PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
MEMORANDUM
TO:
Nathaniel Briggs, Esq., Vice President & General Counsel, Penterra Pharmaceuticals Corp.
Rebecca Liang, Esq., Associate General Counsel, Clinical Affairs, Penterra Pharmaceuticals Corp.
Samantha Novak, Director, Clinical Contracts, Penterra Pharmaceuticals Corp.
FROM:
Sean Morrissey, Associate, Calderwood & Harkness LLP
Christopher Aiken, Associate, Calderwood & Harkness LLP
REVIEWED BY:
Miriam Calloway, Partner, Calderwood & Harkness LLP
DATE: May 15, 2023
RE: Open Payments / Physician Payments Sunshine Act Compliance Analysis — Payments Under Master Clinical Trial Agreement and Investigator Agreements for Protocol PPC-4871-III (CLARION)
MATTER NO.: 1018-00004
This memorandum is a privileged and confidential communication prepared at the direction of counsel for the purpose of providing legal advice. It is protected by the attorney-client privilege and the attorney work-product doctrine. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
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I. Executive Summary
Calderwood & Harkness LLP has been engaged by Penterra Pharmaceuticals Corp. ("Penterra" or the "Company") to analyze the Company's reporting obligations under Section 6002 of the Patient Protection and Affordable Care Act (Pub. L. No. 111-148) (the "Physician Payments Sunshine Act"), codified at 42 U.S.C. § 1320a-7h, and the Centers for Medicare & Medicaid Services' ("CMS") implementing regulations at 42 C.F.R. §§ 403.900–403.914 (collectively, the "Open Payments" program). This analysis addresses payments and other transfers of value made, or to be made, under the Master Clinical Trial Agreement ("MCTA") between Penterra and Veridian Health Research Network, Inc. ("Veridian"), dated June 28, 2023, and the related investigator agreements for Protocol PPC-4871-III, commonly known by its acronym CLARION (Clinical Assessment of Response with Longitudinal Investigation in ONcology).
The total deal value under the MCTA and associated agreements is approximately $80,000,000 across thirty-eight (38) Veridian Network clinical trial sites in fourteen (14) states over a projected sixty (60)-month study duration. The magnitude and duration of these payments, combined with the multi-site, multi-state structure of the trial, create significant and complex reporting exposure under the Open Payments program.
Payments under the MCTA flow to both categories of "covered recipients" under the statute and regulations: (i) individual physicians and investigators — including the Global Principal Investigator, Dr. Catherine Aldridge, M.D., Ph.D., the Co-Principal Investigator, Dr. Howard Matsuoka, M.D., and numerous sub-investigators across the network — and (ii) teaching hospitals, including academic medical centers within the Veridian Network such as Graystone University Medical Center and Lakemont Medical Center. Additionally, significant payments flow to entities that may or may not constitute covered recipients, including Veridian itself (a 501(c)(3) nonprofit), third-party vendors such as Pinnacle Data Solutions, Inc. (a technology provider), and Meridian Contract Research Organization, Inc. ("Meridian CRO"), the Company's contract research organization for this trial.
This memorandum undertakes a comprehensive categorization of each payment stream under the MCTA, identifies applicable exclusions and delayed-publication provisions under the Open Payments regulations, and provides detailed recommendations for tracking and reporting procedures designed to ensure timely, accurate, and defensible annual submissions to CMS. As discussed further in Section VI below, proper Open Payments compliance is interrelated with the Company's obligations under the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), and the fair market value analysis underlying investigator compensation is critical to compliance under both regulatory frameworks.
Our principal conclusions are as follows:
1. Penterra is an "applicable manufacturer" subject to the reporting obligations of the Open Payments program.
2. The majority of payments under the MCTA — including per-patient site fees, start-up fees, annual site maintenance fees, investigator grants, and compensation under the investigator agreements — are reportable to CMS under the "research" nature of payment category.
3. These research payments are eligible for delayed publication under 42 C.F.R. § 403.904(g), meaning that while the payments must be reported to CMS on the same annual reporting schedule as all other payments, public availability of the data will be delayed until the earlier of (a) four years from the date of payment, (b) the date of FDA approval, licensure, or clearance of penterafenib, or (c) the date on which Penterra ceases to pursue FDA approval.
4. Certain payment streams — specifically, the network coordination/administrative fee paid to Veridian and the technology/EDC integration costs paid to Pinnacle Data Solutions, Inc. — may fall outside the scope of reportable transfers of value, but require further analysis of potential pass-through allocations to covered recipients.
5. Penterra should immediately implement a centralized payment tracking system, establish robust data-sharing mechanisms with Veridian, its member sites, and Meridian CRO, and designate responsible internal personnel to manage Open Payments data collection and annual submission for the CLARION trial.
II. Background
A. The CLARION Trial and the MCTA
Penterra is sponsoring a Phase III, randomized, double-blind, placebo-controlled clinical trial evaluating the safety and efficacy of penterafenib (PPC-4871), an oral multi-kinase inhibitor, for the treatment of advanced hepatocellular carcinoma ("HCC") in patients who have progressed on or are intolerant to prior systemic therapy. The trial is being conducted under Investigational New Drug Application ("IND") No. 157823, filed with the U.S. Food and Drug Administration ("FDA").
The trial protocol, designated PPC-4871-III, bears the clinical study title "Clinical Assessment of Response with Longitudinal Investigation in ONcology," or CLARION. The trial has been registered on ClinicalTrials.gov under Identifier NCT05928174. The primary endpoint is overall survival; secondary endpoints include progression-free survival, objective response rate per RECIST v1.1, duration of response, and patient-reported outcomes.
