133 F. Supp. 3d 1068
W.D. Tenn.2015Background
- Infuse Bone Graft (Infuse) is FDA-approved for use with Medtronic’s LT-Cage for anterior lumbar fusion; its labeling warned that safety/effectiveness for other implants, anatomic locations, or approaches was not established and listed potential adverse events.
- Humana (Plaintiff) alleges it reimbursed for off‑label Infuse uses beginning in 2002, relying on medical literature and Defendants’ representations; Humana says Defendants edited/controlled literature and paid KOLs and ghostwriters.
- Humana alleges two fraud theories: (1) pre‑2009 fraudulent medical literature understated risks and (2) post‑2009 fraudulent billing practices (billing codes, reimbursement guide, seminars) caused disguised off‑label claims; identifies twelve paid claims (2008–2012).
- Humana brought 14 counts including fraud, RICO (sections 1962(c) and (d)), negligent misrepresentation, subrogation, consumer protection claims, breach of warranties, unjust enrichment, conversion, Medicare Secondary Payer-related claims (declaratory and private right), right‑to‑charge, and accounting.
- Defendants moved to dismiss arguing lack of injury/causation, failure to state claims, Rule 9(b) particularity failures as to fraud counts, and statute‑of‑limitations bars; after briefing and oral argument, the court granted in part and denied in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Humana alleged injury in fact and causation for fraud/related tort claims | Humana paid for procedures that were not medically necessary and only paid because of Defendants’ fraud; thus it suffered economic injury | Reimbursing covered, medically necessary procedures is the insured/insurer bargain and does not constitute an injury; Humana fails to connect Defendants’ conduct to specific paid claims | Court: Humana adequately alleged injury for some payments caused by reliance, but failed to plead Infuse‑related injuries or jurisdictional ties for consumer protection claims; Count 6 (consumer protection) dismissed; Counts 1–10 and 14 ultimately dismissed (see below) |
| Whether Humana pled fraud/RICO with particularity under Rule 9(b) (pre‑2009 alleged tainted literature) | Humana identified specific articles and general statements relied on | Defendants: statements are conclusory; Humana fails to explain why particular article statements were false or identify speakers/times | Court: pre‑2009 fraud/RICO claims insufficiently particularized; those portions dismissed (and alternative finding they may be time‑barred) |
| Whether Humana pled fraud/RICO with particularity (post‑2009 billing/billing‑code theory) | Humana points to billing codes, a reimbursement guide, seminars, and twelve paid claims as evidence | Defendants: Humana fails to connect any specific code/guide entry or seminar statement to Defendants or to particular claims; allegations are on information and belief without factual basis | Court: post‑2009 fraud/billing scheme not pled with required particularity; related claims dismissed |
| Whether Medicare Secondary Payer (MSP) and related claims may proceed (Counts 11–13) | Humana (an MAO) seeks declaratory relief and a private MSP cause of action and right‑to‑charge to recover payments made to members who later settled with Defendants | Defendants: MAOs lack a private MSP remedy; Care Choices and other authority foreclose similar recoveries | Court: The court found In re Avandia persuasive and, with other authority and regulations, denied dismissal of the private MSP claim (Count 12) and declaratory count (Count 11); denied dismissal of right‑to‑charge claim (Count 13). Accounting claim (Count 14) dismissed as unnecessary |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility and pleadings must raise entitlement to relief above speculation)
- Sanderson v. HCA-The Healthcare Co., 447 F.3d 873 (6th Cir. 2006) (Rule 9(b) requires time, place, content of alleged misrepresentations)
- Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393 (6th Cir. 2012) (fraud pleading: identify statements, speaker, where/when, and why fraudulent)
- Ironworkers Local Union 68 v. AstraZeneca Pharms., LP, 634 F.3d 1352 (11th Cir. 2011) (insurer reimbursement as part of insurer–insured bargain; standing/injury discussion)
- In re Avandia Mktg., 685 F.3d 353 (3d Cir. 2012) (permitting certain private actions under Medicare Secondary Payer context)
- Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003) (interpreting Medicare‑related statutory language regarding HMO enforcement rights)
- Mich. Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787 (6th Cir. 2014) (discussion of private causes of action in Medicare context)