The Sunshine Act: 10 Things to Know

For some companies that make and distribute medical devices and drugs, and for group purchasing organizations (GPOs), reporting financial information to the U.S. government has become a regular part of doing business. The reporting obligations apply if these companies and GPOs supply products or services for which Medicare and Medicaid payment is available.

This requirement comes from the Physician Payments Sunshine Act (Sunshine Act), which seeks to increase transparency around the financial relationships between physicians, teaching hospitals and manufacturers of drugs, medical devices and biologics.

Who does the law affect? What does it require them to do? Here are answers to 10 common questions, as well as a high-level snapshot of how the law applies:

1. What is the Sunshine Act?

The Sunshine Act requires “applicable manufacturers” and GPOs to report certain financial relationships to the Centers for Medicare & Medicaid Services (CMS). “Applicable manufacturers” and GPOs must report information each year that may include:

• Payments and other transfers of value to “covered recipients.”
• Ownership and investment interests held by physicians and their immediate family members.

The reported data is publicly available on the CMS Open Payments website.

Congress passed the Physician Payments Sunshine Act in 2010 and amended it in 2018 with the SUPPORT Act. CMS has also issued implementing regulations.

2. What companies must comply?

The law affects GPOs and manufacturers and distributors of medical devices, drugs, biologicals and medical supplies for which payment is available under Medicare or Medicaid (referred to under the Sunshine Act as “applicable manufacturers”).

• The drug or biological must require a prescription.
• The device must require premarket approval by or premarket notification to the U.S. Food and Drug Administration (that includes a medical supply that is a device).

The law defines “applicable manufacturers” to also include entities under common ownership with the manufacturer or distributor, and it imposes reporting requirements on such entities that provide additional assistance or support with the production, preparation, propagation, compounding, conversion, marketing, promotion, sale or distribution.

3. What kind of payments do “applicable manufacturers” have to report?

The law seeks information about payments and transfers of value to “covered recipients,” which include:

• Teaching hospitals and physicians (including MDs, DOs, dentists, podiatrists, optometrists and chiropractors).
• Some non-physician practitioners (including physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants and certified nurse midwives).

Physicians and non-physician practitioner employees are excluded from the definition.

4. What financial relationships are reportable?

“Applicable manufacturers” must report direct and indirect payments or other transfers of value to “covered recipients” and third parties at the request or on behalf of a “covered recipient.”

Payments or other transfers of value related to research are treated separately from other payments or transfers of value. On request, CMS will delay the publication of certain research-related payments on the Open Payments website until the date of FDA approval, licensure or clearance or four years after the date of payment, whichever occurs first.

“Applicable manufacturers” and GPOs must also report ownership or investment interests held by physicians or their immediate family members.

5. What are common examples of “payments and transfers of value”?

Common examples include payments for consulting, speaking at conferences, royalties and research, as well as providing for travel, food and beverage and entertainment.

A grant of stock options in exchange for services is also considered payment or transfer of value. Once the options are exercised, though, the interest should be reported as an ownership or investment interest.

6. Is there a minimum dollar threshold or other limitations or exceptions?

Yes. For calendar year 2025, payments or transfers of value less than $13.46 are not reportable unless the aggregate amount to the “covered recipient” exceeds $134.54. The threshold amounts increase each year. CMS posts the annual thresholds here.

Many other exceptions and limitations apply. The rules are highly technical, and organizations may need to closely analyze financial relationships to determine whether the law requires them to report such information.

One common exception is for ownership in publicly traded companies. As another example, more limited reporting requirements apply where an “applicable manufacturer’s” revenue from the covered drugs, devices, biologicals or supplies amounts to less than 10% of gross revenue.

7. What is the reporting deadline?

“Applicable manufacturers” and GPOs must submit their data between February 1 and March 31 for the prior calendar year. The deadline to submit 2024 data is March 31, 2025.

CMS publishes the data by June 30 each year, after a period for “covered recipients” to review and dispute the information reported.

8. What are the consequences for non-compliance?

Initial penalties under the law were civil fines that range from $1,000 to $100,000 per violation (adjusted annually), with a $1 million cap (adjusted annually). As of 2024, the cap is just over $1.4 million.

CMS has the right to audit reporting entities for compliance. CMS began its first audits in fiscal year 2023.

9. How does the Sunshine Act intersect with state law?

The Sunshine Act preempts state laws that require the disclosing or reporting of the same information. However, states may have different or additional requirements to promote transparency of industry-health care provider relationships.

In California, for example, a state law requires physicians to notify patients of the Open Payments database in an initial office visit. As related Medical Board guidance explains, the law also requires them to post a notice in their office and on their website.

10. Where can you learn more?

• Peruse CMS resources for “applicable manufacturers” and “covered recipients,” including FAQs.
• Read the law and its implementing regulations.
• Check out the annual report CMS published in August 2024.