Whistle-Blower’s Suit Against Medtronic Companies Loses Lifeline

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By Eric Topor

A former medical device salesman won’t get another shot at amending his False Claims Act lawsuit against medical device companies Ev3 Inc. and Microtherapeutics Inc. ( United States ex rel. D’Agostino v. Ev3, Inc. , 2016 BL 429304, 1st Cir., No. 16-1126, 12/23/16 ).

The U.S. Court of Appeals for the First Circuit declined to hand whistle-blower Jeffrey D’Agostino a second lifeline in his FCA lawsuit alleging the companies made false representations to the Food and Drug Administration over the safety of Onyx and Axium, two medical devices used to induce blood clotting during brain surgery. The First Circuit in 2015 revived D’Agostino’s lawsuit against the defendants (both subsidiaries of Medtronic Plc), on the grounds that the trial court’s decision to deny his fourth attempt to amend his complaint was based on too stringent a review standard ( 192 HCDR, 10/5/15 ).

The trial court’s re-review of D’Agostino’s lawsuit returned the same result, holding that further amendment was futile because his proposed allegations simply fell short of FCA pleading standards. The First Circuit affirmed that decision in a Dec. 23 ruling, marking the likely end of D’Agostino’s lawsuit.

The appeals court specifically cited the absence of any adverse government actions taken against the defendants by either the FDA or the Centers for Medicare & Medicaid Services in the wake of D’Agostino’s allegations as indications that they weren’t material to the government’s decision to approve the devices for patient use or the payment of Medicare claims. The U.S. Supreme Court ruled earlier this year that a misrepresentation or regulatory violation by a defendant must have been material to the government’s decision to pay an individual claim in order to incur FCA liability.

Bloomberg BNA contacted counsel for both parties for comment, but neither responded.

Universal Health Standard Applied

The appeals court faulted D’Agostino’s proposed amended complaint for failing to cite specific examples of alleged false claim submissions for Onyx and Axium, which are generally a requirement to meet the FCA’s stringent pleading standards. In particular, the court said D’Agostino couldn’t simply allege that a large percentage of patients treated by physicians who lacked proper training in using the Onyx device were Medicare beneficiaries: He needed to link specific Medicare claims to Onyx patients treated by physicians without proper training.

But the court also focused on the Supreme Court’s materiality standard espoused in Universal Health Servs., Inc. v. United States ex rel. Escobar , U.S., No. 15-7, 6/16/16 , for additional support in affirming the lawsuit’s dismissal. D’Agostino alleged that the FDA wouldn’t have approved Onyx if eV3 divulged critical safety information, and therefore the device would have been ineligible for Medicare reimbursement.

The court said D’Agostino’s causal link was too tenuous to support FCA liability. In addition, the court said the CMS’s continued reimbursement of Onyx devices despite D’Agostino’s allegations made six years ago “casts serious doubt on the materiality of the fraudulent representations” alleged.

The court also noted that the FDA has several regulatory tools at its disposal, including issuing a recall, suspending a temporary approval, withdrawing approval or imposing additional requirements on Onyx, and it hasn’t taken any adverse actions. The court said the FDA’s failure to withdraw approval for Onyx precluded support for D’Agostino’s claim that “the FDA’s approval was fraudulently obtained.”

Berger & Montague PC and Shapiro Weissberg & Garin LLP represented D’Agostino. Ropes & Gray LLP represented the defendants.

To contact the reporter on this story: Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

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