PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION This memorandum is a privileged and confidential communication prepared by Calderwood & Harkness LLP at the direction of Solstice Biomedical Devices Ltd. and its subsidiaries. It is protected by the attorney-client privilege and the work product doctrine. Any unauthorized disclosure, copying, or distribution of this memorandum is strictly prohibited. If you have received this memorandum in error, please contact Sean Morrissey at Calderwood & Harkness LLP immediately.
CALDERWOOD & HARKNESS LLP 1250 Avenue of the Americas, 38th Floor New York, NY 10020
MEMORANDUM
From: Sean Morrissey, Associate, Healthcare & Life Sciences Practice Group, Calderwood & Harkness LLP
To: Declan Harrington, General Counsel & Company Secretary, Solstice Biomedical Devices Ltd. Siobhán Mulcahy, Head of Global Compliance (interim US Compliance Officer), Solstice Biomedical Devices Ltd.
Reviewed by: Amy Whitfield, Lead Associate, Healthcare & Life Sciences Practice Group, Calderwood & Harkness LLP Joel Strauss, Partner, Healthcare & Life Sciences Practice Group, Calderwood & Harkness LLP
Date: July 15, 2024
Re: Physician Payments Sunshine Act (Open Payments) Compliance Framework — Solstice Biomedical Inc.
Matter No.: 1037-00003
TABLE OF CONTENTS
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I. Executive Summary
This memorandum addresses the obligations of Solstice Biomedical Inc. ("SBI" or "Solstice US"), a Delaware corporation (EIN: 93-4718206) and wholly owned US subsidiary of Solstice Biomedical Devices Ltd. ("SBD" or the "Parent"), under the Physician Payments Sunshine Act, 42 U.S.C. § 1320a-7h (the "Sunshine Act"), and the implementing regulations promulgated by the Centers for Medicare & Medicaid Services ("CMS") at 42 C.F.R. §§ 403.900–403.914 (collectively, the "Open Payments Program"). This memorandum is intended to provide Declan Harrington and Siobhán Mulcahy with a comprehensive legal analysis and practical compliance framework as SBI prepares for the commercial launch of its first US product.
SBI is preparing for the October 1, 2024 US commercial launch of the Pulsar™ CRM System, an FDA 510(k)-cleared (No. K232847, cleared February 9, 2024) Class II subcutaneous implantable cardiac monitor with an integrated remote telemetry platform. As a manufacturer of a covered device for which payment is available under Medicare or a state Medicaid plan, SBI will become an "applicable manufacturer" subject to annual reporting of payments and other transfers of value to covered recipients — principally, physicians (including cardiologists and electrophysiologists who will be the primary users of the Pulsar™ system) and teaching hospitals.
Based on our review of SBI's planned commercial activities, physician engagement programs, and the existing distribution arrangement with Ascendant Distribution Solutions LLC ("ADS"), Calderwood & Harkness estimates that SBI's Year-1 reportable transfers of value will total approximately $650,000, encompassing consulting fees to key opinion leaders, speaker program honoraria, meals and hospitality provided at educational and promotional events, travel and lodging reimbursements, and educational grants. This figure reflects both the partial CY2024 period (October 1 through December 31, 2024) and the anticipated full CY2025 operations, though the first CMS reporting obligation will cover only the CY2024 data.
SBI submitted its CMS Manufacturer ID application through the CMS Enterprise Portal in June 2024, and that application is currently pending. Confirmation of an active Manufacturer ID is a prerequisite to submitting Open Payments data; accordingly, we recommend immediate follow-up with CMS to ensure activation before the October 1, 2024 launch date.
This memorandum provides the following:
(a) A comprehensive statutory and regulatory overview of the Sunshine Act and the CMS Open Payments Program;
(b) An analysis of SBI's status as an applicable manufacturer and the scope of its reporting obligations;
(c) A detailed categorization and dollar-estimate analysis of anticipated reportable transfers of value across all planned physician engagement activities;
(d) An examination of distributor pass-through reporting obligations arising from the ADS Distribution Agreement, including recommended contractual amendments;
(e) Data-collection and tracking system recommendations, including centralized platform specifications, NPI collection protocols, and internal controls; and
(f) A phased implementation timeline keyed to the October 1, 2024 launch and the March 31, 2025 CMS reporting deadline for CY2024 data.
Throughout this memorandum, we have identified specific action items and recommendations, which are consolidated in Section X. We have also identified interactions between the Sunshine Act and other compliance requirements — including the federal Anti-Kickback Statute, state aggregate spend and marketing disclosure laws, and the AdvaMed Code of Ethics — that will require coordinated attention as SBI builds its US compliance infrastructure. Separate Calderwood & Harkness memoranda address those related topics in greater detail.
II. Statutory and Regulatory Background
A. The Physician Payments Sunshine Act — Legislative Framework
The Physician Payments Sunshine Act was enacted as Section 6002 of the Patient Protection and Affordable Care Act ("ACA"), Pub. L. No. 111-148, 124 Stat. 119 (2010), and is codified at 42 U.S.C. § 1320a-7h. Congress enacted the Sunshine Act based on findings that financial relationships between manufacturers of covered products and physicians, while often serving legitimate purposes such as product development, medical education, and clinical research, can also create conflicts of interest that may influence clinical decision-making and erode public trust in the healthcare system. The legislative history reflects Congress's determination that transparency — achieved through public disclosure of these financial relationships — would serve as a mechanism to deter inappropriate relationships while allowing the public and patients to evaluate potential conflicts.
The Sunshine Act requires "applicable manufacturers" of covered drugs, devices, biologicals, and medical supplies to report annually to CMS certain payments and other transfers of value made to "covered recipients," which the statute defines as physicians and teaching hospitals. The reported data is made publicly available through the CMS Open Payments website, allowing patients, researchers, journalists, and other stakeholders to search for and review financial relationships between specific manufacturers and specific physicians or teaching hospitals.
