Overview
(October 8, 2024, New York) – Steptoe achieved a significant victory for our client, Medtronic, securing dismissal of a qui tam False Claims Act action in the Southern District of New York (United States ex rel Powell v. Medtronic, Inc. et al., No. 18 Civ. 1628 (KPF)). The case involved a whistleblower's allegations that Medtronic engaged in a fraudulent scheme to encourage customers to reuse an optional component (Serter) of Medtronic’s iPro2 Continuous Glucose Monitoring (CGM) system on multiple patients, contrary to the device's Food and Drug Administration (FDA) label, leading to false claims for federal and state healthcare reimbursements. The federal and relevant state governments had declined to intervene in this action.
The Court agreed with our client that Plaintiff failed to allege with sufficient particularity that Medtronic caused the submission of materially false claims under the applicable heightened pleading standard (Federal Rule of Civil Procedure 9(b)). The Court held that Plaintiff failed to adequately allege the submission of a claims to government healthcare programs, the falsity of claims reflecting reuse of the Serter, and that Medtronic made false statements that were material to government payment decisions.
Plaintiff alleged that 14 healthcare providers were "sold a high volume of iPro2 Sensors with no corresponding Serters" (indicating reuse of the Serter) and billed the federal government for CGM services provided to Medicare beneficiaries. The Court explained that "noticeably absent" from the Complaint was an allegation that any of the providers that allegedly purchased fewer Serters than Sensors sought reimbursements reflecting multi-patient Serter use as opposed to single-patient Serter use. The allegation was insufficient "to create a strong inference that Serters were reused inappropriately, as use of a Serter is optional," and "offer[ed] limited insight into whether the reuse of Serters, if any occurred, was on multiple patients on the same individual; or whether if used on multiple patients, Serters were disinfected using the process that even [Plaintiff] acknowledge[d] made reuse safe."
As for falsity, the Court rejected both of Plaintiff’s theories – that the reused Serters were not medically "reasonable and necessary" as required for reimbursement under the Medicare Act and that multi-patient use of the Serter rendered the iPro2 system "adulterated" as defined by the Food Drug & Cosmetic Act (FDCA).
On the issue of "reasonable and necessary," the Court sided with Medtronic’s argument that "'merely showing that harm can occur is insufficient’ to demonstrate a device is medically unsafe or ineffective." Additionally, the Court questioned whether FDCA violations alone could constitute actionable claims under the FCA.
Lastly, the Court rejected Plaintiff's argument that Medtronic's purportedly false statements encouraging reuse of the Serter were material, holding that even if Plaintiff had sufficiently alleged false or misleading statements, she had failed to sufficiently allege that physician reuse of Serters was “material to government payment decisions.”
The Steptoe team was led by partners Julia Gatto and Patrick Linehan, along with partner Dwight Draughon* and associates Caitlin Conroy and Joshua Dupre.
*Dwight Draughon is currently on leave to serve as investigative counsel on the bipartisan Task Force on the Attempted Assassination of Donald J. Trump.
About Steptoe
In more than 110 years of practice, Steptoe has earned an international reputation for vigorous representation of clients before governmental agencies, successful advocacy in litigation and arbitration, and creative and practical advice in structuring business transactions. Steptoe has more than 500 lawyers and other professional staff across offices in Beijing, Brussels, Chicago, Hong Kong, Houston, London, Los Angeles, New York, San Francisco, and Washington. For more information, visit www.steptoe.com.
