Understanding the Scope of Disclosure Initiatives

1. Understanding the Scope of Disclosure Initiatives William A. Sarraille wsarraille@sidley.com 202-736-8195 March 5, 2009

2. What Do We Mean by “Scope”? • Really, four elements: • What areas of activity/nature of information or data must be made transparent; • Mandatory model • Legally oriented • What areas of activity/nature of information or data is being made transparent, even if it is not required; • Voluntary model • Ethics oriented • Risk management oriented • The amount of information being supplied; and • Who, directly and indirectly, is receiving the information.

3. When “Transparency” Is Discussed … • Many think fundamentally in narrow terms: • About manufacturer disclosure of physician; and • About a mandated/legal construct. • The single most important thing to appreciate about transparency is that it is an “organizing principle” of (1) the criticism of the current health care system and how it operates now and (2) how it should operate when reform is implemented.

4. Financial Disclosure Initiatives: Clearly a Focus • Manufacturers face a potential amalgam of federal and state laws • DC, MA, ME, MN, VT, WV have passed financial disclosure laws • Each state imposes different disclosure requirements • This diversity creates compliance challenges for manufacturers • As many as 17 additional disclosure bills were introduced in state legislatures in 2007 and 2008 • The Physician Payments Sunshine Act of 2009 is currently being considered by Congress

5. Scope: Looking at the Nature of the Information • Key concerns are transparency surrounding: • Financial relationships involving manufacturers that extend beyond physicians to other “partners”; • Institutional Providers • Advocacy Groups • Chairman Stark’s comments • CME Providers • Grassley investigation • Financial relationships involving others than manufacturers • E.g., relationships between institutional providers, particularly hospitals, and physicians. • CMS’ on-again, off-again hospital survey

6. Beyond Financial Relationships • Clinical Trial Data and Results • Quality • Credentials • Performance (effectiveness) • Errors and adverse events • Complications • Costs and Charges “To promote transparency and provide Americans a greater role in health care decisions, I will require hospitals and providers to collect and publicly report quality and cost data, including rates of preventable medical errors and hospital acquired infections” -- President Obama

7. Examples of Recent Federal and StateTransparency Initiatives • Federal: • Food and Drug Administration Amendments Act (FDAAA) • Establishes reporting requirements for federally-funded clinical trials • Centers for Medicare & Medicaid Services • Physician Quality Reporting Initiative (PQRI) links payment to reporting on quality measures • “Hospital Compare” web-based tool • State: • IA, LA, RI, WA, and WV enacted laws in 2008 requiring disclosure of hospital-based infection rates and/or medical outcomes data.

8. At Its Core: A Tale of Different Visions of Transparency • Transparency as a “solution”, an end in and of itself. • This approach sees many of the problems with the existing system as being a reflection of “imperfect information”. • The premise here is that better quality at lower cost will result where the information necessary to make an informed decision is supplied to the relevant party. • E.g., patients will ask more questions and more penetrating questions about their care where they are aware of the financial relationships that exist between manufacturers and physicians. • Is the premise correct?

9. More Importantly, Does the Scope Serve the Desired End? • If the goal is to create informed patient decision-makers, for instance, what sense does it make to compel a mass of data at a level of detail that cannot be used by the average person in any meaningful way? • When transparency becomes just noise • Some financial disclosure laws require the reporting of annual transfers of value worth as little as $25, producing a deluge of undifferentiated information • Potential opportunity to identify true conflicts of interest is lost, due to focus on de minimis payments and financial support for clearly legitimate activities

10. Transparency as a “Means to an End” • Very Different Sub-categories, Here, Though. • In some cases, the mechanism is intended to hold industry responsible for commitments it made voluntarily. • E.g., the California Law • In some cases, the intent is to embarrass or shame. • E.g., MedPAC’s discussion regarding samples • Not to be publicly available • So, the point can’t be to improve patient decision-making • Stated goal: to determine whether sampling leads to higher utilization of higher cost products • Does that stand up to scrutiny? • Unstated goal: to burden sampling because a conclusion about sampling has already been reached • An extension of the problem posed by “regulation by enforcement”

11. Another, More Disturbing Rationale • Even More Sinister: A “Gotcha” Exercise • In some cases, the intent is to create a mechanism to evaluate compliance with applicable law and to provide a means of identifying and punishing misconduct. • One way of looking at the Sunshine Act is as an industry-wide mandated extension of a “probationary” condition. • Roots in the orthopedic device company cases, for instance. • An industry-wide “indictment”

12. What “Scope” Is Appropriate? • Transparency is not an absolute good; it can be counter-productive. • E.g., MedPAC’s rejection of disclosure of rebate and discount data • Lawmakers have a duty to understand and consider the costs associated with disclosure mandates • Fundamental misunderstanding of these costs, at least as applied to manufacturers. • Disclosure cannot occur “at the push of a button” • Information about marketing, consulting, research, and other payments is often organized by product, division, or subsidiary • Integrating information silos is a time-consuming and expensive task • Interesting to see the disproportionate treatment by MedPAC of manufacturers and hospitals • “Cost” as something more than money. • Discouraging samples • The threat to innovation inherent in development transparency.

13. In Defining the Scope of Transparency… • The central questions should be: • What are we trying to achieve? • Is transparency helpful or counter-productive to that end? • What are the alternatives? • Are they a better, more efficient means to the desired end with less in the way of collateral negatives?

14. And, Thus, the Critical Question of Preemption • Both a “cost” and a “noise” issue • Recent statements from staff open the door ajar to a more promising conclusion of this debate under the Sunshine Act. • Will it happen? • The price of victory on preemption is likely to be an expansion of the Sunshine Act to more closely reflect the scope of the MedPAC recommendations.

15. Active, Not Reactive, Transparency • Ethics and risk management driven • How it works • Some examples

16. A Final Comment on the Scope of Transparency • Transparency viewed as fundamental to health reform • Linked to the notion of “value”, which forms the central rhetorical basis for reform. • “. . .those of us who manage the public’s dollars will be held to account – to spend wisely, reform bad habits, and do our business in the light of day” • -President Obama’s Inaugural Address (1/20/2009)