CMS published implementing regulations in the Federal Register on February 8, 2013 (78 Fed. Reg. 9458), codified at 42 C.F.R. Part 403, Subpart I (§§ 403.900–403.914). These regulations define key terms, establish reporting procedures and timelines, describe the data fields required for each reported transfer of value, set forth the review and dispute resolution process, and outline the civil monetary penalty framework for non-compliance. CMS has subsequently amended the regulations on several occasions, most notably to expand the definition of "covered recipient" to include certain non-physician practitioners beginning with CY2022 data. CMS also publishes annual guidance documents, frequently asked questions, and reporting templates that supplement the regulatory text.
The Sunshine Act operates alongside, but is legally distinct from, other federal healthcare fraud and abuse statutes, including the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the False Claims Act (31 U.S.C. §§ 3729–3733), and the Stark Law physician self-referral prohibition (42 U.S.C. § 1395nn). Compliance with the Sunshine Act's reporting requirements does not create a safe harbor under any of these other statutes, nor does it validate the legality of any underlying payment. Conversely, the Sunshine Act's transparency mandate means that reported payments become part of the public record, which may be reviewed by federal and state enforcement authorities, institutional compliance offices, and private litigants. This dual nature of the Sunshine Act — as both a transparency statute and a de facto enforcement tool — underscores the importance of accurate and complete reporting.
B. Definition of "Applicable Manufacturer"
Under 42 C.F.R. § 403.902, an "applicable manufacturer" is defined as an entity that is operating in the United States and that meets one of two criteria:
(1) The entity is engaged in the production, preparation, propagation, compounding, or conversion of a covered product; or
(2) The entity is under common ownership with an entity described in clause (1) and provides assistance or support to such entity with respect to a covered product of that entity.
The term "operating in the United States" is broadly construed by CMS to include any entity that has a physical presence in the United States or that otherwise conducts business activities within the United States, including through subsidiaries, affiliates, distributors, or agents. CMS has clarified in its guidance that a foreign parent company may itself be deemed an applicable manufacturer if it directly engages US-licensed physicians or makes transfers of value to US-based covered recipients.
Analysis — SBI's Status: SBI, as the US subsidiary of SBD and the entity responsible for US commercialization, marketing, sales, and distribution of the Pulsar™ CRM System, clearly qualifies as an applicable manufacturer under the first prong of the definition. SBI is the entity that holds the US distribution rights, employs the US commercial team, enters into physician consulting and speaker agreements, and will sponsor the educational and promotional programs giving rise to transfers of value. The Pulsar™ CRM System is a "covered device" — it is a Class II medical device (FDA Product Code MHX), cleared under the 510(k) pathway (K232847, cleared February 9, 2024), for which payment is available under Title XVIII (Medicare) or under a state plan under Title XIX (Medicaid). Specifically, subcutaneous implantable cardiac monitors are reimbursable under established Medicare payment categories for cardiac rhythm management devices, and state Medicaid programs similarly provide coverage for such devices when medically necessary.
Parent Entity Considerations: SBD, the Irish parent company, may also be deemed an applicable manufacturer if it directly engages US-licensed physicians or makes transfers of value to US-based covered recipients. This could occur, for example, if SBD physicians based in Ireland invite US cardiologists to attend international medical congresses, provide consulting fees to US physicians for global advisory board participation, or fund research conducted by US-based investigators. To mitigate the risk of dual reporting obligations and potential inconsistencies, we recommend that SBI serve as the sole reporting entity for all US-directed payments and transfers of value, regardless of whether such payments originate from SBI's own budget or are funded by SBD and passed through SBI. This approach requires clear internal protocols to ensure that all SBD-initiated transfers to US covered recipients are captured and reported by SBI.
C. Definition of "Covered Recipient"
The Sunshine Act and its implementing regulations define "covered recipient" in two categories:
Physicians. Under the original statutory text, a "covered recipient" included any individual who is legally authorized to practice medicine or osteopathy by a state. CMS expanded this definition in the implementing regulations to encompass physicians, dentists, podiatrists, optometrists, and chiropractors. Beginning with CY2022 data (reported in 2023), CMS further expanded the definition of covered recipient to include the following non-physician practitioners, pursuant to section 6111 of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), Pub. L. No. 115-271:
•  Physician assistants;
•  Nurse practitioners;
•  Clinical nurse specialists;
•  Certified registered nurse anesthetists;
•  Anesthesiologist assistants; and
•  Certified nurse-midwives.
This expanded definition is significant for SBI because certain non-physician practitioners — particularly nurse practitioners and physician assistants practicing in cardiology — may attend SBI-sponsored events, receive meals, or participate in educational programs. Any transfers of value to such individuals must be tracked and reported.
Teaching Hospitals. A "teaching hospital" for purposes of the Open Payments Program is a hospital that receives payments under 42 U.S.C. § 1395ww(d)(5)(B) (indirect medical education payments) or under 42 U.S.C. § 1395ww(h) (direct graduate medical education payments) during the most recently available calendar year. CMS publishes an annual list of teaching hospitals. Transfers of value made directly to a teaching hospital — such as educational grants, research funding, or in-kind contributions — are reportable.
Relevance for SBI: The physician consultants (key opinion leaders or "KOLs"), speaker program participants, and attendees at SBI-sponsored educational and promotional events will be predominantly cardiologists and electrophysiologists — all of whom are physicians legally authorized to practice medicine by their respective states and therefore covered recipients. In addition, some SBI-sponsored events may be attended by physician assistants or nurse practitioners who work in electrophysiology practices, and these individuals also constitute covered recipients under the expanded definition. SBI must implement processes to identify the covered-recipient status of every individual to whom it provides a transfer of value, including through NPI collection and verification, as discussed in Section VI.C below.
D. "Transfer of Value" — Definition and Scope
42 C.F.R. § 403.902 defines a "transfer of value" broadly as anything of value provided by an applicable manufacturer (or an entity acting on its behalf) to a covered recipient, whether provided directly or indirectly. The regulations enumerate a non-exhaustive list of examples, including:
•  Compensation for services (consulting fees, honoraria);
•  Gifts;
•  Food and beverage (meals);
•  Travel and lodging;
•  Education;
•  Research payments;
•  Charitable contributions;
•  Royalties or licenses;
•  Current or prospective ownership or investment interests;
•  Grants;
•  Entertainment;
•  In-kind items and services; and
•  Any other economic benefit.
