Ain’t No Sunshine When the Government Comes: The DOJ and OIG Enforce the Sunshine Act

Arnall Golden Gregory LLP
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Recently, the United States Department of Justice and the Department of Health and Human Services’ Office of Inspector General entered into a Settlement Agreement with a medical drug company that caught our eye because of the reference to the Open Payments Program, i.e., the Sunshine Act.1  While the Settlement’s focus is on the company’s violation of the Anti-Kickback and False Claims Act statutes, this is the first time, of which we are aware, that the government is enforcing the Sunshine Act requirements.

Below is a summary of some of the facts.

  • Over a number of years, some of the medical device company’s representatives financially supported a neurosurgeon customer’s restaurant by paying for events at the restaurant.
  • Despite the company’s written policies, representatives held multiple (more than 130) events at the restaurant, with the company paying the costs of the meals and alcohol.
  • The events, although touted as educational or business programs, were social, with little discussion about the company’s products.
  • The setting for the events was not conducive to educational distance (such as a private room) in that they were typically held in a public area.
  • The company representatives paid for the physicians’ spouses and significant others who attended the events.
  • The government said the company, therefore, violated the Anti-Kickback Statute by making payments to the neurosurgeon’s restaurant, benefitting him personally, to induce his use of the company’s products.
  • The government also said that the company violated the Sunshine Act by not reporting the payments and transfers of value to the Centers for Medicare & Medicaid Services, as the products were reimbursable by the government.
  • The Settlement notes that the company representatives involved in the wrongdoing did not tell the company’s compliance department of the physicians’ restaurant ownership.
  • The company only reported the food and drinks, but not the total amount paid to the restaurant for the events.
  • Ultimately, the medical device firm settled for $9.2 million – $1 million to resolve the FCA charges and $1.11 million for the Sunshine Act violations.
  • It is likely that the government pursued the Sunshine Act issues once it determined the company had FCA problems, e., an add-on charge.

It is not clear whether this case signals the beginning of the government’s enforcement of the Sunshine Act or not.  Though it seems unlikely the government would initiate an FCA investigation based solely on a Sunshine Act violation, it appears very likely that AKS investigations involving manufacturers will include a review of the manufacturer’s Sunshine Act reporting.  Thus, any company that receives federal reimbursement of its product should take note. To paraphrase Bill Withers’ 1971 classic song, “ain’t no sunshine” when the government comes.

[1] https://www.justice.gov/opa/pr/medtronic-pay-over-92-million-settle-allegations-improper-payments-south-dakota-neurosurgeon

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