Posted July 26th, 2017.
By Melissa Daniels
Law360, Los Angeles (July 26, 2017, 10:09 PM EDT) — A First Circuit panel on Wednesday partially revived claims against Johnson & Johnson and its subsidiary DePuy Orthopaedics Inc. in a False Claims Act suit filed by two whistleblower physicians over allegedly defective hip replacement devices.
The panel agreed with a lower court’s decision to dismiss parts of the complaint that accused the companies of making false statements to the FDA over its marketing of a hip replacement device. But it revived claims connected to accusations that DePuy caused physicians to seek government reimbursement for devices that didn’t match the FDA-approved designs, saying the claims were properly pled.
The panel said it was “very likely” that the devices carried a representation that they were FDA-approved, even if the product wasn’t sold as represented. And given the expense of a hip replacement surgery, uninsured patients likely didn’t cover the costs themselves, the panel said, indicating the potential likelihood of government reimbursement.
The decision cited a 2009 First Circuit decision in a qui tam case known as Duxbury, which allows “more flexible” pleading requirements for indirect false claims filed by third parties seeking government payment.
“In this context, where the complaint essentially alleges facts showing that it is statistically certain that DePuy caused third parties to submit many false claims to the government, we see little reason for Rule 9(b) to require relators to plead false claims with more particularity than they have done here in order to fit within Duxbury’s ‘more flexible’ approach to evaluating the sufficiency of fraud pleadings in connection with indirect false claims for government payment,” the panel said.
Ross Brooks, a partner and co-chair of Sanford Heisler Sharp’s whistleblower and qui tam practice that represented the relators, told Law360 they were pleased with the court’s decision to uphold the complaint’s allegation that DePuy violated the False Claims Act.
“As the court ruled, when a manufacturer sells many thousands of medical devices to providers, and more than half of the devices fall outside of their FDA-approved specifications, it is statistically certain that false claims were submitted to the government,” Brooks said.
The action was filed by relators Antoni Nargol and David Langton in May 2012. They accused DePuy and J&J of committing fraud in marketing their hip replacement devices, dubbed Pinnacle metal-on-metal or “Pinnacle MoM” devices. The name refers to the structure of the devices that use a metal artificial acetabular cup and a metal artificial femoral head, according to court records.
The complaint revolved around two main allegations: that DePuy made false statements to the FDA about the devices that would’ve prevented it from getting approval otherwise, and that DePuy “palmed off” defective versions of the product that fell short of the FDA-approved design specifications, inducing unsuspecting doctors to seek government reimbursement for defective products.
Thousands of Medicare and Medicaid recipients received the device implants, even though more than half of the implants fell outside of FDA-approved specifications, the relators said.
U.S. District Judge F. Dennis Saylor IV dismissed the relators’ operative complaint in February 2016. But the relators appealed, saying at oral arguments in December that Judge Saylor incorrectly found their complaint didn’t include enough details to sustain the allegations.
DePuy argued that the suit failed to identify any connection between a defective device and an actual false claim for payment — and that the FDA never made the company pull the device from the market, which was voluntarily discontinued.
In Wednesday’s decision, the panel found Judge Saylor correctly dismissed claims over whether DePuy misrepresented the safety of its product to the FDA. It cited its January decision in D’Agostino v. ev3 Inc et al., a case that held a relator couldn’t base their allegations off of allegedly fraudulently obtained FDA approval if the FDA hadn’t withdrawn its approval in the face of the allegations.
“The government, having heard what relators had to say, was still paying claims not because of what was said to or by the doctors, but because the government through the FDA affirmatively deemed the product safe and effective,” the panel said. “And, absent some action by the FDA, we can see no plausible way to prove to a jury that FDA approval was fraudulently procured.”
The panel also shot down the relators’ argument that the district court should have allowed them to amend their complaint a fourth time, saying the proposed changes would be “futile or redundant.”
U.S. Circuit Judges Juan R. Torruella, O. Rogeriee Thompson and William J. Kayatta Jr. sat for the panel.
Representatives for the companies didn’t immediately respond to requests for comment Wednesday.
The plaintiffs are represented by Russell L. Kornblith, David W. Sanford and Ross B. Brooks of Sanford Heisler Sharp LLP and Kevin M. Kinne of Cohen Kinne Valicenti & Cook LLP.
Depuy and J&J are represented by Mark D. Seltzer, D. Danielle Pelot and Hannah R. Bornstein of Nixon Peabody LLP.
The case is Nargol et al. v. DePuy Orthopaedics Inc. et al., case number 16-1442, in the U.S. Court of Appeals for the First Circuit.
–Additional reporting by Brian Amaral. Editing by Alyssa Miller.