The breadth of the definition is intentional. CMS has consistently taken the position that virtually any economic benefit flowing from an applicable manufacturer to a covered recipient is a "transfer of value" subject to reporting, unless it falls within one of the specific statutory or regulatory exclusions.
Exclusions. Under 42 C.F.R. § 403.904(g), certain categories of transfers of value are excluded from reporting:
(1) Product samples that are not intended to be sold and are intended for patient use;
(2) Educational materials that directly benefit patients or are intended for patient use, such as anatomical models or informational brochures;
(3) Short-term medical supply or device loans of covered products for evaluation by a covered recipient, lasting no longer than 90 days, provided the manufacturer does not condition the loan on the purchase of any product;
(4) Items or services under $12.49 (CY2024 threshold, adjusted annually for inflation), unless the aggregate of all transfers to a single covered recipient during the calendar year equals or exceeds $100;
(5) discounts, including rebates;
(6) In-kind items used solely for the provision of charity care;
(7) Dividends or other profit distributions from, or ownership or investment interests in, a publicly traded security or mutual fund;
(8) Transfers of value to a covered recipient when the covered recipient is a patient and not acting in a professional capacity; and
(9) Certain other narrow exclusions.
SBI should note that these exclusions are narrowly construed. For example, the product samples exclusion does not extend to demonstration units or devices provided for the physician's personal evaluation rather than for patient use. The educational materials exclusion requires that the materials directly benefit patients — promotional materials or marketing collateral do not qualify. When in doubt, SBI should err on the side of reporting.
E. Reporting Thresholds — CY2024
CMS adjusts the minimum reporting thresholds annually for inflation pursuant to 42 C.F.R. § 403.904(g)(1). For CY2024 data (the first reporting year relevant to SBI), the thresholds are as follows:
•  Per-instance threshold: A transfer of value must be reported if it equals or exceeds $12.49 per instance.
•  Annual aggregate threshold: Even if an individual transfer falls below the $12.49 per-instance threshold, the transfer must be reported if the aggregate of all transfers to a single covered recipient during the calendar year equals or exceeds $100.
Practical Effect for SBI: Given the nature and magnitude of SBI's planned transfers of value, the reporting thresholds will have minimal practical effect on the scope of SBI's reporting obligations. SBI's planned consulting fees range from $350 to $500 per hour, speaker honoraria are set at $1,500 per live presentation and $750 per virtual presentation, and per-person meal caps are set at $150 per attendee per event. Virtually every individual transfer of value will exceed the $12.49 per-instance threshold by a significant margin. Even modest meal expenditures at speaker programs or advisory board meetings — where a per-person meal cost might be as low as $40 to $60 — will substantially exceed the per-instance threshold. As a practical matter, all covered-recipient interactions should be tracked and reported, and SBI's compliance processes should not rely on threshold exemptions to exclude any transfer from the tracking system. It is far more efficient and reliable to track everything and confirm reportability at the reconciliation stage than to attempt real-time threshold determinations in the field.
III. SBI's Anticipated Reportable Transfers of Value — Year 1 Analysis
A. Overview of Estimated Total Reportable Transfers
Based on our review of SBI's proposed commercial plan, physician engagement strategy, and the budget projections provided by Marcus Reilly (VP US Commercial Operations) and Patrick Dunne (Marketing), Calderwood & Harkness estimates that SBI's total reportable transfers of value for Year 1 of US commercial operations will be approximately $650,000. This figure encompasses all categories of reportable transfers — consulting fees, speaker honoraria, meals and hospitality, travel and lodging, and educational grants — and accounts for both the partial CY2024 period (October 1 through December 31, 2024) and the anticipated ramp-up to full-year operations in CY2025.
For purposes of CMS reporting, the critical distinction is the calendar year. CY2024 data (October 1, 2024 through December 31, 2024, representing SBI's first three months of commercial activity) must be reported to CMS by March 31, 2025. CY2025 data (January 1 through December 31, 2025) must be reported to CMS by March 31, 2026. Calderwood & Harkness estimates that the CY2024 portion of total Year-1 transfers will be approximately $140,000 to $180,000, reflecting the partial-year launch period and the ramp-up of physician engagement activities.
The following subsections analyze each category of anticipated reportable transfer in detail.
B. Physician Consulting Agreements (Key Opinion Leaders)
SBI plans to engage up to 35 physician consultants during Year 1 to provide advisory and consulting services in connection with the Pulsar™ CRM System. These consultants, commonly referred to as key opinion leaders ("KOLs"), will be selected based on their expertise in cardiac rhythm management, electrophysiology, and subcutaneous implantable cardiac monitoring. Their services may include participation in advisory board meetings, review of clinical data and marketing materials, input on product development and feature enhancement, assistance with clinical training programs for implanting physicians, and other bona fide consulting services.
Compensation Structure. Consultant compensation will be structured at an hourly rate of $350 to $500, tiered by specialty focus, academic rank, and the nature of the consulting engagement. This hourly rate has been benchmarked against fair market value ("FMV") surveys and is consistent with rates paid by comparable medical device manufacturers for consulting services of similar scope and complexity, as documented in SBI's FMV analysis prepared with the assistance of Meridian Consulting Group LLC. Each physician consulting agreement will include an annual per-consultant cap of $12,000, which serves as both a budget control measure and a compliance safeguard to mitigate the risk that aggregate payments to any single physician reach levels that could raise Anti-Kickback Statute concerns.
Aggregate Exposure. The maximum aggregate consulting fee exposure for Year 1 is 35 consultants × $12,000 per consultant = $420,000. However, actual consulting expenditures during the partial CY2024 period (October through December 2024) are expected to be significantly lower, as many consulting arrangements will not be fully ramped up until CY2025. Calderwood & Harkness estimates CY2024 consulting fee expenditures in the range of $80,000 to $120,000.
