Can The Government's False Claims Act Suit for Defective Cardiac Devices Against Boston Scientific & Guidant Survive A Motion To Dismiss?
On January 27, 2011, the United States filed its complaint-in-intervention in United States ex rel. Allen v. Guidant LLC et al. (including Boston Scientific), Case No. 0:11-cv-00022 (D. Minn.). The Guidant case involves the events surrounding medical device manufacturer Guidant’s recall of the Prizm 2 and Contak Renewal 1 and 2 cardiac devices in June 2005. According to publicly available information, Guidant, which was acquired by Boston Scientific in 2006, has already paid more than $550 million in fines and civil settlements to resolve litigation and legal issues concerning this matter in the past several years.
In the new Guidant FCA complaint, the United States alleges that Guidant knowingly sold implantable cardiac devices which contained a potentially life-threatening defect that could cause the devices to short-circuit without warning. In Guidant, the government is seeking to establish FCA liability for a product defect - which has not been a common use of the FCA in health care litigation against drug and medical device manufacturers.
Typically, FCA cases against drug and device manufacturers have focused on the companies’ sales, marketing, or accounting activities, and have involved alleged conduct such as improper government price reporting, kickbacks, best price violations, and off-label marketing. In 2010, we saw an expansion of the FCA in health care litigation involving manufacturers to reach drug quality issues. In the first half of 2010, two drug companies paid the government $3.5 million and $22 million respectively to settle qui tam actions based on the allegation that the companies sought to charge the government for “less than effective" drugs. In October 2010, GlaxoSmithKline agreed to pay $750 million to settle a qui tam action alleging that the company violated certain current good manufacturing practices at its plant in Cidra, Puerto Rico, causing adulterated products to enter the United States which were then reimbursed by government-funded health care programs.
Product defect cases, however, have been relatively rare in FCA litigation against drug and medical device manufacturers. We know of only six other large-scale FCA suits for product defects; three of those cases settled, two were dismissed, and one is currently pending. The government intervened in three of the cases.
When reading the short case summaries below, it is important to keep in mind that FCA cases often settle before any court decisions addressing the merits of the claims are issued, and many times, settlement occurs before the complaint is even unsealed. The fact that a settlement occurs, therefore, is not necessarily a strong or reliable indicator that the theory of FCA liability alleged by the government in a given case would be able to withstand a dispositive motion for failure to state a claim.