Physician Payment Sunshine Act: Will Sunshine Data Help Qui Tam Whistleblowers and Their Attorneys?
While the pharmaceutical industry scrambles to gather spend data for the Physician Payments Sunshine Act, one issue in particular keeps companies up at night: come September 31, qui tam attorneys will have an easily searchable database to support any False Claims Act claim they decide to make. As part of Washington D.C.'s National Disclosure Summit, Lesley Ann Skillen, partner of Getnick & Getnick LLP's False Claim Act qui tam practice, spoke about whether Sunshine data will provide a boost to whistleblowers. She argued that the Sunshine Act may actually hamper qui tam cases more than it helps.
The False Claims Act (FCA) creates a civil cause of action against anyone who submits a claim to the federal government that he or she knows is false. For example, under the FCA, the government could seek three times the amount of damages of each fraudulent Medicare claim. The FCA allows either the government or a private citizen in the name of the government to bring an action. Whistleblowers, or qui tam relators, are entitled to receive 15-30% of the proceeds. Skillen noted that of the $12 billion recovered in healthcare FCA cases in the last five years, nearly $11 billion came from qui tam cases
Skillen also emphasized the connection between the FCA and the Anti-Kickback Statute (AKS), which prohibits the exchange (or offer to exchange) of anything of value, in an effort to induce the referral of federal health care program business. The AKS states: "a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim" for purposes of the FCA.
CMS notes that complying with the Sunshine Act's reporting requirements does not exempt potential liability associated with payments or other transfers of value. However, while stakeholders are concerned that the public will use Sunshine data as prima facie evidence of a conflict of interest, the rule states: "financial ties alone do not signify an inappropriate relationship…the inclusion of a payment or other transfer of value, or ownership or investment interest on the public database does not mean that any of the parties involved were engaged in any wrongdoing or illegal conduct."
How could the Sunshine Act benefit qui tam claims?
The Sunshine Act requires data to be searchable and "easily aggregated and downloaded." Mandatory Sunshine information includes the manufacturer's name; the physician's name, specialty, and address; the specific payment information; which drug or device the payment relates to (if any); the name of any intermediaries; and the amount of value.
Skillen noted that this database could be "very helpful to attorneys like myself."
Sunshine data instantly provides qui tam attorneys a host of information that would have been impossible or very difficult to find before the Act. Skillen believes the information would, right off the bat, add credibility to a relator's allegations. Attorneys will be able to corroborate their client's allegations or confirm suspicions of widespread conduct by running a simply search.
At the very least, Sunshine data will provide facts to beef up a plaintiff's complaint. Rule 9(b) of the Federal Rules of Civil Procedure requires that for "alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Skillen notes that the exact dates of transactions and the precise amounts of payments will add that required specificity.
Additionally, the data could support an inference of off-label marketing. If a pharmaceutical company's main products are oncology drugs, and the company has substantial payments to doctors who practice in cardiology, attorneys don't have to reach too far to make off-label allegations.
Skillen noted that pharmaceuticals have also worried that plaintiffs will use the Sunshine database not only to support an existing claim, but to create a claim. The fear is that through complex (or even routine) analysis known as data mining, people could manipulate Sunshine data to state a variety of claims. "It's a possibility," she says. In order to qualify, though, "the government has to be provided something it doesn't already have or isn't in the public domain."
How could Sunshine data hurt qui tam claims?
Public Disclosure Bar:
The FCA contains a "public disclosure bar," which is triggered when the fraud allegations were in the public domain before a qui tam relator filed suit. Since Sunshine data is in the public domain, Skillen argues that relators will have a hard time getting past the public disclosure bar.
Skillen believes we can glean important information from how the Supreme Court has treated Freedom of Information Act (FOIA) cases. In Schindler Elevator Corp. v. US ex rel. Kirk, the Supreme Court held that information obtained through a FOIA request is "disclosed 'in' a report for the purposes of the public disclosure bar." A FOIA request takes more proactive action than searching through Sunshine. Skillen noted a small exception: under, New York state law, FCA information obtained through FOI laws is not "publicly disclosed."
To further lend credence to the idea that Sunshine data will hinder FCA claims, a 2010 S.D.N.Y. case held that a searchable government database was "an administrative report" sufficient to dismiss a qui tam case. Here, the relator used tax information from a Department of Finance website to support his claim that an apartment complex wrongfully received government issued vouchers. The court noted: "any individual may look up the [tax] benefit history of any building in the City, the searches are free and unlimited, and both the database and the DOF website are easily navigable." Furthermore, the "database does not present raw, unanalyzed data. Rather, it presents synthesized tax benefit histories for many different properties over many years, organized by block and lot number."
