages – based only on anecdotal reports from the field, is that payments are going down.

The second step is less obvious. Will this really impact the prescribing habits of doctors and will that reduce medicine costs? CMS cites as their main sources the 2009 Institute of Medicine report “Conflict of Interest in Medical Research, Education and Practice.” and the recommendations of the Medicare Advisory Payment Commission (MedPAC).

The IOC report is 436 pages of assistance for insomniacs – but there are some key points about the report that should be noted – and we don’t think that it supports the view that reducing payments to doctors will necessarily reduce prescription costs.

For instance, the IOM report placed a heavy emphasis on the impact of drug samples on prescribing habits, but the Act excludes samples from expense calculations on the basis that samples are for the benefit of patients, not doctors. In general, the IOM report was not considering the impacts on costs, but whether the financial ties compromised the quality of care in any way – so it is probably not good to use its conclusions to justify a measure that is about cost reduction. Quality of care, perhaps, but costs were not the direct goal of the report. The report did support the idea that the Pharmaceutical companies are spending a lot of money on promotion – and therefore, there must be some benefit to it – but that kind of extrapolation is a weak foundation to support laws as far reaching and expensive to comply with as the Sunshine Act.

The argument that the Sunshine Act will reduce federal healthcare spending requires a number of arguments to line up successfully like dominoes – if one of them fails, the logical argument in favor of the Act fails too.

Next update will focus on possible species of unintended consequences, and how to spot them in the wild.