The CLARION trial is designed to enroll 1,200 subjects randomized in a 2:1 ratio (800 treatment : 400 placebo) across 38 clinical trial sites within the Veridian Health Research Network, situated in 14 states across the United States. The enrollment period is projected to span 42 months from the date of first patient in ("FPI"), with a total study duration of approximately 60 months to accommodate the follow-up period for assessment of overall survival and long-term safety. The target FPI date is August 14, 2023.
The Master Clinical Trial Agreement ("MCTA") governing the conduct of the trial was executed on June 28, 2023, with an effective date of July 18, 2023. The MCTA governs the overarching relationship between Penterra and Veridian, including the conduct of the trial across all 38 Veridian Network sites, the payment obligations of Penterra, the allocation of intellectual property rights, the responsibilities of the parties regarding regulatory compliance, and the indemnification and insurance obligations applicable to the study. The MCTA incorporates several exhibits, including Exhibit A (Protocol PPC-4871-III), Exhibit B (Budget and Payment Schedule), Exhibit C (List of Participating Veridian Network Sites — Schedule 1), Exhibit D (Form of Site-Level Agreement), Exhibit E (Investigational Product Supply Terms), Exhibit F (Intellectual Property and Publication Rights), Exhibit G (Insurance Requirements), and Exhibit H (Regulatory Compliance Representations and Covenants).
B. Parties and Key Personnel
Penterra Pharmaceuticals Corp. is a Delaware corporation, publicly traded on the Nasdaq Global Select Market under the ticker symbol "PTRA." The Company's principal offices are located at 200 Biopharma Boulevard, Suite 1400, Princeton, New Jersey 08540. Penterra's senior management includes:
• Dr. Anand Raghavan, M.D., Ph.D. — Chief Executive Officer
• Dr. Elaine Whitford, M.D. — Chief Medical Officer
• Dr. Marcus Yun, M.D., M.P.H. — Senior Vice President, Clinical Development
• Jennifer Holt — Vice President, Clinical Operations
• Nathaniel Briggs, Esq. — Vice President & General Counsel
• Rebecca Liang, Esq. — Associate General Counsel, Clinical Affairs
• Samantha Novak — Director, Clinical Contracts
Penterra's product portfolio includes both approved and marketed pharmaceutical products as well as a pipeline of investigational candidates. For fiscal year 2022, Penterra reported approximately $1.87 billion in total revenue, the majority of which was derived from sales of its approved products — several of which are covered under Medicare Part D and various state Medicaid plans. This revenue profile is directly relevant to Penterra's status as an "applicable manufacturer" under the Open Payments regulations, as discussed in Section III.B below.
Veridian Health Research Network, Inc. is a Delaware 501(c)(3) nonprofit corporation headquartered at 750 Research Parkway, 8th Floor, Philadelphia, Pennsylvania 19104. Veridian operates as a clinical research network comprising academic medical centers, community hospitals, and affiliated physician practices across the United States. Dr. Franklin Osei, M.D., Ph.D. serves as Veridian's President and Chief Executive Officer. Veridian's nonprofit status and organizational structure are relevant to the analysis of whether payments to Veridian centrally constitute reportable transfers of value, as discussed in Section IV.F below.
Global Principal Investigator: Dr. Catherine Aldridge, M.D., Ph.D., is a Professor of Oncology at Graystone University Medical Center, located at 1200 University Avenue, Philadelphia, Pennsylvania 19104. Dr. Aldridge is a board-certified medical oncologist with over twenty years of experience in HCC clinical research. She has entered into a separate Principal Investigator Agreement with Penterra, the terms of which are analyzed in Section IV.I below.
Co-Principal Investigator: Dr. Howard Matsuoka, M.D., is an Associate Professor of Hepatology and Oncology at Lakemont Medical Center, located at 4400 North Michigan Drive, Chicago, Illinois 60611. Dr. Matsuoka has entered into a separate Co-Principal Investigator Agreement with Penterra, the terms of which are likewise analyzed in Section IV.I below.
In addition to Drs. Aldridge and Matsuoka, the CLARION trial will involve numerous sub-investigators and site staff across all 38 Veridian Network sites, including site principal investigators, sub-investigators, clinical research coordinators, research nurses, study pharmacists, and data managers. The sub-investigators who hold medical degrees (M.D. or D.O.) or who fall within the expanded categories of covered practitioners will be "covered recipients" under the Open Payments regulations.
C. Payment Streams Under the MCTA
The total budgeted value of the MCTA, as set forth in Exhibit B (Budget and Payment Schedule), is approximately $80,000,000. This aggregate amount is allocated across the following categories of payments:
1. Per-Patient Site Fees — $62,400,000. Penterra will pay per-patient site fees of $52,000 per subject for each of the planned 1,200 enrolled subjects. These fees are payable in four milestone-based installments:
• Twenty-five percent (25%) — $13,000 — upon randomization of the subject
• Twenty-five percent (25%) — $13,000 — upon completion of the Week 12 visit
• Twenty-five percent (25%) — $13,000 — upon completion of the Week 24 visit
• Twenty-five percent (25%) — $13,000 — upon completion of the final study visit
At full enrollment of 1,200 subjects, the aggregate per-patient site fees total $62,400,000. These payments flow to the individual site institutions within the Veridian Network, with a portion potentially allocated to the site principal investigator as compensation for professional effort.