Reporting Category. Payments to physician consultants are reportable under the CMS Open Payments "Consulting Fee" category. Each payment must be reported with the following specificity: the consulting physician's full name, National Provider Identifier (NPI), specialty, the associated covered product (Pulsar™ CRM System), the date of each payment, the amount of each payment, and the form of payment (e.g., check, electronic funds transfer). If a single consulting agreement involves multiple payment events, each individual payment constitutes a separate reportable transfer.
Documentation. Each consulting arrangement must be documented in a written consulting agreement that specifies the legitimate business need for the services, the scope of work, the hourly rate, the annual cap, and the payment terms. SBI's template Physician Consulting Agreement, which Calderwood & Harkness reviewed in connection with Matter No. 1037-00003, includes the required provisions and should be used without material modification for all KOL engagements.
C. Speaker Programs
SBI's Year-1 commercial plan includes a robust speaker program designed to educate practicing cardiologists and electrophysiologists about the clinical benefits, implantation techniques, and remote monitoring capabilities of the Pulsar™ CRM System.
Planned Program Volume. SBI plans to conduct a total of 180 speaker programs during Year 1, comprising 120 live (in-person) programs and 60 virtual programs. These programs will be organized by SBI's marketing team under the direction of Patrick Dunne, with logistical support from territory managers and regional directors in each geography.
Speaker Honoraria. Physicians selected as speakers will receive honoraria at the following rates: $1,500 per live (in-person) presentation and $750 per virtual presentation. These rates have been benchmarked to FMV and are consistent with industry standards for peer-to-peer medical education programs in the cardiac rhythm management space. Each speaker will be subject to an annual per-speaker cap of $18,000, which accommodates up to 12 live programs or 24 virtual programs (or an equivalent combination) per speaker per calendar year.
Estimated Total Speaker Program Spend on Honoraria. The estimated total Year-1 expenditure on speaker honoraria is calculated as follows:
•  Live programs: 120 programs × $1,500 per program = $180,000
•  Virtual programs: 60 programs × $750 per program = $45,000
•  Total estimated Year-1 speaker honoraria: $225,000
As with consulting fees, the CY2024 portion of this total will reflect the partial-year launch period. Assuming approximately 30 live programs and 15 virtual programs during October through December 2024, the CY2024 speaker honoraria expenditure would be approximately $56,250.
Reporting Category. Speaker honoraria are reportable under the CMS Open Payments category "Compensation for services other than consulting, including serving as faculty or as a speaker at a venue other than a continuing education program." CMS distinguishes between consulting fees (for advisory and consulting services) and honoraria (for speaking and presentation services), and SBI must ensure that each payment is classified in the correct category.
Attendee-Level Reporting. Critically, each speaker program triggers reporting obligations not only for the speaker but also for any covered recipient attendee who receives a transfer of value at the event. This includes meals and beverages provided to physician attendees, any educational materials that do not qualify for the patient-benefit exclusion, and any other item of value. This means that a single speaker program with 20 physician attendees who are served a meal could generate 21 separate reportable transfers: one honorarium payment to the speaker and 20 meal transfers to the attendees. The data-collection implications of this requirement are significant and are addressed in Section VI below.
D. Meals and Hospitality
Meals and hospitality provided to covered recipients in connection with SBI-sponsored events, programs, and business interactions constitute one of the highest-volume categories of reportable transfers.
Per-Person Cap. SBI has adopted a per-person meal cap of $150 per attendee per event, which is aligned with the AdvaMed Code of Ethics (2020 Revision) guidance on modest meals. This cap applies to all meals provided at speaker programs, advisory board meetings, product training events, and other SBI-sponsored occasions. The $150 cap includes the cost of food and beverages (including tax and gratuity) allocated to each individual covered recipient.
Reporting Category. Meals provided to covered recipients are individually reportable under the CMS Open Payments "Food and Beverage" category. CMS requires that each meal be attributed to the specific covered recipient who received it — that is, the cost must be "allocated" on a per-person basis rather than reported as an aggregated total for the event. This is one of the most operationally challenging aspects of Open Payments compliance, as it requires SBI to track not merely the total cost of a meal at a given event but the portion of that cost attributable to each individual covered recipient in attendance.
Allocation Methodology. Where meals are provided in a group setting (e.g., a buffet dinner at a speaker program), SBI must implement an allocation methodology that assigns a per-person cost to each covered recipient. CMS permits pro-rata allocation — dividing the total meal cost by the number of attendees — when itemized per-person costs are not available. However, the pro-rata allocation must include only the covered-recipient attendees and any non-covered-recipient attendees (e.g., SBI employees, industry representatives) who consumed the meal. SBI should document the allocation methodology used for each event.
Tracking Requirements. To support accurate per-person allocation, SBI must implement the following at every event where meals are provided to covered recipients:
(i) Attendee sign-in sheets capturing each attendee's full name, professional credentials, NPI (for covered recipients), and affiliation;
(ii) Itemized meal cost documentation from the venue or caterer; and
(iii) Post-event reconciliation within 10 business days to calculate per-person meal costs and enter data into the aggregate spend tracking system.
These requirements apply not only to formal dinner programs but also to any occasion where SBI personnel provide meals to covered recipients, including working lunches during advisory board meetings, light refreshments at product training sessions, and meals provided in a clinical setting during product demonstrations.
E. Travel and Lodging
SBI will provide travel reimbursement and lodging for physician consultants traveling to advisory board meetings, speaker training sessions, and other SBI-sponsored events that require out-of-town travel.
Reporting Category. Travel and lodging expenses paid or reimbursed by SBI on behalf of covered recipients are reportable under the CMS Open Payments "Travel and Lodging" category. Each reported transfer must include the actual amount paid or reimbursed, the date(s) of travel, and the associated covered product. Where SBI books travel directly (e.g., through a corporate travel agency), the cost attributable to the covered recipient's travel is the reportable amount. Where the covered recipient books travel independently and submits receipts for reimbursement, the reimbursed amount is reportable.
Policy Considerations. SBI's travel and lodging policies should specify permissible travel classes (e.g., economy or premium economy air travel for domestic flights), hotel rate caps (consistent with GSA per diem rates or comparable industry benchmarks), and reimbursable expense categories (e.g., ground transportation, parking, but not personal incidentals or spouse travel). These policies should be documented in the standalone Open Payments Reporting Policy discussed in Section VIII.D and should be consistent with AdvaMed Code guidance on travel and lodging for healthcare professionals.
