United States ex rel. Modglin v. DJO Global Inc., Case No. CV 12–07152 MMM JCGx.

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
Writing for the CourtMARGARET M. MORROW, District Judge.
Citation48 F.Supp.3d 1362
PartiesUNITED STATES of America ex rel. Doris MODGLIN and Russ Milko, Plaintiffs, v. DJO GLOBAL INC., DJO LLC, DJO Finance LLC, Orthofix, Inc., Biomet, Inc. and EBI, LP, Defendants.
Decision Date02 September 2014
Docket NumberCase No. CV 12–07152 MMM JCGx.

48 F.Supp.3d 1362

UNITED STATES of America ex rel. Doris MODGLIN and Russ Milko, Plaintiffs
DJO GLOBAL INC., DJO LLC, DJO Finance LLC, Orthofix, Inc., Biomet, Inc. and EBI, LP, Defendants.

Case No. CV 12–07152 MMM JCGx.

United States District Court, C.D. California.

Signed Sept. 2, 2014.

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David M. Harris, AUSA United States Attorney's Office, Los Angeles, CA, Gerald C. Robinson, Gerald Robinson Law Firm PLLC, David B. Ketroser, MD, David B. Ketroser M.D., J.D., Minneapolis, MN, Linda R. MacLean, Phillip E. Benson, Warren Benson Law Group, Newport Beach, CA, Donald R. Warren, Warren Benson Law Group, La Jolla, CA, for Plaintiffs.

Andrew C. Bernasconi, Reed Smith LLP, Jessica Lynn Ellsworth, Hogan and Hartson LLP, Michele W. Sartori, Hogan Lovells U.S. LLP, Washington, DC, Francisca M. Mok, Reed Smith LLP, Dean Hansell, Hogan Lovells LLP, Los Angeles, CA, Thomas H. Suddath, Reed Smith LLP, Philadelphia, PA, for Defendants.


MARGARET M. MORROW, District Judge.

Qui tam relators Doris Modglin and Russ Milko filed this action against defendants DJO Global Inc. (“DJO Global”), DJO, LLC (“DJO”), DJO Finance LLC (“DJO Finance”), Orthofix, Inc. (“Orthofix”), Biomet, Inc. (“Biomet”), and EBI, LP (“EBI”) under seal and in camera on August 20, 2012. Relators invoked the court's federal question jurisdiction under 28 U.S.C. § 1331, and alleged a single claim for violation of the False Claims Act (“FCA”), 31 U.S.C. § 3729(a)(1)(A) & (B).1 On December 26, 2012, they filed a first amended complaint, realleging the federal FCA claim and alleging state FCA claims under the equivalent statutes of 29 states: California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New

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York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, and Wisconsin.2 On May 17, 2013, the United States declined to intervene in the case.3 On July 19, 2013, each of the 29 states also declined to intervene.4 The court unsealed the amended complaint that day.5

On October 3, 2013, pursuant to a request by relators, the court dismissed Orthofix.6 On November 8, 2013, relators filed a second amended complaint, restating their federal and state FCA claims and adding EBI, LLC (also “EBI”) as a defendant.7 On January 22, 2014, the parties filed a stipulation to dismiss DJO Global and DJO Finance as defendants;8 the court entered an order on the stipulation on January 28, 2014.9 On February 20, 2014, the court granted defendants' motion to stay discovery10 until it decided their pending motion to dismiss the second amended complaint.11 Relators oppose the dismissal motion.12 On May 5, 2014, the court held a hearing on the motion. Following the hearing, the court took the motion under submission and directed the parties to file supplemental briefs addressing four questions.13 The parties did so on July 7, 2014.14


Relators assert that defendants—manufacturers and distributors of durable medical equipment (“DME”)—fraudulently

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caused the government to disburse money by filing claims with Medicare and other federal healthcare plans15 for reimbursement of their provision of noninvasive, bone-growth stimulators (“stimulators”) which they knew had been prescribed by physicians for an off-label purpose, i.e., one not specifically approved by the Food and Drug Administration (“the FDA”). Defendants allegedly failed to reveal to Medicare and other federal healthcare plans that the stimulators were to be used for off-label purposes. Before one can understand the allegations in the complaint, it is necessary to provide an overview of the statutory and regulatory scheme that governs both FDA approval of medical devices and the coverage of such devices by Medicare and other federal programs. The court begins with background on FDA approval of medical devices.

