Here Comes the Sun: How the Impending Data Release Under the Sunshine Act Might Affect False Claims Act Qui Tam Filings

Vol. 11 No. 1

AuthorOn September 30, 2014, the Centers for Medicare & Medicaid Services (“CMS”) will publish on its “Open Payments” website the first set of data reported to it by pharmaceutical and medical device manufacturers related to payments and other transfers of value to physicians and teaching hospitals, as well as information related to physician ownership or investment interests in those entities, as required by the Physician Payments Sunshine Act, also known as CMS’ Open Payments program.1  The data will be publicly available and will be “downloadable, easily searchable, and aggregated.”2   The data will be updated by June 30 of every subsequent year.3 

While the purpose of the Sunshine Act is to increase transparency and help reduce the potential for conflicts of interest, its required public disclosure and transparency might also bring with it an increase in qui tam filings under the False Claims Act (“FCA”), particularly FCA cases predicated on violations of the Anti-Kickback Statute (“AKS”).  This article provides a brief overview of the Sunshine Act and discusses how the Act might facilitate an increase in such qui tam filings.  It also discusses how disclosures under the Act might, in some circumstances, actually make it harder for a potential FCA relator to file suit.

Sunshine Act Overview

The Sunshine Act was first introduced as stand-alone legislation by Senators Chuck Grassley (R-IA), Amy Klobuchar (D-MN), and now-retired Senator Herb Kohl (D-Wis) on January 22, 2009.4  It was eventually passed into law as part of the Patient Protection and Affordable Care Act (“PPACA”) in 2010.  The purpose of the law is to provide for transparency in the relationship between physicians and manufacturers of drugs and medical supplies.5

The Sunshine Act requires covered entities, defined as pharmaceutical, medical device and medical supply manufacturers, as well as group purchasing organizations (“GPOs”), to report annually to CMS any payment or transfer of value from it to any U.S. physician or teaching hospital, as well as information related to physician ownership or investment interests in the manufacturer or GPO.6  In addition to publishing the data on its Open Payments website, CMS is also required to submit the reported data to Congress by way of annual reports, as well as to each state.7  Covered entities were required to begin tracking the required information on August 1, 2013, and to submit the required information for calendar year 2013 to CMS by March 31, 2014.8  For subsequent years, the required data must be submitted to CMS by the 90th day following the end of the calendar year.9

Payments that must be reported under the Sunshine Act include cash or cash equivalents, in-kind items or services, stock, stock options, or other ownership interests, dividends, profits or other investment returns, or any other form of payment or other transfer of value.10   The reporting entity must place each payment into one of the following categories: consulting fees, compensation for other services (including speaking), honoraria, gifts, entertainment, food and beverage, travel and lodging, education, research, charitable contributions, royalties or licenses, current or prospective ownership or investment interests, compensation for speaking at an educational or continuing education event or program, grant, space rental or facilities fees.11  Entities need not report payments or other transfers of value less than $10, unless the aggregate amount transferred to the covered recipient exceeds $100 in a calendar year.12   A common example of a payment that must be reported under the Act is a pharmaceutical representative providing lunch to a physician or physician group, so long as the value of that lunch exceeds $10 per physician (or, if it does not, if the annual aggregate exceeds $100).13  Ownership and investment interests that must be reported under the Act include, but are not limited to, direct or indirect stock, stock options, partnership shares, LLC membership, loans, bonds, or other secured financial interests.14 

Even an unintentional failure to timely, accurately, and completely report the required information subjects a covered entity to a civil monetary penalty of not less than $1,000, but not more than $10,000, for each payment or other transfer of value or ownership or investment interest not properly reported, not to exceed $150,000.15 A knowing failure to timely, accurately, or completely report the required information is subject to a penalty of not less than $10,000, but not more than $100,000 for each payment or other transfer of value or ownership or investment interest not properly reported, not to exceed $1 million.16  The Act also permits Health and Human Services (“HHS”), CMS, and HHS’ Office of Inspector General (“OIG”) to audit the books and records of applicable manufacturers and GPOs to ensure compliance.17

The Anti-Kickback Statute and Pharmaceutical and Device Manufacturers

The AKS prohibits, among other things, the knowing and willful solicitation and receipt of, or knowing and willful offering or payment of, any remuneration in return for referring an individual for the furnishing of certain healthcare items and services, or in return for ordering goods, services, or items covered in whole or in part by a federal healthcare program such as Medicare, Medicaid or TRICARE.18  Violation of the AKS can result in civil monetary penalties as well as a felony criminal conviction and exclusion.19  Importantly, submitting claims for items or services resulting from a violation of the AKS also constitutes a false or fraudulent claim for purposes of the FCA, meaning that the violator is also subject to treble damages and per-claim penalties of up to $11,000.20

