Massachusetts District Court denies medical device companies' motion to dismiss qui tam

by Ben Vernia | December 13th, 2010

In U.S. ex rel. Bierman v. Orthofix Int’l, N.V., Senior District Judge Edward Harrington denies a motion by several makers of non-invasive bone growth stimulators to dismiss a qui tam suit brought by a co-owner of a medical billing company. The relator alleged that the companies instructed physicians and suppliers to sell new stimulators rather than rent them, even though the new devices were only needed – an only designed to last – a few months and could have been rented to patients for a lower total cost.

The Court disagreed with the companies that the relator had failed to plead a valid claim under the False Claims Act. The companies’ certification of compliance ojn CMS’s Medicare Enrollment Application placed in issue their compliance with the Supplier Standard Regulation No. 5 (which required them to advise beneficiaries of the option to rent or buy durable medical equipment), Judge Harrington reasoned. He rejected the companies’ argument that the certification was too broad to be enforced under the FCA, concluding that it was “far more narrow,” and that “[w]hile the Supplier Standard Regulation Number 5 is not explicitly listed in the certification, it is such an applicable condition of participation by Medicare and is explicitly labeled as a condition of participation in the regulations.” Nor, he found, is the regulation trivial, but instead it “directly affects the amount of money paid by the government for reimbursement claims.”

Judge Harrington likewise rejected the defendants’ argument that the complaint was insufficiently particular, noting that the whistleblower had alleged the companies’ specific certifications of compliance, and had provided a schedule of claims which allowed for the reasonable inference that the companies had “routinely failed to inform beneficiaries of the rental option over a number of years.” Moreover, the complaint included specific instances where the defendants’ representatives admitted knowledge of and noncompliance with the regulation, and identified the large monetary incentives for the companies to steer beneficiaries to purchase the stimulators, all leading to a fair inference that the companies knew they would not comply with the rule at the time they submitted their enrollment applications.

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