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From Health Law Daily, June 13, 2013

District Court bars claims involving the marketing of pain pump for use not approved by FDA per the Public Disclosure Bar

By Kelly J. Rooney, JD

In a qui tam action brought by a doctor against the manufacturers of a pain pump that was marketed for use on certain body parts when it had not been so approved by the FDA which caused doctors and hospitals to submit false claims to the government for reimbursement of those claims, the motion to dismiss brought by the manufacturers was dismissed in part and granted in part (United States ex rel. Paulos v Stryker Corp., June 12, 2013, Smith, O). The court reviewed the Public Disclosure Bar rule, which was amended during the recent health reform, and whether the rule barred these claims. Ultimately, the manufacturer’s motion to dismiss certain counts based on the Public Disclosure Bar was granted, as was the motion to dismiss for failure to state a claim on one of the claims. All other motions were denied.

Background. Dr. Lonnie Paulos brought this qui tam action claiming that Stryker Corporation, I-Flow Corporation, and Orthofix International (successor to Breg, Inc.) (collectively referred to as the manufacturers) marketed pain pumps, which are medical devices used to inject anesthetic into the body through the use of a catheter, for the use in the space between joints such as the shoulder. The FDA, however, had declined approval for the use pumps related to orthopedic surgeries, or specifically for the space between shoulder joints. The pumps were used for these allegedly unapproved purposes, and the doctor claimed that when reimbursement was sought by hospitals and doctors from federal programs like Medicare, Medicaid, and the Veterans’ Administration, such claims were false. Dr. Paulos argues that the manufacturers violated the False Claims Act by causing the false or fraudulent claims to be filed to induce payment from the government. An amended complaint later added claims of “deleterious health affects [arising] from the use of pain pumps in joint space,” specifically chondrolysis, which is permanent cartilage damage. It is claimed that the companies failed to disclose these dangers to doctors and hospitals or to report the adverse effects to the FDA.

Public Disclosure Bar. The rules surrounding the source of a relator’s knowledge (governed by 31 USC sec. 3730) have changed throughout the years, and with the events in this case allegedly beginning in 2004, and the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), enacted in 2010 that amended the definition, the question was raised as to which version applied. The court found that it does not matter which version applied, but if it did matter, the Defendants’ argument is correct in that both versions apply—the current version applied to the conduct occurring after PPACA passage and the prior version applies prior to passage. [Most of the allegedly false claims here were submitted before PPACA was passed, so sec. 3730(e)(4) applied to those. The new version of 3730(e)(4) applied to those that occurred after enactment.]

Before PPACA, the rule was that if the relator was not the “original source of the information” the “district court lacked jurisdiction over any qui tam action based upon conduct that was publicly disclosed ‘in a criminal, civil or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media.’” An original source had to have “direct and independent knowledge” of the information that formed the basis of the allegations and had to have provided the information to the government before filing the qui tam suit. PPACA amended these definitions so that now the bar is not jurisdictional, but rather, the statute states that the action or claim must be dismissed “if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed.” Further, disclosure, to be public, now must be in a federal hearing, and reports amounting to public disclosure were expanded to include any “Federal report, hearing, audit, or investigation.” Original source now means anyone who discloses to the government information that is not yet publicly disclosed, and “has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions” and provides the information to the government before filing the qui tam action.

The relator here claims that the old version of the rule imposed a jurisdictional bar while the new version merely calls for dismissal. To determine if the Public Disclosure Bar applies, the court must consider (1) whether the allegations have been publicly disclosed per sec. 3730(e)(4); (2) whether the suit is brought based on the public disclosure; and (3) if yes to both (1) and (2), whether the plaintiff is the original source of the information per sec. 3730(e)(4). The court considered the allegations (failure to disclose adverse health effects, false claims that pain pumps were approved for this purpose and the false labeling and promotion of the pumps), which encompassed Counts I through IV, and Count VI, failing to file reports with the FDA regarding the health effects experienced by patients, which caused doctors and hospitals to seek repayment. Dr. Paulos did not provide the government with this information until 2010 or 2011, but at that point, the allegations in Counts I through IV and VI were already publicly disclosed.

