A federal appeals court last week dismissed a whistleblower lawsuit filed by a former sales rep for Medtronic (NYSE:MDT) subsidiary Ev3, ruling that the allegations weren’t strong enough to sustain a False Claims Act suit.
Whistleblower Jeffrey D’Agostino in October 2010 filed a qui tam lawsuit alleging that Ev3 violated the FCA by promoting its Onyx hydrogel blood blocker and Axium embolization coil for off-label uses. Judge Richard Stearns of the U.S. District Court for Massachusetts dismissed the suit in September 2014, ruling that D’Agostino failed to produce sufficient evidence to prove his allegations, after denying the plaintiff’s bid to file a 4th amended complaint.
“While the [complaint] specifies 2 adverse incidents attributed to Onyx, any identification of the surgeons or facility involved is missing, any description of a monetary loss to the government is omitted, and there is no allegation that a claim for payment (false or otherwise) was presented to any government payer as a result of either of the alleged incidents,” Stearns wrote. “The conclusory allegation that ‘hundreds’ of similar incidents must have occurred and that some of these must have cost the government money is illustrative of the kind of opportunistic pleading that [Massachusetts law] is designed to prevent. Moreover, D’Agostino’s theory that ‘every claim paid by the government which involved the use of Onyx violated the FCA’ fits precisely in the legal-argument-disguised-as-fact category that the 1st Circuit flatly rejected.”
The U.S. Court of Appeals for the 1st Circuit revived the case in 2015 on the grounds that Stearns’ review of the 4th amended complaint move was to strict. But Stearns again found that the allegations fell short of the FCA’s pleading standards. D’Agostino appealed again, but the 1st Circuit affirmed Stearns, effectively putting an end to the case.
“The fact that [the Centers for Medicare & Medicaid Services] has not denied reimbursement for Onyx in the wake of D’Agostino’s allegations casts serious doubt on the materiality of the fraudulent representations that D’Agostino alleges,” Judge William Kayatta Jr. wrote for the 3-member appeals bench. “In any event, even if the alleged fraudulent representations were material as defined by the FCA, the elements of D’Agostino’s fraudulent inducement claims include not just materiality but also causation; the defendant’s conduct must cause the government to make a payment or to forfeit money owed.”
Similarly, Kayatta wrote, the FDA’s inaction on the Onyx and Axium products spiked D’Agostino’s claims.
“If the FDA would have approved Onyx notwithstanding the alleged fraudulent representations, then the connection between those representations to the FDA and a payment by CMS relying on FDA approval disappears,” he wrote. “The FDA’s failure actually to withdraw its approval of Onyx in the face of D’Agostino’s allegations precludes D’Agostino from resting his claims on a contention that the FDA’s approval was fraudulently obtained. To rule otherwise would be to turn the FCA into a tool with which a jury of 6 people could retroactively eliminate the value of FDA approval and effectively require that a product largely be withdrawn from the market even when the FDA itself sees no reason to do so.”
Covidien paid $2.6 million for vEv3 in July 2010; Medtronic acquired the assets when it bought Covidien for $50 billion in January 2015.
