As part of its obligation to implement Section 6002 of the Affordable Care Act-the Physician Payment Sunshine Act ("Sunshine Act"), in February 2013, the Centers for Medicare and Medicaid Services (CMS) released the final regulations for implementation.  The fundamental premise behind the Sunshine Act was to promote greater transparency and shed light on financial relationships between doctors and manufacturers of covered drugs, devices, biologicals, and medical supplies (collectively "Manufacturers"). 

As Peter Budetti, MD, then CMS deputy administrator for Program Integrity stated, "Disclosure of these relationships allows patients to have more informed discussions with their doctors."

On November 13, 2014, CMS published in the Federal Register that they, "have organized these reporting requirements under the 'Open Payments' program. ... The implementing regulations, which describe procedures for applicable GPOs to submit electronic reports detailing payments or other transfers of value and ownership or investment interests provided to covered recipients and physician owners or investors, are codified at § 403.908."  Subsequently, the vernacular changed from the Physician Sunshine Act to the Open Payments Program.  

 

Certain types of payments to physicians, hospitals, or other healthcare entities by persons seeking to utilize those payments in exchanges for referrals or product utilization have been prohibited for nearly 50 years under the Federal Anti-Kickback Statute  and for nearly 30 years under the Stark Law. The False Claims Act has been around since 1863 and all of these laws are considered significant fraud, waste, and abuse laws with which every healthcare industry participant should have familiarity.  

The purpose of this article is to highlight two recent False Claims Act case settlements, which involved allegations of violations of the Anti-Kickback Statute (AKS) and the Open Payment Programs (OPP). 

The False Claims Act (FCA) is the Federal Government's primary tool for combating fraud and returning funds to the federal fisc.  Two recent case settlements highlight the OPP's role in FCA cases. 

On October 29, 2020, the DOJ announced that Medtronic USA, Inc. ("Medtronic") agreed to pay $9.2 million to settle FCA violations based on the violation of two laws: (1) the AKS; and (2) OPP.  The OPP portion of the settlement was $1.11 million, which "requires medical device manufacturers like Medtronic to disclose to CMS certain payments or other transfers of value to a physician like Asfora."  The allegations were premised on Medtronic's payments to the physician's restaurant, knowing that these were kickbacks in exchange for referrals, and underreporting the payments to CMS. As Brenna E. Jenny, former HHS Deputy General Counsel and CMS Chief Legal Officer indicated, "CMS' Open Payments Program is intended to promote transparency and accountability in the healthcare system. Manufacturers that misreport their financial relationships with healthcare providers erode the integrity of the Open Payments Program and will be held accountable."  Hence, underscoring the importance of truthful disclosures to CMS. 

Again, on May 19, 2021, the DOJ revealed that a French medical device manufacturer, Medicrea International and its American affiliate, Medicrea USA, agreed to pay $2 million to resolve civil FCA allegations for violations of the AKS ($1 million) and OPP ($1 million).  The DOJ not only restated the goal of OPP in creating transparency, but also relayed that "The settlement follows the Senate Finance Committee's March 2019 request that HHS-OIG and CMS investigate Open Payments Program non-compliance and pursue enforcement."  It further indicated that it is incumbent upon Manufacturers to ensure timely and accurate OPP reporting of all applicable payments-whether direct or indirect, in cash or in kind.  This second settlement underscores the notion of heightened scrutiny related to OPP violations in connection with FCA cases. 

Acting U.S. Attorney for the Eastern District of Pennsylvania summed it up best: "This case [Medicrea] demonstrates the Department of Justice's commitment to ensuring that medical device manufacturers do not use improper relationships to influence physician decision-making and are transparent about the benefits that they provide to physicians." These cases should serve as a wake-up call to Manufacturers' compliance teams, as well as defense counsel who could be called in to represent companies once the government initiates its investigation. Whistleblowers' counsel now has another established tool in their arsenal and it is likely that OPP violations will be pled conjunctively with AKS violations, as the basis of FCA cases.  

Rachel V. Rose, JD, MBA is an Attorney at Law, in Houston, TX. Rachel advises clients on healthcare, cybersecurity, securities law, and qui tam matters. She also teaches bioethics at Baylor College of Medicine. She has been consecutively named by Houstonia Magazine as a Top Lawyer (Healthcare) and to the National Women Trial Lawyer's Top 25. She can be reached at rvrose@rvrose.com. www.rvrose.com