USA v. BOSTON SCIENTIFIC Corp.

• Decision Date: 31 March 2011
• Docket Number: CIVIL ACTION NO. H-07-2467
• Parties: UNITED STATES OF AMERICA, ex rel. ELAINE BENNETT, Plaintiffs, v. BOSTON SCIENTIFIC CORPORATION and GUIDANT CORPORATION, Defendants.
• Court: U.S. District Court — Southern District of Texas

UNITED STATES OF AMERICA, ex rel.ELAINE BENNETT, Plaintiffs,

v. BOSTON SCIENTIFIC CORPORATIONand GUIDANT CORPORATION, Defendants.

CIVIL ACTION NO. H-07-2467

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

SIGNED: March 31, 2011

MEMORANDUM AND OPINION

This case is one of a number raising the question of when a manufacturer's promotion of a medical device for an "off-label" use may provide the basis for a qui tam action by a private plaintiff suing under the False Claims Act.¹ The relator, Elaine Bennett, alleges that Boston Scientific Corporation and Guidant Corporation improperly promoted the FlexView microwave surgical-ablation system for an off-label use and that these promotional activities caused physicians and hospitals to submit false claims for reimbursement from Medicare or Medicaid. The FDA has approved the defendants' microwave surgical-ablation system for the general uses of ablating soft tissue and striated, cardiac, and smooth muscle. The relators allege that the defendants have improperly promoted the device for the off-label use of surgical ablation to treat atrial fibrillation, both in conjunction with other cardiac surgery and as a stand-alone procedure.

The defendants have moved to dismiss under Rule 12(b)(6), applying the standards of Rule 8 and Rule 9(b) of the Federal Rules of Civil Procedure. The defendants argue that the allegations of off-label promotional activities are insufficient to plead that they caused physicians or hospitals to submit false reimbursement claims to Medicare or Medicaid. (Docket Entry No. 68). Bennett responded, (Docket Entry No. 75), and the defendants replied, (Docket Entry No. 77).

Based on the pleadings, the motion, the responses, and applicable law, this court grants the defendants' motion to dismiss, for the reasons explained in detail in this Memorandum and Opinion. Because there has been only one amendment, and because Rule 15 embodies a liberal amendment policy, the relators may amend no later than April 22, 2011, consistent with this Memorandum and Opinion.

I. Background

A. Procedural History

Elaine Bennett filed her complaint on November 9, 2006, under seal, to allow the United States to decide whether it wanted to intervene.² This is one of five qui tam actions filed by Elaine Bennett against medical-device manufacturers. (Docket Entry No. 4).³ The United States has not intervened in this suit, but it has filed a "Statement of Interest in Response to the Defendant's Motion to Dismiss Plaintiffs First Amended Complaint, (Docket Entry No. 73). The relator filed an amended complaint in July 2009, (Docket Entry No. 33), and an unredacted version of that complaint in December 2009, (Docket Entry No. 58).

B. The Parties

Boston Scientific develops, manufactures, and markets medical devices, including surgical devices. On April 21, 2006, it acquired the codefendant, Guidant Corporation and its Cardiac Rhythm Management and Cardiac Surgery Divisions. Before the acquisition, Guidant had developed the FlexView microwave surgical-ablation system. (Docket Entry No. 58, ¶¶ 17-18).

Boston Scientific employed the relator, Elaine Bennett, for a short period — from June 12 to September 28, 2006 — as a sales representative in the Midwest region. Bennett worked in Central Illinois and throughout Missouri. (Id., ¶ 16). In addition to her false claim allegations, Bennett alleges that the defendants retaliated against her for challenging the legality of their marketing practices. (Id., ¶ 128).

C. The False Claims Act

The False Claims Act prohibits the knowing submission of false or fraudulent claims for payment, or causing the submission of such claims, to the federal government, and prescribes fines and treble damages to penalize offenders. 31 U.S.C. § 3729(a). The FCA establishes liability for "[a]ny person who . . . knowingly presents or causes to be presented, a false or fraudulent claim for payment or approval . . . [or] knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government." 31 U.S.C. § 3729(a)(1-2), amended by 31 U.S.C. § 3729(a)(1)(A-B).

When a qui tam suit is brought by a private relator and the government declines to intervene, the relator is entitled to between 25 and 30% of the recovery, § 3730(d)(2), as well as attorneys' fees. As has often been pointed out, the Act does not create a cause of action against all fraudulent conduct affecting the government. Rather, FCA liability attaches to a "false or fraudulent claim for payment" or to a "false record or statement [made] to get a false or fraudulent claim paid by the government." 31 U.S.C. § 3729(a)(1)-(2), amended by 31 U.S.C. § 37299(a)(1)(A-B). "Evidence of an actual false claim is the 'sine qua non of a False Claims Act violation.'" United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1311 (11th Cir. 2002).