2. Start-Up Fees — $2,850,000. Each of the 38 participating sites will receive a start-up fee of $75,000, payable in two installments:
• Fifty percent (50%) — $37,500 — upon site activation (defined as IRB/IEC approval, site initiation visit completion, and regulatory readiness)
• Fifty percent (50%) — $37,500 — upon enrollment of the first patient at the site
The aggregate start-up fees total $2,850,000 across all 38 sites.
3. Annual Site Maintenance Fees — $5,320,000. Each participating site will receive an annual site maintenance fee of $40,000, payable annually in advance on each anniversary of the site's activation date. Based on an average participation period of 3.5 years per site across 38 sites, the aggregate projected site maintenance fees total $5,320,000.
4. Investigator Grants (Publication and Academic Support) — $1,500,000. The MCTA allocates $1,500,000 for grants to support investigator-initiated publications, academic presentations, and scholarly activities related to the CLARION trial. Disbursement of these funds is contingent upon the acceptance of manuscripts for publication in peer-reviewed journals. These grants are anticipated to be paid primarily to Dr. Catherine Aldridge, Dr. Howard Matsuoka, and potentially other investigators who serve as lead authors on study publications.
5. Network Coordination/Administrative Fee to Veridian Central — $4,200,000. Penterra will pay Veridian a quarterly network coordination and administrative fee of $300,000 per quarter over the anticipated 14-quarter active enrollment and follow-up period, totaling $4,200,000. These payments compensate Veridian for central coordination of the multi-site trial, including site selection and qualification, protocol training and dissemination, regulatory document management, central monitoring support, and data quality oversight across the network.
6. Technology/EDC Integration Costs — $1,230,000. A fixed sum of $1,230,000 is allocated for the integration of the electronic data capture ("EDC") platform provided by Pinnacle Data Solutions, Inc. ("Pinnacle"), a third-party technology vendor. These costs cover the configuration of the EDC system for the CLARION protocol, integration with site electronic health record systems, user training, validation testing, and ongoing technical support during the study.
7. Contingency/Change Order Reserve — $2,500,000. The MCTA includes a contingency and change order reserve of $2,500,000 to cover unanticipated costs, protocol amendments, additional site activations, and other modifications to the trial scope. This reserve has not yet been allocated or disbursed as of the date of this memorandum.
In addition to the payments under the MCTA, Penterra has entered into separate investigator agreements with the Global Principal Investigator, Dr. Catherine Aldridge, and the Co-Principal Investigator, Dr. Howard Matsuoka. These agreements provide for compensation for professional effort, consulting services, protocol development contributions, and scientific advisory services, all at rates determined by Penterra's independent fair market value analysis. The terms of these agreements are discussed further in Section IV.I below.
All payments under the MCTA and the investigator agreements are subject to payment terms of Net 45 days from Penterra's receipt of a proper invoice from the payee.
III. Legal Framework — The Physician Payments Sunshine Act and Open Payments
A. Statutory Overview
Section 6002 of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119, 689 (2010), enacted the Physician Payments Sunshine Act, codified at 42 U.S.C. § 1320a-7h. The statute was enacted to promote transparency in the financial relationships between the healthcare industry — specifically manufacturers of drugs, devices, biologicals, and medical supplies — and certain healthcare providers.
The statute requires "applicable manufacturers" of drugs, devices, biologicals, or medical supplies that are covered or eligible for payment under Medicare, Medicaid, or the Children's Health Insurance Program ("CHIP") to report annually to the Secretary of Health and Human Services, through CMS, certain payments or other transfers of value to "covered recipients." Under the original statute, covered recipients were limited to physicians and teaching hospitals. The statute was subsequently amended by Section 6111 of the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260), which expanded the definition of "covered recipient" to include certain categories of non-physician practitioners, effective for reporting beginning in calendar year 2022.
CMS promulgated implementing regulations at 42 C.F.R. Part 403, Subpart I (§§ 403.900–403.914), which establish the specific requirements for the collection, reporting, and public availability of payment data under what CMS has denominated the "Open Payments" program. Under these regulations, applicable manufacturers must submit annual reports to CMS identifying each payment or other transfer of value made to a covered recipient during the preceding calendar year, together with specified contextual information. CMS then publishes the reported data on the Open Payments website, making it accessible to patients, healthcare providers, researchers, journalists, and the public at large.
The stated legislative purpose of the Sunshine Act is to shed light on the financial relationships between industry and healthcare providers, thereby enabling patients and the public to make more informed decisions about their healthcare. However, the practical implications of the reporting requirements are far-reaching: the publicly available data is routinely examined not only by patients and media, but also by the Department of Justice ("DOJ"), the Office of Inspector General of the Department of Health and Human Services ("OIG"), state attorneys general, qui tam relators, plaintiffs' counsel in civil litigation, academic researchers, and compliance professionals. Inaccurate or incomplete reporting can result in civil monetary penalties of up to $10,000 per payment not reported (up to an aggregate of $150,000 per reporting year), and up to $100,000 per payment for knowing failures to report (up to an aggregate of $1,000,000 per reporting year). See 42 U.S.C. § 1320a-7h(b)(1)–(2).
B. Applicable Manufacturer Status — Penterra
The threshold question in any Open Payments analysis is whether the entity making payments is an "applicable manufacturer" within the meaning of the statute and regulations. Under 42 C.F.R. § 403.902, an "applicable manufacturer" is an entity that is engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply, or an entity under common ownership with such an entity that provides assistance or support to such entity with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological, or medical supply. A "covered" drug, device, biological, or medical supply is one for which payment is available under Title XVIII (Medicare) or a State plan under Title XIX (Medicaid).
