The Ins and Outs of Open Payments Compliance

Since 2013, health care reform laws, such as the Sunshine Act, have meant that it is a mandatory requirement to disclose the financial relationships between pharmaceutical and medical device companies and physicians and teaching hospitals. These relationships can include money for research activities, gifts, speaking fees, meals, or travel.

The Affordable Care Act requires Centers for Medicare and Medicaid Services (CMS) to collect this information, and under the Open Payments scheme, companies in the Life Sciences industry are required to report on funds spent while entertaining or educating healthcare practitioners (HCPs) about their products. These financial transactions can typically include gifts, entertainment, food, beverage, and travel/lodging. In most companies, these HCP transactions can account for 15-45 percent of the total category spend.

While the submission process has become more routine, the large amount of information that must be reported, and the complexity of collection processes have required massive investments in open payments compliance systems and in additional accounts administration. PhRMA members have reported that annual ongoing costs can range from $2 million annually for a mid-sized pharmaceutical company to more than $5 million each year for large companies, making the process a financial burden.