Ninth Circuit Revives FCA Claim Based on “Fraud on the FDA”

The Ninth Circuit recently revived a claim in a qui tam lawsuit against a medical device manufacturer based on a “fraud on the FDA” theory of liability under the False Claims Act.  See United States ex rel. The Dan Abrams Co. LLC v. Medtronic PLC et al., No. 19-56377 (9th Cir. April 2, 2021).

Among other claims, the relator alleged that Medtronic fraudulently obtained 510(k) clearance for certain spinal surgery implants by falsely representing their intended use in submissions to the FDA.  According to the complaint, some of these devices allegedly could not be used as indicated in defendant’s 510(k) submissions and the device’s labeling and, in fact, could only be used for a contraindicated use.  As such, the relator alleged that these devices were not properly approved or cleared by the FDA and thus would have been ineligible for reimbursement under Medicare but for the defendant’s alleged fraud.

The district court dismissed the relator’s “fraud on the FDA” claim in 2019 for failure to state a claim, finding that its allegations were offered “solely as a predicate for the claim that the Subject Devices were intended for off-label use.”  On April 2, a panel of the Ninth Circuit reversed the district court’s decision as to the allegations related to the defendant’s “contraindicated-only devices”—that is, those devices that allegedly could only be used for their contraindicated use and not for their label-indicated use—noting that the relator did not allege mere off-label use for these devices.  Rather, the panel explained that the relator alleged that the “contraindicated-only devices” were not properly cleared for any use by the FDA.

The panel upheld the district court’s dismissal of the relator’s other claims, including the allegation that the defendant promoted off-label and contraindicated uses of certain spinal surgery devices.  According to the panel, the federal government recognizes that doctors may use medical devices for off-label purposes—even contraindicated uses—if they believe that such use is medically “reasonable and necessary.”  In its ruling, the panel found that the relator had not plausibly alleged that the off-label uses at issue were medically unreasonable or unnecessary.

The panel also affirmed the dismissal of the claim that Medtronic violated the Anti-Kickback Statute (AKS) by entering into improper rebate agreements with hospitals and offering kickbacks to physicians.  The panel stated that properly disclosed discounts are exempt from the statute under certain conditions and noted that the relator did not explain how the defendant’s rebate agreements specifically violated the AKS.  Additionally, the panel concurred with the district court’s dismissal of the relator’s physician kickback allegations.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.