Penterra Pharmaceuticals Corp. is unambiguously an "applicable manufacturer." The Company manufactures (either directly or through contract manufacturers on its behalf) pharmaceutical products that are covered under Medicare Part D, Medicare Part B, and various state Medicaid programs. The Company reported approximately $1.87 billion in total revenue for fiscal year 2022, the predominant share of which was derived from sales of its approved and marketed pharmaceutical products. Penterra's status as an applicable manufacturer is determined based on its overall corporate activities — it need not be the case that the specific product associated with a given clinical trial is itself covered or approved for the reporting obligation to attach. Because Penterra manufactures covered drugs, any payment or transfer of value it makes to a covered recipient — regardless of whether the payment relates to a covered product or an investigational product — is potentially reportable under Open Payments.
It is worth noting that even if penterafenib (PPC-4871) were Penterra's only product, and even though penterafenib is an investigational product that has not yet received FDA approval and is therefore not yet covered under Medicare or Medicaid, the reporting obligation could still arise. CMS has taken the position that an entity may be an "applicable manufacturer" if it has a covered product, or if its product is in development and is of a type that would be eligible for coverage upon approval. Because Penterra has multiple approved, marketed, and covered products in its portfolio, the analysis is straightforward: Penterra is an applicable manufacturer, and all of its payments and transfers of value to covered recipients — including those made in connection with the CLARION trial — fall within the scope of Open Payments reporting.
C. Covered Recipients
The Open Payments program requires reporting of payments and transfers of value to two principal categories of "covered recipients": (i) physicians and certain non-physician practitioners, and (ii) teaching hospitals.
Physicians and Non-Physician Practitioners. Under the original statutory framework, a "covered recipient" physician was defined as any physician, as that term is defined under 42 U.S.C. § 1395x(r), which includes doctors of medicine and doctors of osteopathy. The regulations further encompass dentists, podiatrists, optometrists, and chiropractors. Effective for payments made on or after January 1, 2022, Section 6111 of the Consolidated Appropriations Act, 2021, expanded the definition of "covered recipient" to include the following categories of non-physician practitioners: physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants, and certified nurse-midwives.
As applied to the CLARION trial:
• Dr. Catherine Aldridge, M.D., Ph.D. (Global Principal Investigator) is a licensed physician and a covered recipient.
• Dr. Howard Matsuoka, M.D. (Co-Principal Investigator) is a licensed physician and a covered recipient.
• All sub-investigators across the 38 Veridian Network sites who hold M.D. or D.O. degrees, or who hold licenses in any of the categories enumerated above (dentists, podiatrists, optometrists, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants, and certified nurse-midwives), qualify as covered recipients.
• Non-physician site coordinators, research nurses (other than nurse practitioners, clinical nurse specialists, or certified nurse-midwives), research pharmacists, data managers, and administrative staff who do not fall within any of the enumerated covered recipient categories are generally not covered recipients, and payments to or on behalf of such individuals are generally not reportable.
Penterra should obtain a complete roster of all investigators and study personnel at each of the 38 sites, including their professional credentials, to identify all covered recipients. This exercise should be completed before the target FPI date of August 14, 2023.
Teaching Hospitals. A "teaching hospital" under the Open Payments program is a hospital that receives a payment under 42 U.S.C. § 1395ww(d)(5)(B) (indirect medical education, or "IME," payments) or 42 U.S.C. § 1395ww(h) (direct graduate medical education, or "GME," payments) during the most recent period for which CMS has published the teaching hospital list. CMS publishes an updated list of teaching hospitals annually, typically in advance of each reporting cycle.
Two of the most prominent sites in the CLARION trial are academic medical centers that almost certainly qualify as teaching hospitals:
• Graystone University Medical Center (1200 University Avenue, Philadelphia, PA 19104) — a major academic medical center with accredited graduate medical education programs in multiple specialties, including internal medicine, oncology, and hepatology. Graystone is widely known to receive both IME and GME payments under Medicare.
• Lakemont Medical Center (4400 North Michigan Drive, Chicago, IL 60611) — an academic medical center affiliated with a university school of medicine, with accredited residency and fellowship programs.
Both of these institutions are highly likely to appear on the CMS-published teaching hospital list. However, Penterra should confirm this determination by cross-referencing each institution against the most current CMS teaching hospital list, which is available on the Open Payments website. Furthermore, Penterra should undertake the same exercise for all 38 Veridian Network sites identified on Schedule 1 of the MCTA. Some community hospital sites within the Veridian Network may also receive IME or GME payments and thus qualify as teaching hospitals, while others may not. The classification of each site as a teaching hospital or a non-teaching hospital institution has direct implications for the reporting analysis, as discussed in Sections IV and VII below.
D. Transfers of Value — General Definition
The term "payment or other transfer of value" is defined broadly under both the statute and regulations to encompass virtually any transfer of anything of value from an applicable manufacturer to a covered recipient. The regulatory definition at 42 C.F.R. § 403.902 includes, without limitation: compensation, grants, fees for services, consulting fees, honoraria, gifts, food and beverage, travel and lodging, entertainment, education, research funding, debt forgiveness, royalties or licenses, current or prospective ownership or investment interests, charitable contributions, in-kind items or services, and any other form of economic benefit.
The breadth of this definition is intentional and captures the full range of financial interactions between industry and healthcare providers. Even transfers of value that serve legitimate business or scientific purposes — such as fair-market-value compensation for clinical trial services — are reportable. The statute and regulations do not distinguish between payments that are proper and those that may raise compliance concerns; all payments to covered recipients must be reported, regardless of their legitimacy or business justification.
