United States: Will Physician Payment Sunshine Act Data Usher In A New Era Of False Claims Act Litigation?

Last Updated: April 12 2014
Article by Scot T. Hasselman, Elizabeth B. Carder-Thompson, Katie C. Pawlitz and Jillian W. Riley

Most Read Contributor in United States, October 2017

While attention has been focused on Medicare physician payment data released by CMS yesterday, upcoming Sunshine Act data will shine a new spotlight on financial relationships between physicians and pharmaceutical and medical device companies – with potential FCA implications.

Last week marked the deadline for pharmaceutical and medical device manufacturers and group purchasing organizations (GPOs) to register with and submit aggregate 2013 payment and investment interest data to the Centers for Medicare & Medicaid Services (CMS) on certain financial relationships between themselves and physicians and teaching hospitals, as required by the Physician Payment Sunshine Act.1 In May, manufacturers and GPOs will be required to submit to CMS detailed 2013 payment data. With some exceptions, CMS will be making these data public by September 1, 2014. While the publicly available data are intended to provide more transparency for patients – to allow them to have a better understanding of the financial relationships between physicians and pharmaceutical and medical device companies – patients will certainly not be the only group interested in this public information. The Department of Health and Human Services (HHS) Office of the Inspector General (OIG), Department of Justice (DOJ), and relators' attorneys will likely utilize these data to initiate investigations and support complaints under the federal False Claims Act (FCA). As with the recent release of the 2012 Medicare Part B Physician Fee Schedule data, members of the media will likely make inferences about certain financial relationships.

The U.S. government recovered $3.8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013.2 Fiscal 2014 looks to be a record-breaking year, with ever-increasing civil settlements by major pharmaceutical companies.3

As the reporting deadlines approach, it is worth considering an interesting, and largely unknown, potential implication of the public availability of these data: How will it affect future FCA litigation? The publically available Sunshine Act data could become relevant to FCA litigation in a variety of ways; two in particular are discussed below.

Anti-Kickback Statute Violations

The data could give rise to suspicions of violations of the federal Anti-kickback Statute (AKS). The AKS makes it a criminal offense to knowingly and willfully offer or pay remuneration to induce the referral of, or arrange for the provisions of, federal health care program business.4 In other words, the law prohibits any person or entity from giving, receiving – or offering to give or receive – anything of value in return for or to induce referrals for businesses covered by Medicare, Medicaid, or any other federally funded health care program. Violators of the AKS face imprisonment, criminal, and civil fines, as well as exclusion from federal health care programs.5

It is easy to see how publishing information regarding payments from pharmaceutical and medical device manufacturers to physicians and teaching hospitals could implicate the AKS, and by extension, the FCA. The Patient Protection and Affordable Care Act (ACA) made explicit that violations of the AKS are also violations of the FCA.6 Any payment from a pharmaceutical or medical device manufacturer to a physician who prescribes a product manufactured by the company providing the payment could be viewed as potentially inappropriate remuneration intended to influence prescribing behavior.

Off-Label Promotion

Publically available information reported as a result of the Sunshine Act may also have off-label promotion implications. Notably, reports to CMS must include the name of the drug or the type of device that forms the basis of the payment.7 Tying the payment to a particular drug or type of device could raise suspicions of off-label promotion. A pharmaceutical or medical device manufacturer that promotes its products for uses for which the product has not yet been approved by the United States Food and Drug Administration (FDA), i.e., off-label uses, is at risk of FCA liability. A false claim can arise when a manufacturer promotes a product for off-label, non-covered uses (that is, for a use that both has not been approved by FDA and is not covered by the federal health care programs). Payments going to physicians who specialize in an area that is outside the scope of a pharmaceutical or medical device's approved indication could necessarily raise suspicions that the manufacturer is promoting the product for unapproved uses.

Potential Limits

Besides the risk of government identifying potential issues for further investigation and prosecution as a result of reported Sunshine Act data, private parties may also mine the publically available data. One substantial impediment to relators' attorneys using Physician Sunshine Payment data in FCA litigation is the limitation that publicly available data cannot form the basis of a whistleblower claim.8 This is known as the public disclosure bar, although the effectiveness of this defense has been diminished with recent FCA amendments.

That said, the Sunshine Act data, even if not the basis of a claim, could nonetheless impact the litigation in many ways. For example, it could provide additional evidence for the government to review in reaching its decision whether to intervene in a qui tam action. Both OIG and DOJ could review the data before it is publicly available to assist in the determination that a given matter warrants intervention. Additionally, the publicly available data – beyond providing flavor in support of an FCA claim and assisting with meeting the heightened pleading standard associated with fraud allegations9 – could be a potential mine for plaintiff attorneys to locate areas of focus. Relators' attorneys will no doubt track the data to ascertain potential problem drugs or companies about which they can then dedicate efforts to uncovering fraud and abuse in the federal health care system.

Going Forward

It remains to be seen how all of these risks will play out going forward. Courts will have to decide how these new data will fit into FCA litigation. OIG and DOJ will have to determine how much to rely on the new information. And relators' attorneys will need to make decisions about how many resources to dedicate to mining the Sunshine Act data.

One potential consequence that we are already starting to see occur is that pharmaceutical and medical device manufacturers may halt or limit payments to physicians, and/or that physicians themselves will be reluctant to accept such payments, e.g., for research, for expenses associated with training on a device, and the like. Companies may decide to do so for a variety of reasons, including avoiding the administrative burdens associated with tracking and reporting such payments for purposes of the Sunshine Act, fear of FCA litigation, or for public relations reasons. Many physicians simply do not want their names publicized. It remains to be seen how these trends will evolve.  


1 42 C.F.R. § 403.908(a).
2 DOJ Press Release, available at: http://www.justice.gov/opa/pr/2013/December/13-civ-1352.html. 3 See, e.g., DOJ Press Release, available at: http://www.justice.gov/opa/pr/2013/November/13-ag-1170.html.
4 42 U.S.C. § 1320a-7.
5 Id.
6 42 U.S.C. § 1320a-7b(g). Note that manufacturers may submit "assumptions documents" as part of Sunshine reporting. Although CMS stated in the preamble to the Sunshine regulations its belief that the contents of such documents "should not be made public," it acknowledged that it could provide access to the documents during an audit or investigation by other HHS divisions, the Office of Inspector General, or the Department of Justice.
7 42 C.F.R. 403.94(c)(8).
8 31 U.S.C. § 3730(e)(4).
9 Fed. R. Civ. P. Rule 9(b).

This article is presented for informational purposes only and is not intended to constitute legal advice.

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