A. Background Regarding FDA Approval of Medical Devices

One of the “core objectives” of the Food, Drug, and Cosmetic Act (“the FDCA”), 21 U.S.C. § 301 et seq., is to ensure that “there is reasonable assurance of the safety and effectiveness of devices intended for human use.” Food and Drug Administration v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133–34, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000) (citing 21 U.S.C. § 393(b)(2) ). To that end, the FDCA classifies medical devices in three categories: Classes I, I, and III. 21 U.S.C. § 360c(a). Class III devices include those that present a potential unreasonable risk of illness or injury. Id., § 360c(a)(1)(C). Because of the risk associated with such devices, the FDA has determined that manufacturers of such devices must submit premarket approval (“PMA”) applications to the FDA and obtain premarketing clearance before offering the devices for sale.16 42 C.F.R. § 405.201(b). Class III devices that do not have PMA approval cannot be marketed and are considered “adulterated.” 21 U.S.C. § 351(f)(1)(B) (“A ... device shall be deemed to be adulterated ... if it is a class III device ... which ... is required to have in effect an approved application for premarket approval ... and ... which has an application which has been suspended or is otherwise not in effect”); 42 C.F.R. § 405.201(b).

PMA approval is based on a determination by the FDA that the PMA application contains sufficient valid scientific evidence to assure that the device is safe and effective for its intended use. 21 C.F.R. § 814.2(a). It is “a ‘rigorous' process in which the manufacturer submits to the FDA extensive study reports, design specifications and descriptions, samples of the device, and proposed labeling, and the FDA conducts a comprehensive review and

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evaluation of all the submitted documents and materials [.]” Kashani–Matts v. Medtronic, Inc., No. SACV 13–01161–CJC (RNBx), 2013 WL 6147032, *1 (C.D.Cal. Nov. 22, 2013).

If a medical device is used for a purpose other than that for which it has obtained PMA approval, the usage is “off-label.” Carson v. Depuy Spine, Inc., 365 Fed.Appx. 812, 815 (9th Cir.2010) (Unpub.Disp.) (“Drugs and medical devices are approved or cleared by the FDA for marketing with labels describing the uses and the patient conditions which have been reviewed in the approval or clearance process. Any use by a physician which differs from the use described in the label or from the patient conditions described in the label is called ‘off-label’ ”). The FDCA explicitly protects physicians' abilities to prescribe devices for such use. 21 U.S.C. § 396 (“Nothing in this chapter shall be construed to limit or interfere with the authority of a health care practitioner to prescribe or administer any legally marketed device to a patient for any condition or disease within a legitimate health care practitioner-patient relationship”); see also Houston v. Medtronic, Inc., No. 2:13–cv–01679–SVW (SHx), 2014 WL 1364455, *1 n. 1 (C.D.Cal. Apr. 2, 2014) (“Physicians are permitted to use Class III devices in off-label manners”). Indeed, off-label use of medical devices is “generally accepted” within the medical community, and section 396 of the FDCA “expressly disclaims any intent to directly regulate the practice of medicine.” Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341, 351 & n. 5, 121 S.Ct. 1012, 148 L.Ed.2d 854 (2001) (citing Beck & Azari, FDA, Off–Label Use, and Informed Consent: Debunking Myths and Misconceptions, 53 FOOD & DRUG L.J. 71, 72 (1998) (“Off-label use is widespread in the medical community and often is essential to giving patients optimal medical care, both of which medical ethics, FDA, and most courts recognize”)); see also Kashani–Matts, 2013 WL 6147032 at * 1 n. 4 (“The FDA does not prohibit or regulate off-label use of medical devices by medical professionals, and the Supreme Court has emphasized that off-label use is not merely legitimate but important in the practice of medicine,” citing Buckman, 531 U.S. at 350, 121 S.Ct. 1012 ).17

The FDCA does, however, expressly prohibit class III device manufacturers from marketing a PMA-approved device for an off-label use. 21 U.S.C. § 331 (proscribing, inter alia, “[t]he introduction ... into interstate commerce of any ... device ... that is adulterated or misbranded”); 21 C.F.R. § 814.80 (stating that once the FDA has approved a PMA application, the manufacturer of the approved device may not manufacture, package, store, label, distribute, or advertise the device in a manner that is inconsistent with any conditions of approval specified in the PMA approval order for the device). Because off-label usage of medical devices “is an accepted and necessary corollary of the FDA's mission to regulate in th[e] [medical field] without directly interfering with the practice of medicine,” however, Buckman, 531 U.S. at 349–50, 121 S.Ct. 1012, “a manufacturer is not liable [for having violated the FDCA] merely because it sells a device

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