De Minimis Exclusion. The regulations provide a limited exclusion for transfers of value that fall below a de minimis threshold. Under 42 C.F.R. § 403.904(h), a transfer of value of $10 or less per instance need not be reported, provided that the aggregate total of all unreported transfers of value to a given covered recipient does not exceed $100 in a single calendar year. These dollar thresholds are subject to annual adjustment by CMS to account for inflation. For calendar year 2023, the applicable thresholds are $11.23 per individual payment and $112.34 in aggregate per covered recipient. Penterra should apply the current-year thresholds as published by CMS for each reporting period.
Importantly, even where individual transfers fall below the de minimis threshold, they must be tracked because the aggregate cap applies on a per-covered-recipient, per-calendar-year basis. If the aggregate of all individually small transfers to a single covered recipient exceeds the annual threshold, all such transfers become reportable.
Indirect Payments. A critical concept for the CLARION trial analysis is the treatment of indirect payments — payments that do not flow directly from the applicable manufacturer to the covered recipient, but instead pass through an intermediary. Under 42 C.F.R. § 403.904(a)(2), an applicable manufacturer must report indirect payments if the manufacturer "requires, instructs, directs, or otherwise causes" a third party to provide the payment to a covered recipient, or if the applicable manufacturer "knows or should know" the identity of the covered recipient. This standard is particularly relevant here because the MCTA routes most payments through Veridian or through individual site institutions, which in turn may allocate a portion of the funds to individual physician investigators. To the extent Penterra knows or has reason to know that a portion of an institutional payment is allocated to an individual physician covered recipient, that allocation is reportable as an indirect payment to the physician.
IV. Categorization of MCTA Payment Streams Under Open Payments
This section analyzes each of the payment streams under the MCTA and investigator agreements to determine: (i) whether the payment constitutes a reportable transfer of value; (ii) the identity and category of the covered recipient(s); (iii) the applicable "nature of payment" classification; and (iv) whether the payment qualifies for delayed publication under the research payment provisions.
A. Research Payments — The Research Payment Exclusion and Delayed Publication
Before examining each payment stream individually, it is important to address the regulatory framework applicable to research-related payments, as the majority of the CLARION trial payments fall within this category.
The Research Delayed Publication Rule. The Open Payments regulations at 42 C.F.R. § 403.904(g) provide a special rule for payments made in connection with certain research activities. Critically, this provision does not create an exemption from reporting. Rather, it delays the public availability of the reported data. Under this rule, payments made in connection with research conducted pursuant to a written agreement that satisfies specified criteria are reported to CMS on the standard annual schedule, but CMS delays publication of the data on the Open Payments website until the earliest of:
(i) Four (4) calendar years from the date of payment;
(ii) The date on which the FDA approves, licenses, or clears the covered drug, device, biological, or medical supply associated with the research; or
(iii) The date on which the applicable manufacturer or applicable GPO notifies CMS that the application or premarket notification for the covered drug, device, biological, or medical supply will no longer be pursued.
This delayed publication rule serves a recognized interest in protecting the confidentiality of ongoing clinical trials, avoiding premature public disclosure of competitive research activities, and preventing potential unblinding of clinical trial results. For the CLARION trial, the delayed publication rule is particularly significant because the trial involves an investigational product (penterafenib) that has not yet received FDA approval, and the trial is expected to generate data over a five-year period.
Requirements for the Research Delayed Publication Rule. To qualify for delayed publication, the research payment must satisfy three conditions:
1. Written Research Agreement or Protocol. The payment must be made pursuant to a written agreement or protocol for the conduct of research. Here, the MCTA constitutes the written agreement, and Protocol PPC-4871-III constitutes the protocol. Both are documented, executed instruments that define the scope, terms, and conditions of the research to be conducted. This requirement is clearly satisfied.
2. Systematic Investigation Contributing to Generalizable Knowledge. The research must constitute a "systematic investigation, including research development, testing, and evaluation, designed to develop or contribute to generalizable knowledge." The CLARION trial is a Phase III, randomized, double-blind, placebo-controlled clinical trial designed to evaluate the safety and efficacy of penterafenib in a well-defined patient population, using rigorous scientific methodology, with results intended for submission to the FDA in support of a New Drug Application ("NDA") and for publication in peer-reviewed medical literature. This requirement is clearly satisfied.
3. ClinicalTrials.gov Registration. For clinical trials, the payment must be associated with a research study registered on ClinicalTrials.gov, and the applicable manufacturer must include the ClinicalTrials.gov identifier in its report. The CLARION trial is registered under ClinicalTrials.gov Identifier NCT05928174. This requirement is clearly satisfied.
Accordingly, the CLARION trial payments that qualify as research payments will be eligible for delayed publication, though they remain subject to the annual reporting requirement. Penterra must report these payments to CMS by the applicable annual deadline, but the data will not be made publicly available until the earlier of four years from the date of payment, FDA approval of penterafenib, or Penterra's notification to CMS that it is no longer pursuing approval.
B. Per-Patient Site Fees ($62,400,000)
The largest component of the MCTA budget is the per-patient site fee, totaling $62,400,000 for 1,200 subjects at $52,000 per subject. These fees are payable in four milestone-based installments of $13,000 each (at randomization, Week 12, Week 24, and final visit), and they compensate the clinical trial sites for the direct and indirect costs of conducting the study, including investigator time, study coordinator effort, institutional overhead, laboratory assessments, imaging studies, pharmacy services, and administrative support.
Classification: Research payment, reportable under the "research" nature of payment category. Delayed publication eligible under 42 C.F.R. § 403.904(g).
Reporting Approach:
The per-patient site fees present the most complex reporting challenge under the MCTA because the payments flow to site institutions (which may or may not be teaching hospitals), and a portion of the institutional payment may be allocated to individual physician investigators as compensation for their professional effort in conducting the trial.