In this case, there are no allegations that the defendants themselves submitted false claims. Instead, the complaint alleges that the defendants knowingly caused the submission of fraudulent claims by physicians and hospitals. The fraudulent claims allegedly seek reimbursement for off-label uses of the defendants' devices. The complaint does not identify any specific false claim presented by others to Medicare/Medicaid. Nor does the complaint identify any entity or person who actually submitted such a claim. Instead, the complaint alleges that as a result of the defendants' marketing campaign and illegal kickbacks, the FlexView microwave surgical ablation system has been widely used for the off-label purpose of treating atrial fibrillation by physicians and hospitals and that this use "caused to be presented to the United States fraudulent claims . . . in order to obtain reimbursement for surgical ablation services performed with Defendants' microwave surgical ablation products." (Docket Entry No. 58, ¶ 132).

D. Off-Label Use of Medical Devices

The FDA approves products for specific indications, which are stated in the label. When a medical device is approved for one purpose or indication and used outside this approved purpose, that use is deemed "off label." Off-label promotion may involve disseminating information about product uses the FDA did not approve. The FDA generally restricts a manufacturer from marketing for off-label purposes but does not restrict a hospital from purchasing, or a doctor from prescribing or using, a medical device for an off-label purpose. Off-label use of many devices and drugs is an accepted medical practice.⁴

Courts recognize that off-label use of a drug or medical device is not the same as a medically unnecessary use of that drug or device. See Buckman Co. v. Plaintiffs' Legal Comm., 121 S. Ct. 1012, 1018 (2001) ("'[O]ff-label' usage of medical devices . . . is an accepted and necessary corollary of the FDA's mission to regulate in this area without directly interfering with the practice of medicine."); Svidler v. United States Dep't of Health and Human Servs., No. C-03-3593 MJJ, 2004 WL 2005781, at *5 (N.D. Cal. Sept. 8, 2004) ("[T]he FDA can restrict a company from marketing off-label uses, but cannot prevent a doctor from prescribing a device for an off-label use for any purpose she deems medically necessary." (citing Washington Legal Found. v. Friedman, 13 F. Supp. 2d 51 (D.D.C. 1998)); United States ex rel. Polansky v. Pfizer, No. 04-cv-0704 (ERK), 2009 WL 1456582, at *6 (E.D.N.Y. May 22, 2009) ("[T]he FDA has acknowledged that 'accepted medical practice often includes drug use that is not reflected in approved drug labeling.'" (citing Food & Drug Admin., Use of Approved Drugs for Unlabeled Indications, 12 FDA Drug Bulletin 4, 5 (1982)); United States ex rel. Stephens v. Tissue Sci. Labs., Inc., Civil Action No. 1:07-CV-2357-ODE, LEXIS 2009 DIST. 101601, at *20 (N.D. Ga. Aug. 13, 2009) (noting that DRG payment may be made for hernia care even if noncovered care — the use of the device at issue — was present).

Medicare reimbursement for off-label uses of medical devices is not addressed within the Medicare Act itself. See generally Yale-New Haven Hosp. v. Leavitt, 470 F.3d 71, 73 (2d Cir. 2006). Broad wording excludes from Medicare coverage "any expenses incurred for items or services . . . which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." 42 U.S.C. § 1395y(a)(1)(A). The Secretary of the Department of Health and Human Services "is responsible for specifying those services that are covered under the 'reasonable and necessary' standard" and "has wide discretion in selecting the means for doing so." Yale-New Haven Hosp., 470 F.3d at 74 (citing 42 U.S.C. § 1395ff(a); Heckler v. Ringer, 466 U.S. 602, 617 (1984)). Traditionally, the Secretary has acted through "formal regulations and (informal) instructional manuals and letters." Id. Before 1995, the Medicare Hospital Manual, the Medicare Carriers Manual, and the Intermediary Manual stated that payment could not be made for devices not approved by the FDA for commercial distribution because "they were not considered 'reasonable and necessary' under 42 U.S.C. § 1395y(a)(1)." In re Cardiac Devices Qui Tam Litig., 221 F.R.D. 318, 323 (D. Conn. 2004) (citing Medicare Hospital Manual § 260.1(B) (effective July 15, 1986); Medicare Carriers Manual § 230.1; Intermediary Manual § 3151.1)); see also Yale-New Haven Hosp., 470 F.3d at 74 (discussing the history of the manual provisions). In 1995, the Secretary of the United States Department of Health and Human Services published regulations superseding the manual provisions and allowing Medicare coverage for Category B investigational devices under the "reasonable and necessary" standard. Yale-New Haven Hosp., 470 F.3d at 71. As one court has summarized:

On September 19, 1995, after completing...