F. Educational Grants
SBI may elect to provide grants to support independent continuing medical education ("CME") programs or other educational activities related to cardiac rhythm management, subcutaneous cardiac monitoring, or related clinical topics. Educational grants are a common practice in the medical device industry and serve the legitimate purpose of advancing medical knowledge and improving patient care.
Reporting Category. If SBI provides a grant to an entity that is a teaching hospital, the transfer is reportable under the CMS Open Payments "Grant" category, with the teaching hospital identified as the covered recipient. If the grant recipient is an accredited CME provider that is not a teaching hospital (e.g., a medical specialty society or a commercial CME company), the transfer may not be reportable under the Sunshine Act — but SBI should nonetheless track the payment for purposes of state aggregate spend laws and internal compliance records.
Independence Requirements. Grants to accredited CME providers where SBI has no control over content, speaker selection, or attendee lists may qualify for a limited exclusion from certain reporting requirements. However, CMS has clarified that the payment itself — the grant to a teaching hospital — remains reportable even if the underlying educational activity is independently managed. The exclusion pertains only to the characterization of the payment (as a bona fide educational grant rather than as a promotional expenditure) and to the association of the payment with specific covered products, which may be reported as "unrelated to any product" if the CME accreditor certifies independence.
Grants Committee. SBI should establish a grants committee composed of individuals from medical affairs and compliance who are independent from the commercial organization. The grants committee should be responsible for reviewing all educational grant applications, evaluating them based on objective criteria (scientific merit, unmet educational need, accreditation status of the provider), and approving or denying applications without input from sales or marketing personnel. The grants committee's decisions and rationale should be documented. This structure not only supports Sunshine Act compliance but also mitigates Anti-Kickback Statute risk by demonstrating that educational grants are not being used as a vehicle for channeling remuneration to referring physicians.
G. Research Payments and Clinical Studies
If SBI sponsors any US-based post-market clinical studies related to the Pulsar™ CRM System, payments to principal investigators, sub-investigators, research coordinators, research institutions, and associated clinical study costs are reportable under the CMS Open Payments "Research" category. Research payments encompass direct compensation to physician investigators as well as payments made to the institutions where research is conducted, including per-patient enrollment fees, site initiation payments, and institutional overhead.
Delayed Publication. CMS regulations provide that research payments may be reported as "delayed" for a period of up to four years from the date of payment if the payment is related to an ongoing, bona fide clinical study. During the delayed period, the payment amount is disclosed to CMS but is not published on the Open Payments website. This provision is designed to protect the integrity of blinded clinical studies and to prevent premature disclosure of research relationships that could introduce bias. At the conclusion of the clinical study (or after four years, whichever is earlier), the previously delayed payments are published in full.
Current Relevance for SBI. Research payments are not currently a major category for SBI in CY2024. SBI has not yet initiated any US-based post-market clinical studies, and the Year-1 commercial plan does not include sponsored research activities. However, SBI may initiate post-market studies in CY2025 or CY2026, and the aggregate spend tracking infrastructure should be designed to accommodate research payment tracking from the outset. Calderwood & Harkness recommends that research payment tracking capabilities be built into the centralized tracking platform selected by SBI, even if they are not utilized during the initial launch period.
IV. CMS Manufacturer Registration and Reporting Mechanics
A. CMS Manufacturer ID — Application Status
Every applicable manufacturer must register with CMS through the CMS Enterprise Portal and obtain a unique CMS Manufacturer ID before it can submit Open Payments data. SBI submitted its CMS Manufacturer ID application in June 2024, and the application is currently pending. Theresa Brennan (US Regulatory Affairs) has been designated as SBI's primary point of contact for the registration process.
Without a valid CMS Manufacturer ID, SBI cannot access the Open Payments submission system and cannot upload or enter transfer-of-value data. Given that SBI's first reportable transfers will begin on October 1, 2024, and the CMS submission deadline for CY2024 data is March 31, 2025, it is critical that SBI's Manufacturer ID be confirmed as active well before the launch date. A delay in registration could create logistical complications during the data-submission process, even if it does not ultimately prevent timely filing.
Recommendation: SBI should immediately follow up with CMS to confirm the status of its Manufacturer ID application. If the application has not been processed by August 15, 2024, SBI should escalate the inquiry through available CMS contact channels and consider engaging Calderwood & Harkness to make a direct inquiry on SBI's behalf. Theresa Brennan should monitor the CMS Enterprise Portal weekly for updates on the application status.
B. Reporting Timeline
The CMS Open Payments reporting cycle follows the calendar year. The key dates for SBI's first reporting cycle are as follows:
Data collection period for CY2024: January 1, 2024 through December 31, 2024. For SBI, the relevant period begins on October 1, 2024 (the US commercial launch date), as SBI will not be making transfers of value to covered recipients in connection with the Pulsar™ CRM System before that date. However, any transfers made before the launch date in connection with pre-launch activities (e.g., advisory board meetings held in September 2024 to prepare for the launch) may also be reportable if they involve SBI as the payor and relate to a covered product. SBI should consult with Calderwood & Harkness regarding any pre-launch physician engagement activities.
Submission deadline to CMS: March 31, 2025 for CY2024 data. This is a firm statutory deadline. CMS does not grant extensions except in extraordinary circumstances (e.g., natural disasters).
Review and dispute period: Following submission, CMS processes the data and makes it available to the identified covered recipients for a 45-day review and dispute period, typically beginning in mid-to-late April or early May. During this period, covered recipients can log into the Open Payments system, review the transfers attributed to them, and initiate disputes if they believe any data is inaccurate. SBI will be notified of any disputes and must respond within the timeframe specified by CMS. Unresolved disputes are noted in the published data.
Public release of CY2024 data: CMS publishes the data on the Open Payments website in late June 2025 (typically the last Thursday in June), following the conclusion of the review and dispute period.
