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From Health Law Daily, December 27, 2016

On fifth try, qui tam relator fails to state a claim against device manufacturers

By Sheila Lynch-Afryl, J.D., M.A.

A medical device salesman was not permitted to file a fifth version of his qui tam complaint alleging that two medical device manufacturers, his former employer and its subsidiary, violated the False Claims Act (FCA) because such an amendment would be futile. The First Circuit, analyzing the case for the second time in just over a year, found that the relator’s proposed fourth amended complaint failed to state a claim upon which relief could be granted (D’Agostino v. ev3, Inc., December 23, 2016, Kayatta, W.).

Complaint. The relator’s original complaint and three subsequent amendments alleged that his former employer, ev3, Inc., and other companies engaged in improper conduct in connection with the manufacturing and marketing of two medical devices, Onyx® and Axium™, and knowingly caused health care providers to submit false claims to the federal government. The defendants filed motions to dismiss and, on the eve of the due date for his response, the relator instead filed a motion asserting that he had a right to file another amended complaint. The district court denied the relator’s motion under the "good cause" standard of Federal Rule of Civil Procedure 16 and dismissed the case with prejudice.

In 2015, the First Circuit held that the district court erred by applying Rule 16’s standard instead of the more lenient standard of Rule 15(a) (see Wrong standard applied in denying leave to amend, no guarantees on remand, October 1, 2015). On remand, the district court concluded that the amendment failed under that standard because the relator again failed to allege facts sufficient to support his FCA claim (see Court rejects relator’s fifth attempt to amend FCA complaint, January 4, 2016).

Futility of amendment. The First Circuit agreed with the district court that the amendment would be futile under Rule 15(a) because the complaint, as amended, failed to state a claim upon which relief could be granted. The fourth amended complaint alleged, for example, that Micro Therapeutics Inc., a subsidiary of ev3, made fraudulent representations to the FDA in seeking approval to market the Onyx device. The court rejected the fraudulent inducement claims because CMS, not the FDA, reimbursed physicians who performed procedures using Onyx and hospitals where such procedures took place. Furthermore, despite six years of litigation over the alleged fraud, the FDA has not withdrawn its approval of Onyx.

The court similarly rejected the claim that the defendants caused the submission of false claims by encouraging medically unnecessary and dangerous uses of Onyx by physicians who did not attend training, because the complaint did not sufficiently allege the submission of a false claim, nor did it advance a theory and facts that together created a strong inference that false claims were actually filed. Because none of the claims in the fourth amended complaint were adequately pled, the court concluded, the relator’s request was properly denied as futile.

The case is No. 16-1126.

Attorneys: Daniel Robert Miller (Berger & Montague PC) for Jeffrey D'Agostino. Rebecca C. Ellis (Ropes & Gray LLP) for ev3, Inc. and Microtherapeutics, Inc.

Companies: ev3, Inc.; Microtherapeutics, Inc.

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