Although the traditional AKS case involves compensation by a hospital to a physician in exchange for patient referrals, pharmaceutical and device manufacturers are also common targets of AKS investigations and prosecutions.  Over the past several years, there have been a number of high-profile fraud settlements between the Department of Justice (“DOJ”) and pharmaceutical companies in cases that have included allegations of illegal kickbacks to physicians.  These include a $3 billion settlement by GlaxoSmithKline in July 2012,21 a $2.3 billion settlement by Pfizer in September 2009,22 a $762 million settlement by Amgen in December 201223 and a $520 million settlement by AstraZeneca in April 2010.24   For example, in the AstraZeneca case, which was originally brought in a qui tam suit under the whistleblower provisions of the FCA, the government alleged, among other things, that AstraZeneca violated the AKS by paying illegal remuneration to doctors to serve as authors and to speak at conferences with an intent to induce those doctors to prescribe certain drugs for unapproved uses.25   FCA liability predicated on AKS violations can be tremendous, as single damages can consist of every dollar of every tainted claim submitted, which is then subject to trebling and penalties. 

How the Sunshine Act Might Increase Qui Tam Filings

It is no secret that the past several years have seen a tremendous increase in qui tam filings. This is, at least in large part, because of the tremendous windfall that an FCA relator (and the relator’s counsel)26 could receive by filing a qui tam complaint, particularly one premised on an alleged violation of the AKS — between 15 to 30 percent of the total recovery plus attorney’s fees.  It is not surprising, then, that potential relators and relator counsel have resorted to data mining whenever possible to generate whistleblower actions, or at least to strengthen existing actions.  For example, when CMS released a large amount of Medicare billing data for the first time in April 2014, lawyers in the relators’ bar immediately began mining the data to find potential qui tam actions as well as to bolster already pending cases.27  The impending release of payment data pursuant to the Sunshine Act will inevitably result in the same type of data mining. 

This potential is important and could have a major impact on future qui tam filings.  It is not uncommon for a potential FCA relator to have some indication of wrongdoing, but not enough specific information to file a qui tam complaint that can survive a motion to dismiss.  The government, of course, has always had access to the data (or at least has the subpoena power to obtain the data it needs), but that data is not always available to whistleblowers and their attorneys when deciding whether or not to file a case, or when the government declines to intervene in a filed action and the relator is left to litigate the case alone.

Complaints filed under the FCA must meet the heightened pleading standards of Federal Rule of Civil Procedure 9(b) in order to survive a motion to dismiss, and in at least four Circuits, an FCA relator must identify specific claims submitted to the government for payment in order to satisfy Rule 9(b).28 Even in Circuits where this is not required, relators must do more than merely plausibly allege a violation, but must plead the “who, what, when, where, and how” of the alleged misconduct.29  Publicly available data such as the data release in April or the impending data release in September could provide missing pieces of information sufficient to build a viable qui tam case or, at minimum, help relators boost allegations of wrongdoing where those allegations might otherwise fail for lack of specificity.  For example, where a potential whistleblower knows that a physician has a pattern of prescribing a certain drug, that person could search CMS’ Open Payments website30 to see if that physician has received any remuneration from the drug’s manufacturer and, if so, how much and when. The potential relator could then take that information and turn it into a FCA qui tam action premised on alleged violations of the AKS.  Importantly, CMS has clearly stated that compliance with the reporting requirements of the Sunshine Act does not exempt manufacturers and covered recipients from potential liability under the AKS or FCA.31

How the Sunshine Act Might Thwart Potential Qui Tam Filings

Although the required disclosure of physician payment data pursuant to the Sunshine Act might, in some circumstances, provide the missing piece of information required to file a successful FCA qui tam action, such public disclosure might also bar some potential qui tam filings.  This is because the FCA’s public disclosure bar mandates the dismissal of any action, unless opposed by the Government, if substantially the same allegations or transactions alleged in the action were publicly disclosed in a federal criminal, civil, or administrative hearing in which the government is a party, a congressional or other federal report, hearing, audit, or investigation, or from the news media.32  If the allegations were publicly disclosed, the relator’s claims will be dismissed unless the relator is the “original source” of the information, meaning that the relator either voluntarily disclosed the information to the Government prior to any public disclosure or has knowledge that is independent of and “materially adds to” the publicly disclosed information.33  Accordingly, where a relator attempts to build a qui tam case solely off of information disclosed on CMS’ Open Payments website or based solely upon some other public disclosure, there is a good chance that the action could be deemed barred under the public disclosure bar.34  Even where a relator has independent knowledge of the facts disclosed, the relator would also have to show that the knowledge “materially adds to” the publicly disclosed information in order to defeat dismissal based on the public disclosure bar. 

Additionally, because the data reported and released pursuant to the Sunshine Act has the potential of making it easier to gather the information necessary to file a viable qui tam, potential relators will also have to deal with the FCA’s first-to-file bar.  That provision states that when a person brings an action under the FCA, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”35  The first-to-file bar creates a “race to the courthouse” among potential FCA relators.  To the extent that the disclosures made pursuant to the Sunshine Act lead to more potential whistleblowers, that race to the courthouse might quickly become a fast-paced (and crowded) sprint.  

