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The Sunshine Act and Qui Tam

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What is the Sunshine Act?

In 2010 Congress passed the Physician Payments Sunshine Act (Sunshine Act) as part of the Affordable Care Act. The act requires the manufacturers of drugs, medical devices, and biologicals who also participate in Medicare, Medicaid, and other federal healthcare programs to report payments they make to physicians. The first set of payment disclosures had to be made to the Center for Medicare and Medicaid Services (CMS) in March 2014. The data was published in September in a publically searchable database. This database will be updated annually.

The Sunshine Act and Qui Tam: The Positive

Making this data available publically can have a major impact on qui tam cases. First, qui tam cases, like other fraud cases, must be pled with “particularity” according to Federal Rule of Civil Procedure 9(b). This means that instead of simply pleading general facts that could possibly suggest a fraudulent scheme, qui tam complaints must generally allege the “who, what, where, and when” of the fraud. Having quick access to payment information from medical manufacturers to doctors helps to fill in some of those details and may help a complaint survive a motion to dismiss at the beginning of litigation.

The Sunshine Act and Qui Tam: The Potential Drawback

The public database of payment information may make it more difficult in other ways to plead a qui tam case. Qui tam actions are limited by the public disclosure bar, a provision of the Federal False Claims Act. Unless the Relator, or private party representing the interests of the government in the case, qualifies as an original source of the information under the statute, qui tam actions cannot be based on publically available information. The payment information provided under the Sunshine Act and published online may count as a public disclosure. If this is the case, unless the Realtor is an original source of that data, or is an original source of other information in the complaint necessary to establish the alleged fraudulent scheme, the Relator could be barred from bringing a qui tam action. If a Relator does not have additional information that is material to the allegations of fraud, they will now be in a race not only against other possible Relators (the first to file bar) but with the Sunshine Act disclosures as well. If a Relator can disclose to the government any allegedly fraudulent payments before the companies disclose the payments to the government themselves, the Relator may still have a qui tam action.

The Future of Qui Tam and the Sunshine Act

Since the release of payment information is new, it is unclear exactly how it will affect future qui tam actions. While the database of information may affect who can file and how specifically they can allege the fraud, the basic requirements of qui tam cases remain the same:

  • The Relator must be the original source of the information
  • The claims must be alleged with particularity

Even before the payment information disclosed under the Sunshine Act was made public, Qui Tam actions would be dismissed where they failed to meet these requirements. Although some Relators may find that they have to move faster before their claims are barred by public disclosure, others may find that their claims are made stronger with the addition in the complaint of specific payment information. Only time will tell exactly how the Sunshine Act disclosures impact qui tam actions.