48 F. Supp. 3d 1362
C.D. Cal.2014Background
- Qui tam relators allege FCA violations by DJO Global, DJO, DJO Finance, Orthofix, Biomet, and EBI related to off-label use of bone-growth stimulators and Medicare/Medicaid reimbursements.
- Relators claim stimulators approved for lumbar use were prescribed off-label for cervical use and that defendants concealed this off-label use in reimbursement submissions.
- Medicare coverage decisions are governed by NCDs/LCDs and the Medicare Manual; NCD 150.2 covers stimulators as adjuncts to spinal fusion, with various LCDs mirroring that coverage.
- Relators allege defendants submitted reimbursement claims for cervical off-label use without properly disclosing the off-label use or seeking PMA supplements, and that some certifications to Medicare were false or impliedly false.
- The court granted a stay on discovery earlier and ultimately dismissed the federal FCA claim, with leave to amend on a narrow theory related to implied false certifications tied to off-label promotion; it declined jurisdiction over state-law claims.
- The court also granted judicial notice of several CMS and FDA documents and denied others, and held that leave to amend is limited to the asserted PMA-implied certification theory only.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether relators adequately plead a federal FCA claim. | Modglin/Milko assert claims were false since cervical off-label use was reimbursed without disclosure. | Defendants contend Medicare covers stimulators with FDA approval for at least one use and off-label use is not categorically barred. | Yes, inadequately pleaded; FCA claim dismissed with prejudice except for a narrow implied-certification theory. |
| Whether Medicare coverage for off-label device use forecloses false-claim liability. | NCD 150.2/280.1 require disclosure of off-label use; off-label cervical use not reimbursable. | CMS can reimburse off-label uses when device is FDA-approved for some use; NCD 150.2 does not restrict off-label reimbursement. | Court rejects categorical bar; finds CMS may cover off-label uses under NCDs where appropriate; no blanket false-claim conclusion. |
| Whether a PMA supplement duty creates an implied false certification under the FCA. | Defendants must file PMA supplements for off-label cervical use; failure implies false certification. | No duty to file PMA supplements absent explicit promotion of off-label use; Carson precedent limits liability for mere knowledge of off-label prescribing. | Implied false certification theory pleaded inadequately; leave to amend limited to theory based on off-label promotion triggering PMA duty. |
| Whether leave to amend should be granted and whether supplemental jurisdiction over state claims is warranted. | Relators should be allowed to amend to plead the PMA-implied theory and expand on state-law claims. | Amendment would be futile except for the narrow PMA-implied theory; state claims should be dismissed without prejudice. | Leave to amend granted narrowly for the PMA-implied theory; state-law claims dismissed without prejudice. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard explained)
- Twombly, 550 U.S. 544 (U.S. 2007) (facilitate plausible claims; no formulaic recitations)
- Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (U.S. 2001) (FDA-related claims require appropriate pleading; off-label use context discussed)
- U.S. ex rel. Aflatooni v. Kitsap Physicians Serv., 314 F.3d 995 (9th Cir. 2002) (requires actual false claim; specificity under Rule 9(b))
- U.S. v. Bourseau, 531 F.3d 1159 (9th Cir. 2008) (false certification theory; scienter standards in FCA)