Concerns Over Data Accuracy

As with all large amounts of data, there are major concerns over the accuracy of the data submitted to CMS through the Open Payments program. On August 15, 2014, for instance, the American Medical Association (“AMA”) called for CMS to delay publication of the database and allow more time for physicians to review and seek correction of inaccurate claims made by reporting entities.36  In support of its call for a delay, the AMA cited the “poor functionality” of the Open Payments website and “poor communication to physicians and the public, which has led to widespread confusion among physicians and hindered education efforts about the program.”37  If the AMA is correct, and the data that is set to be released contains inaccuracies, the possibility of FCA relators and their attorneys using that flawed data to support qui tam filings should concern all healthcare providers.


Although the purpose of the Sunshine Act is to increase transparency and avoid the potential for conflicts of interest between physicians and drug and device manufacturers, as with past examples of increased transparency and disclosure in the healthcare industry, the information released pursuant to the Act will likely lead to the proliferation of qui tam filings and investigations.  Because the relatively simple act of filing a qui tam action could in itself result in the expenditure of hundreds of thousands, if not millions, of dollars in legal fees alone, the Sunshine Act and its intersection with the FCA is yet another regulatory issue with which healthcare providers and their counsel must become intimately familiar. 


Scott R. Grubman is an attorney with Rogers & Hardin, LLP in Atlanta, where he represents healthcare clients in connection with Government and internal investigations, False Claims Act litigation, and other fraud and compliance matters, including Stark and Anti-Kickback.  Prior to joining Rogers & Hardin earlier this year, Mr. Grubman served as an Assistant U.S. Attorney for the Southern District of Georgia, where he investigated and prosecuted cases under the FCA and other federal fraud statutes.  He may be reached at (404) 420-4651 or



The Sunshine Act was passed as Section 6002 of the Patient Protection and Affordable Care Act (“PPACA”), 42 U.S.C. § 1320a-7h et seq. 


78 Fed. Reg. 9459 (Feb. 8, 2013). 


Id. at 9503.  As with other recent healthcare-related website rollouts, CMS’ Open Payments system has already experienced some glitches.  Earlier this summer, CMS’ database was taken offline for almost two weeks in order to fix an issue that was causing a mix-up of records for physicians with similar names.  Based on this glitch, CMS extended the deadline for physicians to review and dispute data attributed to them, which was originally August 27, 2014, to September 8, 2014.


S.301, 111th Cong. (2009).




42 C.F.R. §§ 403.904, 403.906.




42 C.F.R. §§ 403.906(a)(2), 403.908(a).


Id. § 403.908(a).


42 C.F.R. § 403.904(d).


Id. § 403.904(e)(2).


Id. § 403.904(i)(2).


78 Fed. Reg. 9478-79.


42 C.F.R. § 403.902.


Id. § 403.912(a).


Id. § 403.912(b).


Id. 403.912(e)(2).


42 U.S.C. § 1320a-7b(b).


Id.; see also 42 U.S.C. §§ 1320a-7a(a)(7) (civil monetary penalties); 1320a-7(b)(7) (exclusion).


42 U.S.C. § 1320a-7b(g).








In connection with the $3 billion GSK settlement mentioned above, for example, it has been reported that the two whistleblowers (and their lawyers) shared a payout of nearly $75 million.

27 idUSBREA3D05820140414?feedType=RSS&feedName=healthNews. The article quotes Patrick Burns, co-director of Taxpayers Against Fraud (“TAF”), who sent a link to the Medicare billing database to the 400 TAF lawyers under the heading “Have Fun!”


This requirement is imposed by the Fourth, Sixth, Eighth and Eleventh Circuits.  See U.S. ex rel. Nathan v. Takedia Pharms et al., 707 F.3d 451 (4th Cir. 2013), cert. denied, 81 U.S.L.W. 3650 (U.S. Mar. 31, 2014) (No. 12-1349); U.S. ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 504 (6th Cir. 2007); U.S. ex rel. Joshi v. St. Luke’s Hospital, Inc., 441 F.3d 552, 560 (8th Cir. 2006), cert. denied, 549 U.S. 881 (2006); U.S. ex rel. Clausen v. Lab Corp. of Am., Inc., 290 F.3d 1301, 1311-12 (11th Cir. 2002), cert. denied, 537 U.S. 1105 (2003).


See, e.g., Vess v. Ciby-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).


Available at


78 Fed. Reg. 9460.


31 U.S.C. § 3730(e)(4)(A).


Id. § 3730(e)(4)(B).


An analogous situation presented itself in Schindler Elevator v. U.S. ex rel. Kirk, where the Supreme Court held that an FCA qui tam based upon information obtained through a FOIA request should be dismissed pursuant to the FCA’s public disclosure bar.  131 S. Ct. 1885 (May 16, 2011).


Id. § 3730(b)(5). On July 1, 2014, the Supreme Court granted a petition for certiorari in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, in which one of the issues presented is whether the first-to-file bar prohibits an FCA case from being filed where a prior case based on the same underlying facts was previously filed, but had been dismissed by the time the latter case was filed.

36 (AMA Press Release, August 15, 2014).





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