Internal Deadlines. To ensure timely and accurate submission, SBI should build an internal reporting timeline with the following milestones:
This internal timeline provides a two-week buffer before the CMS deadline, which allows time to address any technical issues with the CMS submission portal, correct data errors identified during the legal/compliance review, and resolve any discrepancies between SBI's records and ADS's monthly data feeds.
C. Reporting Format and Data Fields
CMS requires submission of Open Payments data through the CMS Open Payments system, which is accessible via the CMS Enterprise Portal. Data may be submitted via CSV file upload (the preferred method for datasets with a significant number of records) or via direct data entry through the portal interface (suitable for smaller datasets). Given the expected volume of SBI's reportable transfers, CSV upload will likely be the most efficient submission method.
For each transfer of value, the following data fields are required:
•  Covered recipient name (first name, middle name, last name, suffix)
•  Covered recipient NPI (National Provider Identifier)
•  Covered recipient type (physician, teaching hospital, or non-physician practitioner subcategory)
•  Covered recipient specialty (as reported in NPPES)
•  Covered recipient primary business address (street address, city, state, ZIP code)
•  Date of payment (specific date on which the transfer was made or the service was provided)
•  Amount of payment (in US dollars, to two decimal places)
•  Nature of payment (one of 14 predefined categories, as discussed in Appendix A)
•  Form of payment (cash or cash equivalent, in-kind items or services, stock/stock option/other ownership interest, dividend/profit/other return on investment, or other)
•  Associated covered product(s) (name, NDC or device identifier, and therapeutic area)
•  Contextual information (optional free-text field for manufacturer to provide additional context)
•  Program or event details (for speaker and consulting payments: name of program, location, date)
•  Indicator of third-party payment (if the payment was made by a third party on the manufacturer's behalf, such as a distributor)
•  Related covered recipient (if the payment was to a physician who is related to a principal investigator or to a teaching hospital)
Ownership and Investment Interests. In addition to transfers of value, the Sunshine Act requires applicable manufacturers to report ownership and investment interests held by physicians or their immediate family members in the manufacturer. Based on information provided by SBI, no physician or physician family member currently holds an ownership or investment interest in SBI or SBD. If this changes — for example, if SBI issues equity compensation to a physician consultant — the ownership interest must be reported in the annual Open Payments submission.
D. Penalties for Non-Compliance
The Sunshine Act establishes a tiered civil monetary penalty framework for non-compliance:
Failure to Report. An applicable manufacturer that fails to report one or more transfers of value is subject to civil monetary penalties of not less than $1,000 and not more than $10,000 per payment that is not reported, up to an aggregate cap of $150,000 per annual submission. This penalty applies to negligent or inadvertent failures to report.
Knowing Failure to Report. An applicable manufacturer that knowingly fails to report one or more transfers of value is subject to significantly higher penalties: not less than $10,000 and not more than $100,000 per payment that is not reported, up to an aggregate cap of $1,000,000 per annual submission. The term "knowingly" is defined under 42 U.S.C. § 1320a-7h(b)(2)(B) to include not only actual knowledge but also deliberate ignorance and reckless disregard of the reporting obligation. This means that a manufacturer cannot avoid "knowing" liability simply by failing to implement adequate tracking systems or by choosing not to inquire about potentially reportable transfers.
Practical Implications for SBI. The knowing-failure penalty framework creates a powerful incentive for SBI to invest in robust data-collection, tracking, and internal-audit processes. If CMS or the HHS Office of Inspector General ("OIG") were to determine that SBI's failure to report a transfer was the product of reckless disregard — for example, because SBI failed to implement reasonable tracking systems despite being aware of its reporting obligations — the per-payment penalty exposure could reach $100,000 per unreported transfer, with an aggregate cap of $1,000,000 for the annual submission. This memorandum is itself evidence that SBI and its counsel are aware of the reporting obligations, which further underscores the importance of timely implementation of the compliance infrastructure recommended herein.
Recommendation: SBI should implement robust tracking and internal audit procedures, as described in Sections VI and VIII, to ensure the completeness and accuracy of all Open Payments reporting. The investment in compliance infrastructure is modest relative to the potential penalty exposure and reputational risk of non-compliance.
V. Distributor Pass-Through Reporting Obligations — Ascendant Distribution Solutions LLC
A. Background
SBI's exclusive US distributor is Ascendant Distribution Solutions LLC ("ADS"), a limited liability company organized under the laws of the State of Georgia. The distribution relationship is governed by the ADS Distribution Agreement (Ref. SBD-ADS-2024-0315), dated March 15, 2024, between SBI (as the US distribution rights holder) and ADS.
Under the ADS Distribution Agreement, ADS serves as SBI's exclusive US distributor for the Pulsar™ CRM System and related accessories. ADS is responsible for warehousing, order fulfillment, delivery logistics, and certain field-level customer support activities. ADS receives a commission of 18% on net US sales of Pulsar™ devices and accessories. Based on SBI's projected Year-1 net US sales of approximately $26 million, ADS's projected Year-1 commission is approximately $4.68 million.
ADS is authorized under the Distribution Agreement to engage up to 5 sub-distributors, each of which must receive SBI's prior written approval and must execute a Compliance Certification in the form attached to the Distribution Agreement. As of the date of this memorandum, ADS has not yet engaged any sub-distributors, but SBI should anticipate that sub-distributor arrangements may be established before or shortly after the October 1, 2024 launch.
B. Applicable Manufacturer Obligations for Distributor Transfers
The Sunshine Act and CMS regulations impose reporting obligations not only on transfers of value made directly by an applicable manufacturer but also on transfers made by entities acting on the manufacturer's behalf. Under 42 C.F.R. § 403.904(c)(1), an applicable manufacturer is responsible for reporting transfers of value made to covered recipients by agents, including distributors, acting under an agency or distribution arrangement.
This means that if ADS or any ADS sub-distributor makes payments or provides transfers of value to covered recipients in connection with the promotion, marketing, or distribution of the Pulsar™ CRM System, SBI is responsible for capturing and reporting those transfers. The types of distributor-initiated transfers that could arise include:
•  Meals provided by ADS sales representatives to physicians during product demonstrations or in-servicing sessions;
•  Travel or lodging paid by ADS for physicians attending ADS-organized training events;
•  Promotional items or educational materials provided by ADS to physician offices;
•  Any gratuities, gifts, or other items of value provided by ADS personnel to covered recipients; and
•  Similar transfers made by ADS sub-distributors in connection with Pulsar™ products.
