Beyond Pharma: Defining the Applicable Manufacturer Under the Sunshine Act (42 CFR § 403.902)

The Sunshine Act is not limited to traditional pharmaceutical companies. Under 42 CFR § 403.902, an applicable manufacturer includes any entity that produces, prepares, propagates, compounds, or converts a covered drug, device, biological, or medical supply; it also includes companies under common ownership with such an entity that provide assistance or support with respect to those products. If the entity operates in the United States, it falls within the definition. For small practices, recognizing who is an applicable manufacturer matters because those entities must report payments and transfers of value to your clinicians, which shape clinicians’ Open Payments public profiles. Properly understanding this definition reduces disputes, prevents surprise listings, and streamlines vendor relationships.

Small clinics interact with a wider ecosystem than “big pharma.” Contract device makers, biologic sponsors, software-enabled device companies, relabels, and even co-owned marketing or reimbursement affiliates can meet the applicable manufacturer definition. When those entities fund consulting, education, travel, research support, or even provide in-kind items, the transactions may be reportable. Conversely, some counterparties, like pure distributors without manufacturing responsibility or warranty service performed strictly under a purchase contract, may sit outside reportable flows or be excluded for specific transactions. Building an operational lens around § 403.902 helps clinics predict which counterparties must report, prepare the right documentation, and avoid unnecessary review-period disputes.

Legal Framework & Scope Under 42 CFR § 403.902

Core definition. An applicable manufacturer is an entity engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply (as defined in § 403.902), and that operates in the United States. The definition also includes an entity that is under common ownership with such a manufacturer and provides assistance or support to the production entity with respect to the covered product.

Covered products. A “covered drug, device, biological, or medical supply” is one that is FDA-approved, cleared, or licensed and is available for sale or distribution in the United States. The covered-product status is product-specific; a diversified firm may have both covered and non-covered lines. If the payment relates to a covered product, the manufacturer side triggers the reporting lens.

Operating in the United States. An entity operates in the United States if it has physical locations, employees, or agents in the U.S., or the product is available for use in the U.S. This brings foreign companies into scope when their FDA-regulated products are distributed domestically, and they make payments to U.S. covered recipients.

Common ownership. Common ownership is generally 5% or more common equity (direct or indirect) held by the same individual(s) or entity(ies). This matters because a non-manufacturing affiliate that is co-owned with a production entity and that provides assistance or support, such as marketing, distribution strategy, speaker programs, reimbursement hub services, data, or sales enablement, can itself be an applicable manufacturer for reporting purposes when it provides a transfer of value related to the covered product.

Assistance or support. The rule’s language is intentionally broad. If the affiliate’s function tangibly supports the production, marketing, promotion, or commercialization of the covered product, payments it makes to covered recipients can be reportable as if made by the manufacturing sibling. This prevents avoidance through corporate structuring.

Contract manufacturing and private labeling. The entity that holds FDA approval/clearance/licensure or otherwise meets the “engaged in” verbs above is the applicable manufacturer. A contract manufacturer may be within scope when it produces covered products and operates in the U.S. A private-label marketer that holds the 510(k)/PMA/BLA/NDA for the brand in U.S. commerce can also be within scope even if a third party physically manufactures the product.

Distributors and relabels. A pure distributor that does not meet the production verbs and is not under common ownership providing assistance/support to a manufacturer may fall outside the definition. But a relabeled or repacked that assumes roles aligned with production/approval or shares ≥5% ownership and provides support can fall inside.

Research payments and pass-throughs. If a payment flows from an applicable manufacturer (or co-owned support affiliate) to a clinic or site for research related to a covered product, it is ordinarily reportable under the research categories, often at the entity (teaching hospital/clinic) level with associated physician(s) as required. The status of the paying entity as “applicable manufacturer” drives the obligation to report.

This framework ensures the reporting duty follows control and benefit over covered products and not just the brand name “pharma.”

CMS administers Open Payments, defines the terms in § 403.902, and oversees data submission, publication, and the review and dispute processes. Clinics are not filers, but they experience downstream impacts when classification questions arise. Common triggers include: (1) entries reported by a co-owned affiliate rather than the well-known manufacturing brand; (2) payments from foreign-based sponsors with U.S. distribution; and (3) confusion over whether a distributor is truly an applicable manufacturer. Understanding the definitions lets clinics triage disputes quickly and direct evidence to the reporting party that actually bears the duty.

The following practical controls help clinics anticipate which counterparties are applicable manufacturers and to equip clinicians for cleaner review-period outcomes. Each item ties to 42 CFR § 403.902 and is built for lean teams.

Control 1. Vendor Classification Matrix (the “Who Are You?” test)

• How to implement: Create a single spreadsheet listing all vendors that interact with clinicians (honoraria, consulting, meals, samples, grants, education, research). Add columns: Holds FDA approval/clearance/license? Produces/compounds/propagates/converts? Common ownership ≥5% with a production entity? Provides assistance/support? Operates in U.S.?

