Veloxis Pharmaceuticals, Inc. (“Veloxis”) recently agreed to pay more than $46 million to resolve criminal and civil allegations that it paid kickbacks to health care professionals to encourage prescriptions and sales of a brand-name immunosuppression drug to kidney transplant recipients instead of a generic drug.
What makes this settlement noteworthy is that it includes a civil penalty of $1.55 million to address claims that Veloxis knowingly failed to report to the Centers for Medicare and Medicaid Services payments to health care professionals (“HCPs”) under the federal Open Payments Program (also known as the Physician Payments Sunshine Act or “Sunshine Act”). This civil penalty is the largest penalty ever imposed under the Sunshine Act.
In the settlement, the Department of Justice (“DOJ”) alleged that Veloxis violated the criminal Anti-Kickback Statute through lavish meals, “large quantities” of “expensive alcohol,” gifts, flights, and hotel stays at luxury resorts for HCPs in exchange for the HCPs recommending or prescribing Envarsus XR, a drug used to prevent organ rejection in patients who have received a kidney transplant. The recipients of these purported kickbacks included transplant surgeons, nephrologists, pharmacists, a hospital administrator, and spouses. Veloxis also allegedly made large payments to HCPs under the guise of consulting agreements, often for work that was not actually performed. In addition, the government alleged that Veloxis violated the civil False Claims Act by causing hospitals and pharmacies to submit claims that were tainted by the kickbacks.
The government did not stop there. It alleged further that Veloxis falsified records in order to avoid its reporting obligations under the Sunshine Act. Briefly, the Sunshine Act, which was included in the Affordable Care Act, requires pharmaceutical manufacturers, device manufacturers, and group purchasing organizations that participate in federal health programs to report a wide range of cash and non-cash payments and other transfers of value made to physicians and teaching hospitals. The reporting obligation covers items such as travel, food, lodging, consulting fees, honoraria, gifts, grants, and debt forgiveness. Reported information is available to the public on a dedicated database. A reporting company that unintentionally fails to report a payment is subject to a civil monetary penalty that can be imposed by the Department of Health and Human Services (“HHS”), which adjusted for inflation in 2026 can be as high as $14,067 per instance, with an annual cap of $211,008. A knowing failure to report a payment can result in a fine of up to $140,674 per instance, subject to a cap of $1,406,728 in 2026.
The Veloxis settlement signals that DOJ and HHS are willing to use the Sunshine Act as an adjunct to their investigative and enforcement powers under the Anti-Kickback Statute and the False Claims Act, which have been the mainstays of federal health care fraud enforcement. This expansion of authority was not the original intent of the Sunshine Act drafters, who envisioned the law as a way to provide information to consumers rather than as a tool for fraud investigations and enforcement.[1] Nevertheless, manufacturers should take careful note and review their compliance policies and internal audit processes to recognize the intersection of the Sunshine Act and traditional fraud laws, now that the federal government has sought to link them together. In view of the fact that the Sunshine Act requires that manufacturers report a broad range of cash and in-kind compensation that sweeps in almost all interactions between manufacturers and HCPs or teaching hospitals, manufacturers should presume that if they receive a touch from DOJ or HHS, that agency has already reviewed the relevant Open Payments report in conjunction with any informal or formal investigation.
If you have questions, please reach out to the authors.
Epstein Becker Green Staff Attorney Ann W. Parks contributed to the preparation of this post.
Endnotes
[1] See, e.g., 155 Cong. Rec. S787-S789 (2009); 154 Cong. Rec. S5029-S5033, S5956-S5958, and S8165-S8169 (2008).
* * * *
If you have questions, please reach out to the author(s).
The Health Law Advisor blog is currently edited by Emily Chi Fogler.
Authors
Member of the Firm
Member of the Firm