Recent action by the Vermont Attorney General’s office to enforce its longstanding law on industry relationships with providers serves as a valuable roadmap for the Centers for Medicare and Medicaid Services’ enforcement of the Physician Payment Sunshine Act, which went into effect August 1.

Last month the Vermont Attorney General announced it had reached settlements with 25 different pharmaceutical companies, for their violations of the Vermont’s Prescribed Product Gift Ban and Disclosure Law. Vermont was one of the first states to create transparency laws to monitor drug companies’ activities, and later banned most industry gifts to Vermont licensed health care providers. Under the Vermont AG settlement, 24 manufacturers paid a combined total of $25,250 to the State in fees for failure to file annual reports with the AG, as required by state law. In addition, Novartis paid $36,000 for self-disclosed violations of the state-law ban on provider meals paid for by manufacturers.

As CMS ramps up the new national program, now called the Open Payments program, Vermont’s action is an example of the enforcement actions CMS is authorized to take if industry fails to accurately report payments on a national level. Fines of up to $10,000 will be applied by CMS, not to exceed $150,000 annually, while knowing failure to report incurs fines of $100,000, not to exceed $1 million annually. 

Furthermore, industry could face state action for payments reported on a national level that are illegal under state bans in Vermont, Minnesota and Massachusetts on certain gifts and meals. Fortunately industry has experience with these state requirements, which have been on the books for several years.

Careful reporting by industry and vigorous enforcement by CMS will support the underlying rationale for the Open Payment program, which is to ensure that collaboration among physicians, teaching hospitals and industry manufacturers “serve the purpose of contributing to the design and delivery of life-saving drugs and devices”, while not crossing the line into financial relationships that can “inappropriately influence research, education and clinical decision making.”

As this process unfolds, physicians and teaching hospitals have the opportunity to consider whether they should accept payments that would not stand up to such public scrutiny.

Industry payments and transfers of value to physicians and teaching hospitals will be fully transparent to the public on the CMS Open Payments website by September, 2014.