Does the Public Disclosure Bar apply? The court listed out in its decision all of the exhibits that evidence that this information was publicly disclosed, including websites and newspaper articles discussing the link between the use of pain pumps in the spaces between joints and cartilage and other permanent damage to patients. Although per PPACA, only lawsuits where the government is a party may be considered a public disclosure, there were plenty of suits predating PPACA that involved complaints regarding similar circumstances. The manufacturers made public statements on the connection between the use of pain pumps and chondrolysis. There were also several reports published by the FDA warning the medical community of this issue, the earliest of which was dated November of 2009.

Specifically when Dr. Paulos met with the government was ambiguous in the documents, and it could be concluded that “the Plaintiff did not provide a narrower timeframe because he did not meet with the Government before the FDA promulgated [its published warnings].” The relator’s argument that the submission of claims for payment was not publicly disclosed was not an independent piece of information, the court found, because the logical consequence of the manufacturer’s misrepresentations was that doctors and hospitals would submit for reimbursement and would thus be submitting false claims. The court ultimately dismissed Counts I through IV and VI because (1) the potential for damage from the pain pumps, as well as that the manufacturers falsely claiming that the pumps were approved for these uses, was publicly disclosed by various sources prior to Dr. Paulos meeting with the government and (2) a 2009 lawsuit disclosed allegations regarding the failure to report to the FDA complications from pain pumps.

Having direct and independent knowledge is a requirement for being an “original source”—independent meaning that the information is not dependent on public disclosure, and direct meaning that it was obtained on his own and not derived from other sources. Here, the relator did not have direct and independent knowledge of the connection between the use of pain pumps and chondrolysis, nor did he claim that the manufacturers misrepresented that the FDA has approved the use of pain pumps in this manner, he merely claimed that if they had made the proper misrepresentations, no doctor or hospital would have used the pumps in this manner. The relator also did not justify why he was the original source for information that the manufacturers failed to file medical device reports with the FDA. Further, he has no direct knowledge of many of the other claims, including what the manufacturers may have told other doctors with regard to FDA approval. The court found the relator was not the original source for the information that gave rise to Counts I through IV.

Failure to state a claim. The manufacturers argued that the relator failed to state a claim with regard to each of his counts. The relator agreed to the dismissal of Count V. Count VI, causing a false statement to get a false claims to be paid by the government, requires that the party that made the false statement must have the specific intent to get the government to pay the claim, but here the most the relator claimed was that the manufacturers failed to make the required reports to the FDA, which does not amount to a “false report.” Further, the relator did not allege that they acted with the specific intention to induce payment. Therefore Count VI was not dismissed. With regard to Counts I through IV, those are also not dismissed because they are “too fact-bound for proper consideration under Federal Rule of Civil Procedure Rule 12(b)(6).” [The court recommended that these counts would be best dealt with on summary judgment, assuming the dismissal of the counts based on the Public Disclosure Bar is reversed.]

The case number is 11-0041-CV-W-ODS.

Attorneys: Brian Bewley, Office of Counsel for the Inspector General, for the United States of America. George Edgar Wolf , III (Shook, Hardy & Bacon, LLP-KCMO) for Stryker Corporation. Stephen L. Hill , Jr. (Dentons US LLP-KCMO) for I-Flow Corporation. Christina Marie DiGirolamo for (Berkowitz, Oliver, Williams, Shaw & Eisenbrandt, LLP-KCMO) for Orthofix International.

Companies: United States of America; Stryker Corporation; I-Flow Corporation; Orthofix International; DJO Incorporated

MainStory: TopStory QuiTamNews FCANews FraudNews MDeviceNews HealthReformNews MisbrandingNews MissouriNews

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