• Evidence to retain: Vendor attestations (email is fine), corporate family chart, FDA listing or public labeling showing approval/clearance, and a one-page “nature of services” description.

• Low-cost approach: Begin with top 15 vendors by spend or clinician touchpoints; expand quarterly.

• Why tied to § 403.902: Directly operationalizes the definition of applicable manufacturer, covered product, common ownership, and operating in the United States.

Control 2. Common Ownership Screen (≥5% rule)

• How to implement: For vendors not obviously manufacturing, request disclosure if the vendor is under common ownership (≥5%) with any entity that produces a covered product used in the U.S. Ask explicitly if the vendor provides assistance or support to that manufacturer.

• Evidence to retain: An emailed statement naming the manufacturing affiliate and describing support functions (marketing, training, HCP engagement, reimbursement services).

• Low-cost approach: Add the question to your vendor onboarding form and renewal RFI.

• Why tied to § 403.902: A co-owned support affiliate may itself be an applicable manufacturer for reporting.

Control 3. Operating-in-the-U.S. Determination

• How to implement: For foreign vendors, ask: “Is any product related to this payment available for use in the United States?” and “Do you maintain U.S. personnel, agents, or distribution?”

• Evidence to retain: A one-paragraph vendor email confirming U.S. commercialization and the U.S. nexus.

• Low-cost approach: Copy/paste questions into calendar invites for speaker/consulting logistics.

• Why tied to § 403.902: A foreign entity operating in the United States falls within the definition.

Control 4. Activity-to-Product Mapping

• How to implement: Before clinicians accept honoraria or support, ask the sponsor to specify the product(s) implicated and whether they are covered (FDA-regulated for U.S. sale).

• Evidence to retain: Agenda, slide deck, or scope of work linking the activity to the covered product.

• Low-cost approach: Add a “Product(s) discussed” line to every speaking/consulting agreement.

• Why tied to § 403.902: Reporting hinges on a covered product connection.

Control 5. Distributor vs Manufacturer Check

• How to implement: If a “distributor” offers payments, confirm whether it holds approval/clearance or is co-owned with a producer and provides assistance/support. If none, note that the counterpart may not be an applicable manufacturer (though other rules may still apply).

• Evidence to retain: Distributor’s statement, plus any labeling or FDA record showing who holds approval.

• Low-cost approach: Maintain a quick list mapping distributor brands to the underlying approval holder.

• Why tied to § 403.902: Distinguishes out-of-scope distributors from in-scope producers/affiliates.

Control 6. Research Sponsor Clarification

• How to implement: When a site agreement lists a CRO or foundation as the payor, obtain a one-line statement identifying the applicable manufacturer sponsor behind the funds if the research involves a covered product.

• Evidence to retain: Email from CRO noting the sponsor legal entity and covered product.

• Low-cost approach: Standard clause in your site template: “Sponsor shall identify the applicable manufacturer, if any, for Open Payments classification.”

• Why tied to § 403.902: Ensures the entity with the applicable manufacturer status stands behind reportability.

Control 7. Affiliated Services Carve-outs

• How to implement: When a co-owned services affiliate (marketing/training/reimbursement hub) pays a clinician, request the affiliate include a line confirming its status (co-owned with XYZ Manufacturer; services relate to ABC covered product).

• Evidence to retain: Payment letter/SOW that names the manufacturing affiliate and the product link.

• Low-cost approach: One standardized sentence in SOW templates.

• Why tied to § 403.902: Confirms assistance or support within a common-ownership structure.

Control 8. Physician Talking Points for Review-Period Disputes

• How to implement: Give each physician a one-pager with the definitional hooks: “If the paying entity is a co-owned affiliate that supports a covered product, it may be an applicable manufacturer and reportable; if it’s a pure distributor without production/approval and no common ownership, it may not.”

• Evidence to retain: The one-pager with the § 403.902 citations.

• Low-cost approach: Laminate and keep in the billing manager’s binder and the medical director’s office.

• Why tied to § 403.902: Speeds accurate classification during the dispute window.

Case Study

A small orthopedic clinic participates in educational dinners sponsored by OrthoTech Services LLC, a marketing and HCP-engagement firm. The clinicians assume OrthoTech is “just an agency.” During the Open Payments review period, physicians see multiple consulting and food and beverage entries reported not by a familiar device company but by OrthoTech Services LLC. Confused, they initiate disputes, claiming the payer is not a manufacturer.

The clinic’s office manager applies the Vendor Classification Matrix and requests clarification. OrthoTech confirms it is under common ownership (20%) with OrthoTech Devices, Inc., which holds multiple 510(k) clearances for implants used in the clinic. OrthoTech Services provides assistance/support, it designs peer-to-peer programs promoting those covered devices. Under § 403.902, OrthoTech Services is treated as an applicable manufacturer because it is co-owned with a production entity and provides assistance with respect to the covered product line. The reported entries are therefore proper.

