One Claim Survives Dismissal in False Claims, Kickback Scheme Case Against Medtronic

A Monday Central District of California ruling dismissed most of the claims in a False Claims Act (FCA) case against Medtronic, leaving just one to survive and permission for the plaintiff to amend the dismissed claims.

The United States took over as plaintiff for relator Kuo Chao, initially Chao filed a qui tam action in 2017 against Medtronic PLC, Medtronic Vascular Inc., Medtronic USA Inc., Covidien LP, and Covidien Sales LLC alleging that the defendants operated a kickback scheme to promote a Medtronic medical device — called the Pipeline and used to treat aneurysms — while inducing submissions of false claims for reimbursement from government-funded health care programs such as Medicaid and Medicare.

The relator claimed that the defendants veiled their kickbacks to physicians as payment for “proctoring,” which included using Pipeline in procedures or doing research to contribute to the product. Accordingly, proctors received about $4,600 per day from the defendants, Chao alleged, violating the anti-kickback statute (AKS).

Because Chao alleged illegal kickback conduct, allegations of false claims necessarily followed, rendering claims submitted “in connection with a use of Pipelines tainted by kickback payments” to be false, according to the relator. Chao further argued that the defendants supported their alleged kickback scheme through data collection studies, payments for lab services, company acquisitions, fellowships, and grants.

The court said the relator failed to sufficiently plead all of the FCA and AKS claims, finding that they lacked plausibility and thus standing.

The only claim the court did not dismiss was that of group pleading. The relator broadly alleged that all of the defendants took part in the same unlawful conduct, the defendants claimed this was not particular enough, pursuant to Rule 9(b) of federal civil procedure, which “ does not allow a complaint to merely lump multiple defendants together but requires plaintiffs to differentiate their allegations when suing more than one defendant.”

However, the court said the defendants’ reasoning here was misguided, as there is no need to “distinguish between defendants that had the exact same role in a fraud,” citing United States ex rel. Anita Silingo v. Wellpoint, Inc. The court found that the relator had sufficiently alleged a “wheel conspiracy-like fraud,” keeping it in line with civil procedure.

Glancy Prongay and Murray LLP is representing Chao, and the U.S. retains its own counsel. The defendants are represented by Jones Day and Ropes & Gray LLP.