OLR Research Report

September 18, 2007




By: John Kasprak, Senior Attorney

You asked for information on recently proposed federal legislation that addresses payments made by pharmaceutical companies to physicians.



The “Physician Payments Sunshine Act” (S. 2029) was introduced earlier this month in the U.S. Senate by Senators Grassley, Kohl, Kennedy, McCaskill, Schumer, and Klobuchar. The bill amends Title XI of the Social Security Act to “provide for transparency” in the relationship between physicians and manufacturers of drugs, devices, or medical supplies for which payment is made under Medicaid, Medicare or SCHIP. The bill has been referred to the Senate Committee on Finance.

The bill requires drug and device manufacturers to disclose to the Secretary of Health and Human Services (HHS), on a quarterly basis, anything of value given to physicians, such as payments, gifts, honoraria, or travel. It only applies to companies with annual revenues over $100 million dollars. The required disclosure must include the physician's name, the value and date of the payment or gift, its purpose, and what, if anything was received in exchange. The bill then requires HHS to make the information available to the public through a searchable website.

The bill also includes civil monetary penalties for noncompliance.


The bill defines “covered drug, device or medical supply” as any drug, biological product, device, or medical supply for which payment is available under title XVIII (Medicare) or a State plan under Title XIX (Medicaid) or XXI (State Children's Health Insurance Program (SCHIP)).

“Manufacturer of a covered drug, device, or medical supply” means any entity with annual gross revenues that exceed $100 million, which is engaged in (1) the production, preparation, propagation, compounding, conversion, or processing of a covered drug, device, or medical supply; or (2) the packaging, repackaging, labeling, relabeling, or distributing of a covered drug, device, or medical supply.

“Payment or other transfer of value” means a transfer of anything of value exceeding $25, and includes any compensation, gift, honorarium, speaking or consulting fee, travel, discount, cash rebate, or services. The term does not include (1) product samples that are intended for patients, (2) a payment or other transfer of value made for the general funding of a clinical trial, and (3) a transfer of anything of value to a physician when the physician is a patient and not acting in his or her professional capacity.

Reporting of Payments or Other Transfers of Value

Beginning January 1, 2008 and the first day of each fiscal year quarter afterwards, the bill requires each manufacturer of a covered drug, device, or medical supply who provides a payment or other transfer of value, directly or indirectly, or through an agent, subsidiary,, or other third party, to a physician or to an entity employing the physician, to submit information to HHS electronically. This includes the physician's name and address or in the case of an entity employing the physician, its primary place of business; the facility the physician is affiliated with, if any; and the value of the payment or other transfer of value and the date it was provided.

When describing the nature of the payment or other transfer of value, the company must also indicate whether it was (1) compensation; (2) food, entertainment, or gifts; (3)trips or travel; (4) a product or other item provided for less than market value; (5)participation in a medical conference, continuing medical education, or other educational or informational program or seminar, provision of materials related to such a conference or educational program, or remuneration for promoting or participating in the conference or program; (6) product rebates or discounts; (7) consulting fees or honoraria; or (8) any other economic benefit, as defined by the HHS Secretary.

Annual Summary Report

The proposed bill requires each manufacturer of a covered drug, device, or medical supply that is required to submit information to submit a report to the HHS Secretary by December 31 that summarizes in electronic format each submission of information made by the manufacturer during that year.

Penalty for Noncompliance

Any manufacturer that fails to submit the information required above is subject to a civil penalty of between $10,000 and $100,000 for each failure.

Public Availability of Information

By June 1, 2008, the HHS Secretary must establish procedures to ensure that the information reported as required under the bill and the summary reports are readily accessible to the public through an Internet website.

Report to Congress

By April 1, 2009 and annually thereafter, the HHS Secretary must provide Congress with a report that includes (1) the information submitted during the preceding year, aggregated for each manufacturer and (2) a description of any enforcement actions taken, including any penalties imposed for noncompliance during the preceding year.