Alleging Payment is No Longer Enough:
If the public disclosure bar applies, the relator must prove he or she meets the Act's "original source exception" or be dismissed from the case. To fit within the exception, the relator must (1) disclose the information to the government before the public disclosure is made, OR (2) have had knowledge independent of the disclosure that "materially adds" to the disclosure and is provided to the government before the plaintiff files his or her lawsuit.
Skillen explained now that physician payment disclosures are mandatory, relators have an increased urgency to file. Not only do they have to beat other whistleblowers to the courthouse, they also have to file before the company's disclosures.
Before the Sunshine Act, a relator with information that a company transferred payment to a doctor could be the original source of underlying information related to illegal kickbacks. Now, however, relators must give the government something beyond the mere fact of payments to clear the public disclosure hurdle.
How does this hurdle work in practice? In 2012, GlaxoSmithKline (GSK) agreed to pay $3 billion related to qui tam allegations. These allegations included information such as sponsoring lunch and dinner programs related to GSK's drug. Such information would be included in the Open Payments website. If the transfer of meals was all the whistleblowers had now in 2014, their case would have been dismissed.
We have covered many FCA cases, and it is worth noting that plaintiffs never allege mere payments in qui tam cases. In the GSK example, relators also alleged that those lunch and learn programs involved presentations on off-label use of Paxil in children and adolescents, and that GSK had published misleading studies on the efficacy of its products for such uses. Sklilen notes that GSK whistleblowers had independent information of company bad acts that would have "materially added" to the fact that payments had been made.
Stark Law Violations:
The Stark law, also known as the Physician Self-Referral Law, provides a basis for FCA violations by forbidding physician referrals of designated health services (including outpatient prescription drugs) to an entity where that physician has a financial arrangement. Under Sunshine, companies will now have to disclose ownership or investment interests held by physicians, including the amount of the investment
According to Skillen, relators will have a tough time bringing Stark cases because the core of these allegations—the physician's financial relationship with the drug or device manufacturer—will be publicly disclosed. Unless there are allegations of other unlawful activities, Skillen believes these whistleblowers will have little to "materially add" to the publicly disclosed information. She notes that whistleblowers may have an element of concealment that would still make them Stark violations.
Government knowledge "Defense"
The FCA requires that the defendant must knowingly submit a false claim to the government. Skillen stated that while government knowledge alone is not a defense to an FCA action, courts have held that "the extent and the nature of government knowledge may show that the defendant did not 'knowingly' submit a false claim and so did not have the intent required" by the law.
Companies may be able to assert government knowledge based on the fact that the government was aware of the payments, particularly where the company has provided additional information to provide context. Skillen again noted that: "While CMS has said that reporting does not exempt reporting entities or recipients from liability under the AKS or FCA, government knowledge arising from Sunshine disclosure may pre-empt or compromise a qui tam claim" (emphasis added).
Skillen states that based on her experience with CMS, the agency may be persuaded that a company did not commit fraud when they voluntarily disclose the payments. Furthermore, under the FCA there has to be materiality. The Department of Justice, Skillen says, "puts a lot of store on whether CMS would have made the payment notwithstanding the violation."
What's left for whistleblowers?
Despite the new hurdles, Skillen believes that several areas remain "prime territory" for whistleblowers.
- Discounts and rebates, especially where doctor purchases and resells DME
- Free products, either for charity or as a free sample
- Kickbacks to pharmacies: Sunshine only covers physicians and teaching hospitals. Skillen notes that pharmacies were giving kickbacks in the form of the spread of what they got from the government and the discount they received from the company.
- Payment for services of non-physicians, for examples payments to administrative staff
Furthermore, company reporting is not live. Skillen notes that data will be between 6 and 18 months old when it is published. This leaves some wiggle room for whistleblowers to get to the courts before Open Payments reporting.
Consequences of not-reporting
A company who does not report physician payments to Sunshine faces a myriad of penalties. In addition to the fines (up to $1 million for not reporting), Skillen believes that where a whistleblower exposes kickbacks or Stark violations that a company has failed to report, companies should "expect a hard line from the government on FCA damages."
Of course, reporting payments under Sunshine laws could result in prosecution if the payments are kickbacks or Stark violations, but it is likely that qui tam attorneys will be digging for unreported payments. Where any payment is concealed, Skillen argues, the government can approach damages more aggressively.
In conclusion, Skillen noted that the Sunshine Act and qui tam share a common purpose: creating transparency to detect and deter fraud. It will be interesting to see the true effect Sunshine has on whistleblower litigation, but with FCA settlements in the billions of dollars, it is safe to assume that they will continue.