April 22, 2021

The United States Court of Appeals for the Ninth Circuit (“Federal Appellate Court”) held in its unpublished Memorandum opinion filed on April 2, 2021 in a whistleblower lawsuit alleging that Medtronic Inc. and various related entities fraudulently obtained Food and Drug Administration clearance for several devices used in spinal fusion surgeries (Subject Devices), unlawfully marketed them for an off-label and contraindicated use, and illegally compensated physicians to use them: “Relator incorrectly assumes that the federal government will not reimburse for an off-label use of a medical device. To the contrary, the federal government has recognized that doctors may use medical devices for off-label purposes as long as it is medically necessary and reasonable … the federal government does not distinguish between on-label and off-label uses in determining whether to pay for medical devices. Rather, to be reimbursable, a device must (1) have FDA approval/clearance, (2) be reasonable and necessary.”

The Federal Appellate Court further held: “Medtronic’s alleged omission about its intent to market the devices for a contraindicated use was immaterial to the FDA’s clearance for Extra-use Devices … But the Contraindicated-only Devices present a different story. For those devices, Relator does not allege mere off-label use. Rather, Relator alleges that the Contraindicated-only Devices were not properly cleared for any use: they cannot be used for their labeled intended use (and are thus not substantially similar to the predicate device), and they can only be used for their contraindicated use. Relator claims that Medtronic knew that cervical VBRs posed different questions of safety to its previously approved devices, and if Medtronic disclosed that the devices were intended for use in the cervical spine, then the FDA may have required Class III approval. These considerations—intended use, similarity to a predicate device, and different questions about safety—are precisely those that the FDA considers in granting Class II certification. 21 U.S.C. § 360c(i)(1)(A). Put differently, Medtronic’s alleged fraud went “to the very essence of the bargain” … In Campie, we noted that other jurisdictions had “cautioned against allowing claims under the False Claims Act to wade into the FDA’s regulatory regime” … Yet we nevertheless allowed the relator’s fraud-on-the-FDA theory to go forward … We thus affirm the district court for claims based on the Extra-use Devices, but we reverse for claims based on Contraindicated-only Devices.”

With regard to the Anti-Kickback Statute claims, the Federal Appellate Court stated: “Relator first alleges that Medtronic entered into improper rebate agreements with hospitals to buy the Subject Devices. But the AKS [Anti-Kickback Statute] exempts from its scope discounts offered to providers if properly disclosed to and reflected in charges to the federal program. 42 U.S.C. § 1320a-7b(b)(3)(A). Similarly, Medicaid allows rebate agreements so long as the state Medicaid programs are offered the same pricing. 42 U.S.C. § 1396r-8(a)(1). Relator does not explain how Medtronic’s rebate agreement violated the AKS. Therefore, in relation to the rebate agreements, Relator fails to state a claim.”

The Federal Appellate Court further held: “Relator next alleges that Medtronic remunerated physicians by paying the costs, including food, travel, and promotional expenses, in connection with certain business development events. But as the district court observed, these “general allegations do not identify any physicians, or categories of them, who actually received payment in connection with decisions — in which they participated — to purchase or use of any of the Subject Devices.” We thus affirm the district court’s dismissal of Relator’s AKS claim.”

Source The Dan Abrams Company LLC v. Medtronic LLC, No. 19-56377.

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