To the extent payments flow to a teaching hospital — such as Graystone University Medical Center, Lakemont Medical Center, or any other Veridian Network site that appears on the CMS teaching hospital list — the payments are reportable as transfers of value to the teaching hospital covered recipient. Each payment must be reported under the teaching hospital's name and CMS-assigned teaching hospital identifier.
To the extent a portion of the institutional payment is allocated to an individual physician investigator — either through a direct investigator compensation arrangement with the institution or through an institutional pass-through mechanism — the allocated amount must be attributed to the individual physician covered recipient and reported separately under the physician's name, National Provider Identifier ("NPI"), and state medical license number.
Determining the allocation. Under the regulations, if an applicable manufacturer makes a payment to a teaching hospital, and a portion of that payment is subsequently paid by the teaching hospital to an individual physician (e.g., as faculty compensation for clinical trial effort), the applicable manufacturer's reporting obligation depends on whether the manufacturer knows or should know about the allocation. If Penterra makes a lump-sum per-patient site fee payment to a teaching hospital and does not direct, require, or instruct the institution to pay any specific portion to an individual physician, and if Penterra does not know the specific amount allocated to a physician, then the entire payment may be reported as a teaching hospital payment. However, if Penterra has knowledge of or directs the allocation — for example, through the budget line items in the MCTA or through the investigator agreements — then the physician-allocated portion must be reported as a payment to the individual physician.
Recommendation: Penterra should include, and has included in Exhibit H of the MCTA (Regulatory Compliance Representations and Covenants), a contractual covenant requiring Veridian and each participating site institution to provide Penterra with timely and detailed information regarding the allocation of per-patient site fee payments to individual investigators. This data-sharing obligation is essential to Penterra's ability to properly categorize and report payments under Open Payments. Specifically, each site should be required to identify: (a) the total amount of per-patient site fees received during the calendar year; (b) the amount of such fees allocated to each individual physician investigator at the site; and (c) the name, NPI, and state medical license number of each such physician. This information should be provided to Penterra no later than January 31 of the following calendar year to allow sufficient time for data compilation and submission by the March 31 reporting deadline.
C. Start-Up Fees ($2,850,000)
Each of the 38 participating Veridian Network sites will receive a start-up fee of $75,000, payable in two installments: $37,500 upon site activation and $37,500 upon enrollment of the first patient at the site. These fees are intended to compensate the site institution for the initial costs of preparing to conduct the study, including IRB/IEC submission and review, study-specific training of personnel, establishment of regulatory files, pharmacy set-up for investigational product handling, and site initiation visit coordination.
Classification: Research payment, reportable under the "research" nature of payment category. Delayed publication eligible.
Reporting Approach: Start-up fees are institutional operational payments paid to the site entity. They are not typically allocated to individual physician investigators, as they compensate the institution for infrastructure and preparatory costs rather than for physician professional effort. Accordingly, for sites that are teaching hospitals, these payments should be reported as transfers of value to the teaching hospital. For sites that are not teaching hospitals and are not otherwise covered recipients, these payments may not be reportable — subject to the analysis in Section VII.A below regarding payments to non-teaching hospital sites.
If any site does allocate a portion of the start-up fee to an individual physician — for example, as compensation for the site principal investigator's time in completing regulatory start-up activities — that portion would need to be identified and reported separately as a payment to the individual physician covered recipient.
D. Annual Site Maintenance Fees ($5,320,000)
Annual site maintenance fees of $40,000 per site per year, payable annually in advance on each anniversary of the site's activation date, are intended to compensate sites for the ongoing administrative and operational costs of maintaining active participation in the CLARION trial between patient visits, including regulatory file maintenance, ongoing IRB/IEC submissions, safety reporting, staff training updates, and institutional overhead.
Classification: Research payment, reportable under the "research" nature of payment category. Delayed publication eligible.
Reporting Approach: These fees are treated identically to start-up fees for reporting purposes. They are institutional payments and should be reported as transfers of value to the teaching hospital (for sites that qualify) or assessed for reportability based on institutional status (for non-teaching hospital sites). As with start-up fees, if any portion of the annual maintenance fee is allocated to an individual physician investigator, that portion must be reported separately under the physician's name. Penterra should obtain the same data-sharing information from sites for maintenance fees as for per-patient site fees.
E. Investigator Grants — Publication and Academic Support ($1,500,000)
The MCTA allocates $1,500,000 for grants to support investigator-initiated publications and academic activities related to the CLARION trial. These grants are disbursed to individual investigators upon the acceptance of manuscripts for publication in peer-reviewed scientific or medical journals. The anticipated primary recipients of these grants are Dr. Catherine Aldridge, Dr. Howard Matsuoka, and other investigators who serve as lead authors on study publications.
Classification: Research payment to covered recipients (individual physicians), reportable under the "research" nature of payment category. Delayed publication eligible.
Reporting Approach: Unlike the institutional payments discussed above, the investigator grants for publication and academic support are made directly to, or specifically on behalf of, individual physician investigators. They must be attributed to the specific physician recipient(s) and reported under the individual physician's name, NPI, and state medical license number.
Key Concern Regarding Timing: Because disbursement of these grants is contingent upon the acceptance of a manuscript for publication, the actual date of payment may differ from the date of manuscript acceptance. Under the Open Payments regulations, the reportable event is the date of payment — i.e., the date on which the transfer of value actually occurs (or, for purposes of research payments, the date the payment is made). Penterra should maintain records of both the manuscript acceptance date and the corresponding payment date to ensure accurate reporting. If a manuscript is accepted in one calendar year but the grant payment is not made until the following calendar year, the payment should be reported in the year of actual payment, not the year of acceptance.
