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UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION UNITED STATES ex rel. KEVIN N. COLQUITT Plaintiff, v. ABBOTT LABORATORIES, et al. Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) )

Civil Action No. 3:06-cv-01769-M (BMGL) ORAL ARGUMENT REQUESTED

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT BOSTON SCIENTIFIC CORP.’S MOTION TO DISMISS THE RELATOR’S THIRD

AMENDED COMPLAINT

Wayne B. Mason Joseph P. Griffith SEDGWICK, DETERT, MORAN & ARNOLD LLP 1717 Main Street Suite 5400 Dallas, Texas 75201-7367 Tel: (469) 227-8200 Fax: (469) 227-8004 Counsel for Defendant Boston Scientific Corp.

Stephen J. Immelt (pro hac vice) Andrea W. Trento (pro hac vice) HOGAN LOVELLS US LLP Harbor East 100 International Drive Suite 2000 Baltimore, MD 21202 Tel: (410) 659-2700 Fax: (410) 659-2701 Mitchell J. Lazris (pro hac vice) HOGAN LOVELLS US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 Tel: (202) 637-5600 Fax: (202) 637-5910

Case 3:06-cv-01769-M Document 111 Filed 07/16/10 Page 1 of 52 PageID 1238

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TABLE OF CONTENTS

Page(s) TABLE OF AUTHORITIES ......................................................................................................... iii

INTRODUCTION ...........................................................................................................................1

BACKGROUND .............................................................................................................................2

ARGUMENT...................................................................................................................................7

I. THE COURT LACKS SUBJECT MATTER JURISDICTION OVER THE CLAIMS AGAINST BSC...........................................................................................7

A. Relator’s Allegations are Based on Public Disclosures Occurring Prior to the Filing of the Original Complaint in this Action..........................................8

B. Relator is not an Original Source of the Allegations Asserted Against BSC.................................................................................................................14

II. RELATOR FAILS TO STATE A CLAIM AGAINST BSC UPON WHICH RELIEF CAN BE GRANTED............................................................................18

A. Relator Fails to Allege the Existence of a False Claim Because the Off-Label Use of Biliary Stents is Reimbursable by Medicare .............................19

1. Medicare Does Not Categorically Preclude Coverage for the Off-Label Use of 510(k)-Cleared Devices.............................................................20

2. Applicable LCDs Do Not Preclude Coverage for the Off-Label Use of Biliary Stents in the Vasculature ................................................................23

B. Relator Fails to State a Claim as to Any Allegedly False Statements in BSC’s 510(k) Clearance Notifications..................................................27

1. Allegedly False Statements in a 510(k)-Clearance Notification Do Not Give Rise to False Claims Act Liability ...................................................27

2. Relator’s State Claims Premised on BSC’s Alleged “Fraud on the FDA” are Preempted.......................................................................30

III. RELATOR FAILS TO PLEAD HIS CLAIMS AGAINST BSC WITH THE PARTICULARITY REQUIRED BY RULE 9(B) ...................................................31

A. Relator’s Section 3729(a)(1) Claims Are Not Pled with Particularity as to BSC.................................................................................................32


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1. Relator Fails to Plead BSC’s Role in Causing the Submission of False Claims with Particularity..........................................................................32

2. Relator Fails to Plead Reliable Indicia that Lead to the Strong Inference that False Claims were Actually Submitted...........................................35

B. Relator’s Section 3729(a)(2) Claims are Not Pled with Particularity as to BSC......................................................................................................................36

C. Relator’s Anti-Kickback Statute Allegations are Not Pled with Particularity as to BSC.................................................................................................38

IV. RELATOR’S STATE FCA CLAIMS SHOULD BE DISMISSED..................................39

CONCLUSION..............................................................................................................................40


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TABLE OF AUTHORITIES

Page(s) CASES

Allison Engine Co. v. United States ex rel. Sanders, 128 S.Ct. 2123 (2008)..............................................................................................................37

Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009).............................................................................................................18

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)...........................................................................................................18, 34

Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001).......................................................................................................3, 24, 30

Collins v. Morgan Stanley Dean Witter, 224 F.3d 496 (5th Cir. 2000) ...................................................................................................26

Dyer v. Danek Medical, Inc., 115 F. Supp. 2d 732 (N.D. Tex. 2000) ....................................................................................24

Erringer v. Thompson, 371 F.3d 625 (9th Cir. 2004) ............................................................................................. 21-22

Federal Recovery Service, Inc. v. United States, 72 F.3d 447 (5th Cir. 1995) .......................................................................................................8

Funk v. Stryker Corp., 673 F. Supp. 2d 522 (S.D. Tex. 2009) .....................................................................................24

Glucotec, Inc. v. United States Department of Health & Human Services, C.A. No. 6:07-2995-HMH, 2008 WL 1766709 (D.S.C. Apr. 11, 2008) .................................21

Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 130 S. Ct. 1396 (2010)...............................................................................................................2

Gross ex rel. United States v. AIDS Research Alliance-Chicago, No. 01 C 8182, 2004 WL 905952 (N.D. Ill. Apr. 27, 2004)....................................................11

Hopper v. Solvay Pharmaceuticals, Inc., 588 F.3d 1318 (11th Cir. 2009) .............................................................................35, 36, 37, 38

In re Natural Gas Royalties, 562 F.3d 1032 (10th Cir. 2009) ...................................................................................12, 13, 15


iv \\\BA - 066785/000044 - 284693 v1

In re Orthopedic Bone Screw Liability Litigation, 159 F.3d 817 (3d Cir. 1998). ...................................................................................................24

Johnson & Johnson Vision Care, Inc. v. CIBA Vision Corp., 648 F. Supp. 2d 1294 (M.D. Fla. 2009)...................................................................................24

Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996).................................................................................................................24

Notmeyer v. Stryker Corp., 502 F. Supp. 2d 1051 (N.D. Cal. 2007) ...................................................................................24

Rockwell International Corp. v. United States, 549 U.S. 457 (2007).................................................................................................................14

Steen v. Medtronic, Inc., No. 3:10-CV-936-L, 2010 WL 2573455, (N.D. Tex. June 25, 2010) ...............................18, 25

Svidler v. United States Department of Health & Human Services, No. C 03-3593 MJJ, 2004 WL 2005781 (N.D. Cal. Sept. 8, 2004).........................................22

Thomas v. Hoffman-LaRoche, Inc., 949 F.2d 806 (5th Cir. 1992) ...................................................................................................21

United States ex rel. Ackley v. IBM, 76 F. Supp. 2d 654 (D. Md. 1999) ...........................................................................................15

United States ex rel. Aflatooni v. Kitsap Physicians Services, 163 F.3d 516 (9th Cir. 1999) ...................................................................................................15

United States ex rel. Bailey v. Ector County Hospital, 386 F. Supp. 2d 759 (W.D. Tex. 2004)....................................................................................28

United States ex rel. Barrett v. Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 28 (D.D.C. 2003) ...........................................................................................18

United States ex rel. Barrett v. Johnson Controls, Inc., No. 3:01-CV-1641-M, 2003 WL 21500400 (N.D. Tex. Apr. 9, 2003) .............................13, 33

United States ex rel. Becker v. Tools & Metals, Inc., Civ. Action Nos. 3:05-CV-0627-L, 3:05-CV-2301-L, 2009 WL 855651 (N.D. Tex. Mar. 31, 2009) ..........................................................................40

United States ex rel. Boothe v. Sun Healthcare Group, Inc., 496 F.3d 1169 (10th Cir. 2007) .................................................................................................8

United States ex rel. Branch Consultants, L.L.C. v. Allstate Insurance Co., 668 F. Supp. 2d 780 (E.D. La. 2009).......................................................................................15


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United States ex rel. Duxbury v. Ortho Biotech Products, L.P., 579 F.3d 13 (1st Cir. 2009)................................................................................................18, 36

