The Department of Justice announced a $9.2 million settlement with Minnesota medical device maker Medtronic USA last month that could signal a developing interest in Physician Payments Sunshine Act enforcement. Medtronic agreed to pay $8.1 million to resolve allegations that it violated the False Claims Act by paying kickbacks to a South Dakota neurosurgeon to use its products, and an additional $1.1 million for allegedly failing to report payments to the neurosurgeon as required by the Sunshine Act.
Sunshine Act
As part of the Affordable Care Act, the Sunshine Act was enacted to increase transparency of the financial relationships between healthcare providers and manufacturers of drugs, medical devices, and medical supplies. Since 2014, medical product manufacturers have been required to disclose any payments or transfers of value made to physicians or teaching hospitals to the Centers for Medicare and Medicaid Services’ (CMS) Open Payments Program. The Sunshine Act will be expanded in 2021 to include payments to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, certified registered nurse anesthetists, and anesthesiologist assistants, in recognition of these professionals’ prescriptive authority. Medical product manufacturers must begin collecting this additional data on January 1, 2021 and report it beginning in 2022.
The Medtronic case
The Medtronic case centers on the manufacturer’s dealings with Dr. Wilson Asfora, M.D. from September 2010 through September 2019. The government alleged that Medtronic agreed to Dr. Asfora’s request to pay for events at a restaurant that he owns with his wife. Medtronic allegedly hosted more than 130 events at the restaurant, Carnaval Brazilian Grill, and paid the eatery more than $87,000. Medtronic’s internal expense reports listed the events as educational or business events.
The government, however, alleged that these were social events complete with lavish meals and alcohol for a guest list selected by Dr. Asfora that included his acquaintances, business partners, favored colleagues, and referral sources. The government said the events amounted to kickbacks that improperly induced the doctor to place orders for Medtronic’s implantable SynchroMed II intrathecal infusion pumps and submit false claims to Medicare, Medicaid, and TRICARE.
“Kickbacks undermine the integrity of federal health care programs and increase costs borne by taxpayers,” Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division said in a statement announcing the settlement. “This case demonstrates the Department of Justice’s commitment to ensure that medical device manufacturers do not use improper financial relationships to influence physician decision-making.”
Sunshine Act violations
The government also alleged that Medtronic failed to report the full value of its payments or transfers of value to Dr. Asfora for 74 events over six years. While Medtronic salespeople knew that Dr. Asfora owned the restaurant and that he requested that Medtronic pay for events there, this information was withheld from the company’s compliance department, which led to underreporting to CMS, according to the government. Instead of reporting the total amount paid to Carnaval as required by the Sunshine Act, Medtronic only reported the value of the food and drinks that each physician at the event personally consumed.
Penalties for failing to properly report information to the Open Payments Program are $10,000 to $100,000 per violation, not to exceed $1 million per year, for knowing violations and $1,000 to $10,000 per violation, not to exceed $150,000 per year, for violations that were not willful. The settlement announcement did not specify how Medtronic’s total penalty was calculated, but it did indicate there may be heightened focus on Sunshine Act violations in future enforcement actions.
“Manufacturers that misreport their financial relationships with health care providers erode the integrity of the Open Payments Program and will be held accountable,” Brenna E. Jenny, Department of Health and Human Services Deputy General Counsel and CMS Chief Legal Officer, was quoted as saying. “CMS looks forward to continued partnership with the Department of Justice to resolve allegations of manufacturers skirting their Open Payments allegations.”
Although the Open Payments reporting process has been in effect for six years, the Medtronic case marks the first public settlement involving Sunshine Act. While the Sunshine Act was not the entire focus of the enforcement action, it serves as a reminder to manufacturers of medical devices, supplies, and pharmaceuticals that they must accurately report all applicable payments or transfers of value to CMS.