Additionally, to the extent any publication-related grants are paid to an institution (e.g., a teaching hospital) on behalf of an individual investigator — for example, where the institution manages faculty academic accounts — the payment should be reported as a payment to the teaching hospital and/or the individual physician, depending on the structure of the disbursement and whether Penterra knows or should know the identity of the ultimate beneficiary.
F. Network Coordination/Administrative Fee ($4,200,000)
Penterra will pay Veridian Health Research Network, Inc. a quarterly network coordination and administrative fee of $300,000, for a total of $4,200,000 over 14 quarters. This fee compensates Veridian's central office for its role in coordinating the multi-site clinical trial, including site selection and qualification, centralized regulatory oversight, protocol training and dissemination, data quality monitoring, and administrative support.
Classification: This payment requires careful analysis. Veridian is a 501(c)(3) nonprofit corporation. It is not, in itself, a physician, a teaching hospital, or any other category of covered recipient. If Veridian does not appear on the CMS-published teaching hospital list — which it should not, as a network coordinating entity rather than a hospital — and if Veridian is not otherwise a covered recipient, then payments made directly to Veridian for its own coordination and administrative services are not reportable under Open Payments.
However, the analysis does not end there. If any portion of the $4,200,000 network coordination fee is passed through by Veridian to its member sites (teaching hospitals or institutions employing physician investigators), or if any portion is allocated to individual physicians who provide network-level coordination services, those downstream allocations may trigger reporting obligations for Penterra to the extent Penterra knows or should know of the pass-through.
Recommendation: Penterra should obtain written confirmation from Veridian, prior to the commencement of payments, regarding whether any portion of the quarterly network coordination fee is allocated, passed through, or otherwise transferred to (a) any teaching hospital member of the Veridian Network, or (b) any individual physician or other covered recipient. This confirmation should be obtained at the outset and updated annually. If Veridian confirms that the entire network coordination fee is retained by Veridian centrally to fund its own operational activities and is not passed through to covered recipients, then Penterra may reasonably conclude that these payments are not reportable. If, however, any pass-through exists, Penterra must identify the covered recipient recipients, determine the amounts attributable to each, and report accordingly.
G. Technology/EDC Integration Costs ($1,230,000)
A fixed amount of $1,230,000 is allocated under the MCTA for the integration of the electronic data capture platform provided by Pinnacle Data Solutions, Inc. ("Pinnacle"). These costs are paid directly by Penterra to Pinnacle pursuant to a separate technology services agreement.
Classification: Not reportable. Pinnacle Data Solutions, Inc. is a technology vendor. It is neither a physician, a teaching hospital, nor any other category of covered recipient under the Open Payments regulations. Payments to non-covered recipients are outside the scope of the reporting requirement.
Caveat: Penterra should confirm that no portion of the $1,230,000 is paid by Pinnacle to, or passed through to, any covered recipient — for example, as site-specific technology support fees, training honoraria to physician investigators, or equipment provided to teaching hospital sites. If any site-specific technology costs are billed through or allocated to individual sites, those amounts should be assessed for reportability based on the identity of the site (teaching hospital or not) and whether any portion is ultimately received by an individual physician or other covered recipient.
H. Contingency/Change Order Reserve ($2,500,000)
The MCTA includes a $2,500,000 contingency and change order reserve to cover unanticipated costs arising during the course of the study. As of the date of this memorandum, no amounts have been allocated or disbursed from this reserve.
Classification: Not currently reportable. Under the Open Payments regulations, the reporting obligation arises upon the actual payment or transfer of value, not upon the budgeting or earmarking of funds. Because no payments have been made from the contingency reserve, there is nothing to report at this time.
Prospective Obligation: When and if Penterra disburses funds from the contingency reserve, each disbursement must be evaluated at the time of payment to determine whether it constitutes a reportable transfer of value. The reportability will depend on the identity of the payee (whether a covered recipient or not), the purpose of the payment (whether related to research or another category), and whether the payment exceeds the applicable de minimis thresholds. Penterra should maintain a tracking log for all disbursements from the contingency reserve, capturing the same data elements required for all reportable payments.
I. Payments Under Investigator Agreements
In addition to the institutional payments under the MCTA, Penterra has entered into separate investigator agreements with the Global Principal Investigator, Dr. Catherine Aldridge, and the Co-Principal Investigator, Dr. Howard Matsuoka. These agreements provide for compensation for the following categories of services:
• Professional effort in overseeing the conduct of the CLARION trial across the Veridian Network (for Dr. Aldridge, as Global PI) or at Lakemont Medical Center and affiliated sites (for Dr. Matsuoka, as Co-PI)
• Consulting services related to protocol design, endpoint selection, and statistical analysis plan development
• Scientific advisory services, including participation in Data Safety Monitoring Board briefings, Steering Committee meetings, and regulatory strategy discussions
• Protocol development contributions, including review and revision of the study protocol, informed consent documents, and case report forms
Compensation under each investigator agreement has been established at fair market value based on an independent valuation conducted by Penterra's internal FMV methodology, benchmarked against external survey data, and validated by the Company's compliance department. The specific compensation amounts are set forth in the individual agreements and are not reproduced in this memorandum for confidentiality reasons.
Classification: Research payments to covered recipients (individual physicians). Each payment under the investigator agreements must be reported under the specific physician's name, NPI, and state medical license number, and categorized under the "research" nature of payment classification. Delayed publication eligible.
