Physician Payments Sunshine Act

By Zach Henderson, Vice President, Corporate Strategy & Analytics

A perspective on the hidden value of the Physician Payments Sunshine Act.

When the moon is in the seventh house (Pelosi’s House, that is)
And Jupiter aligns with Mars (Congress finally passes a healthcare reform bill)
Then peace will guide the planets (peace = improved and expanded coverage dictated to the insurers)
And love will steer the stars (love for the uninsured)

This is the dawning of the age of Aquarius (Physician payments disclosure for pharmaceutical and medical device manufacturers for all 50 states and DC)
Age of Aquarius (did they say all 50 states?!?)
Aquarius (Med device too?!?)
Aquarius (by when?!?)

Harmony and understanding (data feed integration harmony and spend capture understanding)
Sympathy and trust abounding (as long as you report your physician payments on time)
No more falsehoods or derisions (was that payment to Dr. Smith, Dr. L Smith, Dr. Len Smith, Dr. Laura Smith or Dr. Smyth…or are they all the same person?!?)
Golden living dreams of visions (visions of data aggregation, cleansing and reporting nightmares)
Mystic crystal revelation (there IS value from this new collection of data)
And the mind's true liberation (we can now be doing true promotion ROI and promotion optimization across channels!)
Aquarius (Sunshine Act)

The passage of healthcare reform in the United States was seen by many in the pharmaceutical and medical device industries as Jupiter aligning with Mars…and as a great increase in workload.  Indeed, the Physician Payments Sunshine Act (Section 6002 of the bill) has placed a distinct additional burden on Chief Compliance Officers and their IT and operations counterparts who must interpret and implement a solution to this complex problem.  And now with all 50 states impacted (vis-a-vis the existing spend disclosure laws for various states and the District of Columbia), the problem has grown exponentially.  Manual processes are no longer an option and the industry is somewhere in the process of discovering all spend sources as well as automating the collection, integration, reporting and alerting processes necessary to ensure compliance.  Those of us who work for pharmaceutical companies actually have a head start as they have been dealing with aggregate spend laws for several years now and investing slowly in this new age of transparency.  Those in medical device and diagnostics are not so lucky as they only recently entered the fray with the passage of an aggregate spend law in Massachusetts that includes medical device.  They have some catching up to do.

So many are in the throes of selecting or implementing an aggregate spend compliance solution, they are spending an incredible amount of resources on becoming compliant with the new laws and many see this as something being thrust upon them.  But in this Age of Aquarius there is a silver lining, a mystic crystal revelation if you will.

When we were children we were often forced by our parents to undergo times of torture (think of braces) that were quite painful at the time, but had long term benefit (straight teeth as adults…hopefully).  In the same way, our legislatures are asking us to move into a period of transparency and disclosure with these state and federal laws.  But through this process, we stand to gain much more than the perceived pain if we recognize the long-term benefit.  While there are many areas of opportunity, two present tremendous value to the life sciences commercial enterprise:
1.    Customer master creation and consolidation and
2.    Promotion rationalization and optimization.

“Customer” Master Creation and Consolidation

We should start by discussing the definition of a customer.  As the industry has evolved and non-physician actors are taking a greater role on stage, our definition of “customer” has evolved as well.  Physicians are still important, but the emergence of mid levels (Nurse Practitioners, Physicians Assistants, etc.), group practices, hospital systems, long-term care centers, home health agencies, integrated delivery networks, group purchasing organizations, and of course, the patient as a consumer of healthcare have all widened our aperture on how we define customer.  And we can’t forget the other professionals that are a key component of healthcare delivery such as the office staff.  This has also broadened our compliance tracking efforts as we are forced to create a customer master broader than prescribers, broader than physicians.  In fact, we frequently create and deploy an “auxiliary master” for clients to capture spend with non-practicing professionals. The compliance necessity creates a valuable asset for the company.

In a recent client engagement, the commercial operations team expressed envy over the Compliance MasterFile.  In this new age, we’ll all share.  It’s cool.

Promotion Rationalization and Optimization

It is no mystic crystal revelation that our industry has been rationalizing its expenses for a few years now.  Some industry estimates have cited a 25% reduction in total sales force size and we are frequently engaged by clients to optimize their portfolio promotion levels and mix.  The hunt for rational promotion expense is on.  For us to shift to this more efficient go to market model, we need to develop cost effective (and effective) channels to reach customers whoever they may happen to be and however they want us to reach them (e.g. email).  A centralized store of all spend data is vital to executing the necessary analyses to decide which channels are most effective.  Optimizing promotion across all channels of the new commercial model is a complex task, but the rate limiter in the past was the lack of consolidated spend for each customer as it lay across various vendor and internal systems.  Section 6002 forces us to address this head on much like our parents forced correction of our crooked teeth when we were teenagers.

Knowing who every customer is and how many resources to deploy against each…doesn’t sound so bad after all.  Golden living dreams of visions and mystic crystal revelations indeed.