This post is from the non-Reed Smith side of the blog only.
For the last two years during the week of Halloween, we’ve posted about the scary case of United States v. King-Vassel, 728 F.3d 708 (7th Cir. 2013), trial court decision at 2012 U.S. Dist. LEXIS 152496 (E.D. Wisc. Oct. 23, 2012). It is an eerie tale in which one doctor tries to hold another doctor liable under the False Claims Act for prescribing a drug off-label. The trial court dismissed the case but on narrow grounds – leaving the door open to resurrection. Think Glenn Close springing out of the tub at the end of Fatal Attraction. The district court only drowned the claims and instead of putting a bullet through the heart of the complaint, the Seventh Circuit administered CPR. While there were a lot of weird and frightening things going on in that case, what was more important to us was why the case wasn’t thrown out on the general principle that off label prescriptions are not false claims.
Well if the last two years were all Freddy and Jasonand Chucky -- this year is more like It’s the Great Pumpkin, Charlie Brown or Monsters, Inc., or even Casper, The Friendly Ghost. No zombies, demons or ghouls this year. This year we’re celebrating the treat of a judge who gets it.
The claim in United States v. DJO Global, Inc., __ F. Supp.2d __, 2014 WL 4783575 (C.D. Cal, Sep. 2, 2014) reads like a sequel – actually more like the 20th installment in a franchise. The recurring plot being use of the False Claims Act to reap financial windfalls from appropriate off-label prescriptions involving federal payors. Plaintiffs allege that the defendants, manufacturers of spinal stimulators (PMA, Class III medical devices), submitted false claims to Medicare seeking reimbursement for devices that were used off-label. To be covered under Medicare, a medical device needs to be “reasonable and necessary” to diagnosis or treatment. Part of the determination of whether something is reasonable and necessary is whether the device is safe and effective. Id. at *3-4. Because the FDA determines safety and efficacy as part of the pre-market approval process, the Department of Health and Human Services (HHS) has determined that PMA devices generally may be covered under Medicare. Id. at *4.
Plaintiffs’ primary theory is not based on whether defendants’ reimbursement claims actually contained false information. Rather, plaintiffs argue that when a device is prescribed for an off-label use, the device becomes “categorically” excluded from Medicare coverage. Id. at *16. Does this argument sound familiar? It should. It is how plaintiffs in products liability cases involving PMA devices try to get around preemption. They argue that the off-label use negates the FDA’s pre-market approval determination that the device is safe and effective and therefore preemption no longer applies. Fortunately, as seen recently through the InFuse litigation, most courts haven’t been willing to follow plaintiffs down that illogical path.
But, we always like to bolster our position. So, it doesn’t hurt that the court in DJO Global, was likewise not persuaded by this argument in the qui tam context. The first inkling that DJO Global wasn’t going to be another slasher flick disaster was the court’s up-front discussion about the valid, legitimate and perfectly lawful use of medical devices for off-label purposes:
If a medical device is used for a purpose other than that for which it has obtained PMA approval, the usage is “off-label.” The FDCA explicitly protects physicians’ abilities to prescribe devices for such use. Indeed, off-label use of medical devices is “generally accepted” within the medical community, and section 396 of the FDCA expressly disclaims any intent to directly regulate the practice of medicine.
Id. at *2 (citations omitted). What is prohibited by the FDCA is marketing a PMA-approved device for an off-label use. Id. at *3. That distinction is key. “[A] manufacturer is not liable [for having violated the FDCA] merely because it sells a device with knowledge that the prescribing doctor intends an off-label use.” Id. (citation omitted).
With the proper regulatory background set, the court moves into its analysis of the plaintiffs’ claim which boils down to this – because HHS has determined that reimbursement is limited to devices approved through the PMA process, that means that Medicare can only cover on-label uses. Replace HHS with Supreme Court and replace reimbursement/Medicare with preemption in that sentence and this is an argument we are all too familiar with.
And just like the plaintiffs who make this argument in products cases, the qui tam plaintiffs’ argument is fatally flawed by their commingling of “devices” and “uses.” The FDA regulates the former, not the latter. The same holds true for Medicare.
The court agrees with defendants. The Medicare Manual states that “devices” approved through the PMA process are eligible for coverage, not that “the use of a device” that has been approved by the FDA is eligible for coverage.
Id. at *18. Therefore, if the FDA has approved a device for at least one purpose, Medicare can determine that a particular use (one that is reasonable and necessary) is reimbursable, even if that use is off-label. Id. at *19.
There are many other aspects to this decision that are more closely tied to specific Medicare provisions, but for us those are more like the pretzels and raisins you move aside to get to the Snickers at the bottom of your trick-or-treat bag. They’re tasty, but just not as sweet as that candy bar. And, unfortunately, like Charlie Brown, this decision gives us one rock in our bag too. The court found at least one theory asserted by plaintiffs that could plausibly survive and is giving them a chance to amend their complaint. But if this decision didn’t deliver the fatal blow to False Claims Act suits based on nothing more than off-label use – it stabbed deep. Plaintiffs are going to have to do some serious surgery to bring this claim back to life. Here’s hoping we aren’t talking about a Dr. Frankenstein version of DJO Global next year.