The Ninth Circuit recently weighed in on the appeal of a False Claims Act lawsuit from a relator against Medtronic. In this case, the relator alleges that Medtronic, Inc.:
(1) Engaged in “fraud-on-the-FDA” when
obtaining clearance for several devices used in spinal fusion
(2) Engaged in unlawful marketing of the devices for off-label and contraindicated use; and
(3) Paid illegal kickbacks to physicians to induce physicians to order such devices in violation of the federal Anti-Kickback Statute.
The Ninth Circuit reversed the district court, in part, for the fraud-on-the-FDA allegation, and affirmed the district court's dismissal of the unlawful marketing and kickback allegations. We discuss each of these allegations in turn.
With regard to the fraud-on-the-FDA allegation, the relator alleges that Medtronic defrauded the FDA into granting it Class II clearance for the devices. The Ninth Circuit accepted the relator's grouping of the devices into two categories: (1) “Contraindicated-only Devices,” devices that cannot be used for their intended use in the thoracolumbar spine in their clearance application, but rather can only be used in the cervical area of the spine; and (2) “Extra-use Devices,” devices that could be used for their stated intended use in the thoracolumbar spine, but are used for a contraindicated use in the cervical spine.
In its decision, the Ninth Circuit dismissed the relator's fraud-on-the-FDA allegation with regard to the Extra-use Devices; however, for the Contraindicated-only Devices, the Ninth Circuit reversed the district court, giving credence to the relator's theory that such devices were not properly cleared by FDA for any use, and that if Medtronic properly disclosed that the devices' intended use was in the cervical spine, then FDA would have required Class III approval, rather than Class II clearance based on a predicate device. The relator advanced this argument in an attempt to show that the fundamental requirement for Medicare or Medicaid reimbursement of a device—that there be an appropriate FDA clearance or approval in place—had not occurred in this case. We note that Medtronic countered this relator's allegation by stating that a False Claims Act action is an improper vehicle to bring a fraud-on-the-FDA claim and plans to continue to defend itself against this remaining claim that was not dismissed by the Ninth Circuit.
With regard to unlawful marketing claim for contraindicated use, the relator alleges that Medtronic marketed the devices without FDA approval or clearance for use in the cervical spine, which would be an off-label and contraindicated use, and thus a misbranding and adulteration violation of the FDCA. The Ninth Circuit affirmed the district court in dismissing the relator's claims, more firmly establishing the standard that off-label promotion is not an inherent False Claims Act violation, particularly if the device has appropriate FDA clearance or approval and is “reasonable and necessary” under the CMS rules.
In the decision, the Ninth Circuit specifically noted the well-rooted idea that a physician may use a device for an off-label purpose so long as such use is medically necessary and reasonable. The court went on to state: “As long as a doctor finds an off-label use to be medically reasonable and necessary, then the off-label use is permitted, even if the particular use is contraindicated on the label.” The court's reasoning is in line with the concept that FDA does not regulate or interfere with the practice of medicine. Accordingly, whether a device is used off-label has no bearing on whether a federal healthcare program reimburses for such device; rather, the device must have FDA approval/clearance and be “reasonable and necessary” to be eligible for Medicare coverage, as well as meet any other pertinent regulations.
Lastly, with regard to the relator's allegations of Anti-Kickback violations, the Ninth Circuit dismissed the relator's claims. The relator alleged that Medtronic paid illegal kickbacks to healthcare providers through the use of improper rebate agreements with hospitals and through paying physicians for food, travel, and promotional costs related to business development events. The Ninth Circuit affirmed the district court in dismissing these two anti-kickback allegations. First, the Ninth Circuit found that the relator did not identify how the rebate agreement violated the Anti-Kickback statute, particularly in light of the fact that medical device companies may provide rebates if such rebates are properly disclosed and reflected in charges to federal healthcare programs, in accordance with existing safe harbor provisions. Second, the Ninth Circuit found that the relator identified only general allegations related to improper physician remuneration; the relator did not identify any physicians or categories of physicians who received payment in connection with these types of events or connect such physicians or groups of physicians to the purchase or use of the subject devices.
This decision, therefore, only leaves open one important claim, the “fraud-on-the-FDA” claim. Our team will be monitoring this issue going forward to better understand how the courts are interpreting this important claim, where private litigants seek to enforce or prosecute issues under the FDCA.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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