Distinguishing Research Payments from Other Categories: It is important to note that while the predominant purpose of the investigator agreements relates to the conduct of the CLARION clinical trial, certain components of the compensation may relate to services that extend beyond the scope of the clinical trial protocol. For example:
• If Dr. Aldridge or Dr. Matsuoka participates in an advisory board meeting that addresses Penterra's broader clinical development strategy for penterafenib (beyond the CLARION trial specifically) or for other Penterra products, the compensation for that service may more properly be categorized as a "consulting fee" rather than a "research" payment.
• If either investigator is engaged to deliver a speaking engagement on behalf of Penterra at a medical conference, that compensation should be categorized as "compensation for services other than consulting, including serving as faculty or as a speaker at a venue other than a continuing education program."
• If either investigator receives a travel and lodging reimbursement for attending an investigator meeting related to the CLARION trial, that reimbursement is a research payment. However, if travel and lodging are provided for attendance at a non-trial-related advisory board, the category may differ.
Penterra should work with its compliance team to disaggregate investigator compensation by service type and assign the appropriate nature of payment category to each component. Blanket classification of all investigator compensation as "research" may be inappropriate if a portion of the services rendered falls outside the research context.
V. Reporting Mechanics and Timing
A. Annual Reporting Cycle
Under 42 C.F.R. § 403.904, applicable manufacturers must submit Open Payments reports to CMS on an annual basis. The report for each calendar year must be submitted by the 90th day of the following calendar year — typically March 31, unless CMS extends the deadline or the 90th day falls on a weekend or federal holiday.
For the CLARION trial, the relevant reporting timeline is as follows:
• First Reporting Period: The MCTA effective date is July 18, 2023, and the target FPI is August 14, 2023. Payments made to covered recipients from July 18, 2023, through December 31, 2023, must be included in the calendar year 2023 report, which will be due to CMS by March 31, 2024. The first payments likely to be made in this period include start-up fees (upon site activation and first patient enrollment), early milestone-based per-patient site fees (upon randomization of initial subjects), and quarterly network coordination fees.
• Subsequent Reporting Periods: Penterra will have ongoing annual reporting obligations for each calendar year in which payments are made under the MCTA and investigator agreements. Given the 60-month projected duration of the CLARION trial (through approximately August 2028), and assuming payments continue through study close-out and final database lock, Penterra's reporting obligations may extend through the calendar year 2029 report (due March 31, 2030), or later if final payments are made after study completion.
Penterra should establish a reporting calendar that aligns with the annual Open Payments submission cycle, with internal milestones for data collection, reconciliation, review, and submission. Key milestones for each cycle should include:
• December 31 — End of reporting period; close of data collection for the calendar year
• January 31 — Deadline for receipt of allocation data from Veridian and individual sites
• February 15 — Completion of internal reconciliation and quality review
• March 1 — Submission of draft report for legal review
• March 15 — Final review and approval by Rebecca Liang, Esq. and Nathaniel Briggs, Esq.
• March 31 — Submission to CMS
B. Data Elements Required for Each Reportable Payment
For each reportable payment or transfer of value, the applicable manufacturer must submit to CMS the following data elements, as specified in 42 C.F.R. § 403.904(c)–(d):
For Payments to Physicians and Non-Physician Practitioners:
1. Name of the covered recipient (full legal name as it appears on the physician's medical license)
2. Business address of the covered recipient (primary practice or institutional address)
3. National Provider Identifier (NPI) of the covered recipient
4. State medical license number(s) of the covered recipient, including the state(s) of licensure
5. Specialty of the covered recipient
6. Amount of payment or transfer of value (in U.S. dollars)
7. Date of payment
8. Form of payment (e.g., cash or cash equivalent, in-kind items or services, stock, stock option, or any other ownership interest, dividend, profit, or other return on investment)
9. Nature of payment (one of the following categories: consulting fee; compensation for services other than consulting, including serving as faculty or as a speaker at a venue other than a continuing education program; honorarium; gift; entertainment; food and beverage; travel and lodging; education; research; charitable contribution; royalty or license; current or prospective ownership or investment interest; directly or indirectly from a covered recipient through a third party; grant; space rental or facility fees; or any other nature of payment)
10. If the nature of payment is "research":
a. Name of the research study or project (CLARION — Clinical Assessment of Response with Longitudinal Investigation in ONcology)
b. ClinicalTrials.gov identifier (NCT05928174)
c. Research indication or therapeutic area (advanced hepatocellular carcinoma, second-line)
d. Name of the entity or individual receiving the research funding (Veridian Health Research Network, Inc.; individual site institutions; individual physician investigators)
e. Name of the principal investigator (Dr. Catherine Aldridge, M.D., Ph.D.)
f. Contextual information about the research, as required under CMS guidelines
11. Name of the associated covered drug, device, biological, or medical supply (penterafenib / PPC-4871)
12. Whether the product is covered (approved and reimbursable) or not yet covered (investigational)
13. Program year
14. Any additional contextual information permitted by CMS to provide context for the reported payment
For Payments to Teaching Hospitals:
The data elements are similar to those for physician payments, but substitute the teaching hospital's name, address, and CMS-assigned teaching hospital identifier for the physician-specific identifiers (NPI, state license, and specialty).
C. Disputed and Corrected Reports
Following Penterra's annual submission of Open Payments data, CMS initiates a 45-day review and dispute period during which covered recipients (physicians and teaching hospitals) are given the opportunity to review the data reported about them and to dispute any inaccuracies. CMS notifies covered recipients that data has been reported and provides access to the reported information through the Open Payments system.