ADS itself is not an "applicable manufacturer" for purposes of the Pulsar™ product (unless ADS independently engages in the manufacturing of a covered product, which it does not). ADS is a distributor, and its transfers of value in connection with the Pulsar™ CRM System are attributable to SBI as the applicable manufacturer. This attribution cannot be delegated or disclaimed by contract — the Sunshine Act places the reporting obligation on the applicable manufacturer regardless of the contractual allocation of responsibility between the manufacturer and its distributor.
C. Data-Collection Requirements from ADS
Calderwood & Harkness has reviewed the current ADS Distribution Agreement (Sections 7 and 12), which addresses compliance certifications and audit rights in general terms. Section 7 ("Compliance with Laws") requires ADS to comply with all applicable federal and state laws in the performance of its obligations under the Agreement, and Section 12 ("Audit Rights") grants SBI the right to conduct audits of ADS's books, records, and operations twice per calendar year upon 30 days' written notice.
However, the current Agreement does not contain specific Sunshine Act data-collection and reporting obligations. This gap creates a significant compliance risk. Without contractual mechanisms requiring ADS to collect, document, and transmit transfer-of-value data to SBI in a timely and standardized format, SBI may be unable to capture distributor-initiated transfers, resulting in incomplete CMS reporting and potential penalty exposure.
Recommendation. Calderwood & Harkness recommends amending the ADS Distribution Agreement to include the following Sunshine Act-specific provisions. This recommendation is aligned with proposed amendments that were transmitted by Amy Whitfield to Dawn Hitchens (ADS in-house counsel) and Gregory Paige (Hadley, Ostrander & Paige LLP, outside counsel for ADS) on June 28, 2024:
(i) Monthly Data Reporting Obligation. ADS shall collect and report to SBI, on a monthly basis (no later than the 10th business day of the following month), all transfers of value made by ADS or its personnel to covered recipients in connection with Pulsar™ products. Each reported transfer shall include the following per-recipient detail: covered recipient full name, NPI, professional specialty, primary business address, date of transfer, dollar amount, nature/category of transfer, form of transfer, and the associated covered product.
(ii) Sub-Distributor Flow-Down. ADS shall ensure that each authorized sub-distributor is contractually obligated to collect and report the same transfer-of-value data to ADS on a monthly basis, and ADS shall include all sub-distributor transfers in its monthly reports to SBI.
(iii) Compatible Tracking System. ADS shall implement a transfer-of-value tracking system that is compatible with SBI's Open Payments data infrastructure, including the ability to export data in CSV format using SBI-specified field definitions and templates.
(iv) Enhanced Audit Rights. SBI's existing audit rights (twice per calendar year, 30 days' written notice) shall be expressly extended to encompass review of ADS's and its sub-distributors' Sunshine Act data collection processes, tracking systems, and underlying records (including expense reports, sign-in sheets, and receipts).
(v) Mandatory Training. All ADS personnel engaged in Pulsar™-related interactions with healthcare professionals, including sales representatives, clinical specialists, and managers, must complete SBI-approved Sunshine Act training before engaging in covered activities and annually thereafter.
(vi) Certification of Completeness. ADS shall provide SBI with a quarterly written certification, signed by an authorized officer of ADS, confirming that all transfers of value made by ADS and its sub-distributors during the preceding quarter have been captured and reported to SBI in accordance with the Agreement.
(vii) Indemnification. ADS shall indemnify SBI for any penalties, fines, or costs incurred by SBI as a result of ADS's failure to collect and report transfer-of-value data as required by the Agreement.
Calderwood & Harkness is coordinating with Amy Whitfield on the drafting and negotiation of these amendments. A draft of the proposed Sunshine Act provisions is being prepared for transmission to ADS counsel and is referenced in Appendix D.
D. Sub-Distributor Oversight
As noted, ADS is authorized to engage up to 5 sub-distributors under the Distribution Agreement, subject to SBI's prior written approval. Each sub-distributor poses the same pass-through reporting risk as ADS itself — any transfers of value made by a sub-distributor to covered recipients in connection with the Pulsar™ CRM System are attributable to SBI and must be captured and reported.
To manage this risk, SBI should require the following:
(i) Each sub-distributor's Compliance Certification (required under the Distribution Agreement as a condition of SBI approval) should be amended to include specific Sunshine Act reporting obligations, including the monthly data-reporting and compatible-tracking-system requirements described above.
(ii) SBI should require ADS to provide quarterly certifications confirming that all sub-distributor transfers of value have been captured, reviewed for accuracy, and included in ADS's monthly reports to SBI.
(iii) SBI's audit rights should expressly extend to sub-distributor records and operations. While SBI may not have direct contractual privity with sub-distributors, the audit-rights provisions should require ADS to facilitate SBI's access to sub-distributor records upon request.
Given the relatively early stage of SBI's US commercial operations and the fact that no sub-distributors have yet been engaged, SBI has an opportunity to build these requirements into the sub-distributor onboarding process from the outset, rather than having to retrofit them after sub-distributor relationships are established.
VI. Data-Collection and Tracking System Recommendations
A. Centralized Tracking Platform
The foundation of SBI's Open Payments compliance program should be a centralized aggregate spend tracking system that captures all categories of transfers of value with the required CMS data fields. This system must be operational before the October 1, 2024 launch date.