Separately, a different company, Regional Med Distribution, pays for boxed lunches at an in-office in-service. The distributor attests it does not hold approvals, is not co-owned with a producer, and does not provide assistance/support to a producer; it merely resells inventory from multiple manufacturers. The clinic informs clinicians that payments from this distributor may not appear in Open Payments (other fraud/abuse rules still apply), preventing unnecessary disputes and helping clinicians set expectations.

Outcome: By anchoring communications to § 403.902, the clinic accepts the OrthoTech Services entries as correctly reported and avoids a needless back-and-forth with CMS or the manufacturer. Clinicians also avoid chasing non-issues with a pure distributor.

Risk Traps & Fixes Under 42 CFR § 403.902

Below are high-impact errors clinics see when classifying counterparties. Each item shows the error, the regulatory hook, and the practical consequence, followed by a fix.

• Assuming only “big pharma” files Open Payments reports, ignoring device/biologic makers and co-owned affiliates; § 403.902 squarely includes device and biologic manufacturers and co-owned support entities, leading to unexpected public listings if ignored. Fix: Use the Vendor Classification Matrix to capture devices/biologic and support affiliates.

• Treating co-owned services companies as non-manufacturing “agencies,” despite ≥5% common ownership and assistance/support roles; § 403.902 can deem them applicable manufacturers, so payments they make are reportable. Fix: Collect ownership and function attestations at onboarding.

• Missing foreign sponsors that “operate in the U.S.” because products are distributed domestically; under § 403.902, these entities are in scope, so U.S. clinician payments are reportable. Fix: Ask foreign vendors to confirm U.S. commercialization.

• Confusing pure distributors with approval-holding manufacturers, leading to misdirected disputes and wasted time; § 403.902 focuses on production/approval, common ownership, and support. Fix: Request documentation of approval holder and ownership ties.

• Ignoring product specificity, where a diversified firm pays for activities tied to a non-covered product line; § 403.902 hinges on covered products for Open Payments relevance. Fix: Require product mapping in every SOW and event agenda.

• Not distinguishing warranty/service performance (contract fulfillment) from promotional support; the former may affect reporting of particular transfers via other provisions, but the applicable manufacturer lens still depends on whom the entity is under § 403.902. Fix: Keep warranty/service records separate from promotional engagements; classify the payer correctly first.

• Failing to involve the clinic early when clinicians book outside engagements with unfamiliar brands; classification mistakes propagate into disputes. Fix: Add a pre-engagement questionnaire capturing the § 403.902 elements.

Together, these fixes keep the clinic focused on the definitions that determine who must report, which minimizes disputes and clarifies expectations before value is transferred.

Designate the office manager as owner of the Vendor Classification Matrix and the compliance lead as owner of policy language used in speaker/consulting and research templates. Provide annual training for clinicians and schedulers on three questions: (1) Is the payer a producer or co-owned supporter of a covered product? (2) Does it operate in the U.S.? (3) Which product(s) are implicated? Track two metrics quarterly: percentage of new vendors with complete 403.902 attestations and number of disputes prevented during review windows due to pre-classification. Add a standing contracts huddle once a quarter to review new affiliates, mergers, and brand launches that may shift “applicable manufacturer” status.

The Sunshine Act’s applicable manufacturer definition extends well beyond pharma brands. Under 42 CFR § 403.902, device makers, biologics firms, approval-holding marketers, contract producers, foreign manufacturers operating in the U.S., and co-owned support affiliates can all be in scope. Clinics that screen vendors using the rule’s elements, production activity, covered product link, common ownership, support role, and U.S. operations, avoid confusion and negotiate cleaner contracts. Clinicians benefit from fewer surprises during the review period and a public profile that accurately reflects industry relationships.

Immediate next steps for a small clinic:

1. Stand up the Vendor Classification Matrix and populate the top 15 clinician-touching vendors this week.

2. Update onboarding forms to capture FDA approval/clearance status, U.S. operations, and ≥5% common ownership with any manufacturing entity.

3. Insert product-mapping clauses into all speaking/consulting and education agreements to tie activities to specific products.

4. Add a CRO sponsor-identification clause to every research template, so the true applicable manufacturer is named up front.

5. Publish a one-page physician guide for the Open Payments review period that explains how § 403.902 determines who reports.

Compliance should be a living process. By leveraging a regulatory tool, your practice can maintain real-time oversight of requirements, identify vulnerabilities before they escalate, and demonstrate to both patients and payers that compliance is built into your culture.

• eCFR: 42 CFR § 403.902 — Definitions
  

• 42 U.S.C. § 1320a-7h — Transparency Reports and Reporting of Physician Ownership or Investment Interests
  

• CMS Open Payments — Program Overview
  

• CMS Open Payments — Frequently Asked Questions (Definitions and Reporting Obligations)
  

• Federal Register: Medicare, Medicaid, Children’s Health Insurance Programs; Transparency Reports and Reporting of Physician Ownership or Investment Interests