The tracking platform should have the following capabilities:
•  Multi-category tracking: Support for all CMS Open Payments transfer-of-value categories (consulting fees, honoraria, food and beverage, travel and lodging, grants, research, gifts, education, charitable contributions, royalties/licenses, ownership interests, and other categories);
•  CMS data-field compliance: Capture all required data fields for each transfer, including covered recipient name, NPI, specialty, address, date, amount, nature of payment, form of payment, associated covered product(s), and contextual information;
•  Integration with existing systems: Ability to integrate with SBI's CRM system (for covered-recipient identification and engagement tracking), expense management system (for territory manager and regional director expense reports), accounts payable system (for consulting and speaker payments), and event management platform (for speaker program and advisory board attendee tracking);
•  ADS data-feed compatibility: Ability to ingest monthly data feeds from ADS in a standardized format (CSV or equivalent);
•  Reporting and reconciliation: Built-in reconciliation tools for monthly, quarterly, and annual data review, including flagging of incomplete records, duplicate entries, and threshold-relevant transfers;
•  CMS submission capability: Ability to generate CMS-compliant CSV files for upload to the Open Payments system; and
•  Audit trail: Complete audit trail for all data entries, modifications, and exports, with user-level access controls and date/time stamps.
Several commercially available aggregate spend platforms are designed specifically for Open Payments compliance and may be suitable for SBI's needs. These platforms typically offer cloud-based deployment, CMS template compatibility, and integration capabilities with common CRM and expense management systems. Calderwood & Harkness recommends that SBI evaluate at least two to three vendor options and select a platform by August 2024 to allow sufficient time for configuration, testing, and staff training before the October 1, 2024 launch.
Meridian Consulting Group LLC (Dr. Lena Voss and James Cho) has been retained to design the broader US compliance program structure for SBI. Aggregate spend tracking should be coordinated with Meridian's deliverables to ensure that the tracking platform is integrated into the overall compliance program architecture, including reporting lines, escalation procedures, and internal-audit workflows.
B. Data-Collection Processes by Category
In addition to the centralized tracking platform, SBI must establish specific data-collection processes for each category of transfer of value. The following processes should be documented in the standalone Open Payments Reporting Policy (Section VIII.D) and communicated to all responsible personnel through training (Section VIII.C):
1. Consulting Agreements. Finance/Accounts Payable shall log each consulting payment against the executed Physician Consulting Agreement. At the time of consultant onboarding, the designated compliance contact shall collect the consultant's NPI and verify it against the CMS NPPES database. Each payment event (invoice, payment date, amount) shall be entered into the tracking platform within 5 business days of payment processing. The tracking record shall include the consultant's name, NPI, specialty, payment date, payment amount, category ("Consulting Fee"), form of payment, and associated covered product (Pulsar™ CRM System).
2. Speaker Programs. Marketing (Patrick Dunne) shall implement a standardized event management workflow for all speaker programs, comprising the following steps:
(a) Pre-event needs assessment: Documentation of the legitimate business need for the program, including target audience, educational objectives, and speaker selection rationale;
(b) Attendee registration with NPI collection: All physician and non-physician-practitioner attendees must provide their NPI at the time of registration. NPI shall be verified against the CMS NPPES database prior to the event;
(c) Sign-in sheets: Physical or electronic sign-in sheets shall be used at every event. Sign-in sheets must capture each attendee's full name, professional credentials, NPI, and affiliation. Attendees who do not sign in shall not receive meals or other transfers of value;
(d) Itemized meal costs: The total meal cost for the event shall be documented with an itemized invoice from the venue or caterer. Per-person meal costs shall be calculated using the allocation methodology described in Section III.D;
(e) Post-event reconciliation: Within 10 business days of each program, the responsible territory manager or marketing coordinator shall complete a post-event reconciliation form, confirming the list of attendees, the per-person meal cost allocation, the speaker honorarium payment, and any other transfers of value. This reconciliation shall be entered into the tracking platform and reviewed by the Open Payments Compliance Lead.
3. Meals and Hospitality. Territory managers and regional directors shall submit expense reports that identify each covered recipient who received a meal or hospitality from SBI. Expense reports must include the covered recipient's full name, NPI, the date and location of the meal, the total meal cost, and the per-person allocation. Meal costs must be allocated on a per-person basis — they may not be split evenly among all attendees unless itemized per-person costs are not available, in which case pro-rata allocation is permissible with documentation of the methodology used. The critical principle is that each individual covered recipient's meal cost must be determinable and traceable.
4. Travel and Lodging. Travel booked through SBI-approved travel vendors or reimbursed upon submission of receipts shall be attributed to the specific covered recipient who traveled. The tracking record shall include the covered recipient's name, NPI, travel dates, destination, airfare cost, hotel cost, ground transportation cost, and any other reimbursed travel expenses. Each component of travel expense (airfare, hotel, ground transportation) may be reported as a single aggregate "Travel and Lodging" transfer or as separate line items, at SBI's election, provided the total amount and dates are accurate.
5. Educational Grants. The grants committee shall maintain records of all educational grant applications received, the committee's evaluation and decision, the amount awarded, the recipient entity, and the terms and conditions of the grant. If the recipient is a teaching hospital, the transfer shall be reported as a "Grant" under Open Payments. All grants committee records shall be maintained in the tracking platform.
6. Distributor Transfers (ADS). SBI shall receive a monthly data feed from ADS, pursuant to the amended Distribution Agreement provisions described in Section V.C. Upon receipt, the Open Payments Compliance Lead shall review the ADS data feed for completeness, accuracy, and consistency with SBI's data templates. Any discrepancies, missing fields, or questionable entries shall be flagged and resolved with ADS within 10 business days. Once validated, ADS data shall be integrated into SBI's centralized tracking platform.
C. NPI Collection Protocol
The National Provider Identifier (NPI) is a unique 10-digit identification number assigned by CMS to healthcare providers and is a mandatory reporting field for every covered-recipient transfer of value reported through the Open Payments system. Without a valid NPI, a transfer cannot be attributed to a specific covered recipient, and the submission may be rejected or flagged by CMS.
SBI should collect the NPI from every physician consultant, speaker, and covered recipient at the point of initial engagement. Specific collection points include:
•  Consulting agreement execution: NPI collected as part of the consultant onboarding package, alongside the W-9, curriculum vitae, and conflict-of-interest disclosure;
•  Speaker enrollment: NPI collected during the speaker bureau enrollment process, before any speaking engagement is scheduled;
•  Event registration: NPI collected during the online or on-site registration process for speaker programs, advisory board meetings, and other SBI-sponsored events;
•  Ad