United States ex rel. Farmer v. City of Houston, 523 F.3d 333 (5th Cir. 2008) ...................................................................................................26

United States ex rel. Feingold v. AdminaStar Federal, Inc., 324 F.3d 492 (7th Cir. 2003) .....................................................................................................7

United States ex rel. Findley v. FPC-Boron Employees’ Club, 105 F.3d 675, 682 (D.C. Cir. 1997) ...........................................................................................8

United States ex rel. Fine v. Sandia Corp., 70 F.3d 568 (10th Cir.1995) ....................................................................................................12

United States ex rel. Foster v. Bristol-Myers Squibb Co., 587 F. Supp. 2d 805 (E.D Tex. 2008)................................................................................38, 39

United States ex rel. Franklin v. Parke-Davis, Divison of Warner-Lambert Co., No. Civ. A. 96-11651PBS, 2003 WL 22048255 (D. Mass. Aug. 22, 2003) ...........................19

United States ex rel. Fried v. West Independent School District, 527 F.3d 439 (5th Cir. 2008) ...............................................................................................8, 13

United States ex rel. Gonzalez v. Fresenius Medical Care North America, No. EP-07-cv-247, 2008 WL 4277150 (W.D. Tex. Sept. 2, 2008) .........................................36

United States ex rel. Graves v. ITT Educational Services, Inc., 284 F. Supp. 2d 487 (S.D. Tex. 2003) .....................................................................................27

United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009) .......................................................................................32, 34, 35

United States ex rel. Hafter D.O. v. Spectrum Emergency Care, Inc., 190 F.3d 1156 (10th Cir. 1999) ...............................................................................................15

United States ex rel. Hess v. Sanofi-Synthelabo, Inc., No. 4:05CV570MLM, 2006 WL 1064127 (E.D. Mo. Apr. 21, 2006) ....................................19

United States ex rel. Hopper v. Anton, 91 F.3d 1261 (9th Cir. 1996) ...................................................................................................27

United States ex rel. Hutcheson v. Blackstone Medical, Inc., 694 F. Supp. 2d 48 (D. Mass. 2010) ........................................................................................29

United States ex rel. Jamison v. McKesson Corp., No. 2:08CV214-SA-DAS, 2010 WL 1276712 (N.D. Miss. Mar. 25, 2010) ...........................11


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United States ex rel. Johnson v. Shell Oil Co., 33 F. Supp. 2d 528 (E.D. Tex. 1999).........................................................................................8

United States ex rel. Laird v. Lockheed Martin Engineering & Science Services Co., 336 F.3d 346 (5th Cir. 2003) ...........................................................................................7, 8, 14

United States ex rel. Laird v. Lockheed Martin Engineering & Science Services Co., 491 F.3d 254 (5th Cir. 2007) ...................................................................................................28

United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013 (7th Cir. 1999) .................................................................................................27

United States ex rel. Laucirica v. Stryker Corp., No. 1:09-CV-63, 2010 WL 1798321 (W.D. Mich. May 3, 2010) ...........................................39

United States ex rel. Longhi v. Lithium Power Technologies, Inc., 513 F. Supp. 2d 866 (S.D. Tex. 2007) .....................................................................................28

United States ex rel. Paranich v. Sorgnard, 286 F. Supp. 2d 445 (M.D. Pa. 2003) ......................................................................................24

United States ex rel. Polansky v. Pfizer, Inc., No. 04-cv-0704 (ERK), 2009 WL 1456582 (E.D.N.Y. May 22, 2009) ............................19, 36

United States ex rel. Radcliffe v. Purdue Pharma, L.P., 582 F. Supp. 2d 766 (W.D. Va. 2008) .....................................................................................11

United States ex rel. Rafizadeh v. Continental Common, Inc., 553 F.3d 869 (5th Cir. 2008) .................................................................................31, 32, 33, 37

United States ex rel. Reagan v. East Texas Medical Center Regional Healthcare System, 274 F. Supp. 2d 824 (S.D. Tex. 2003) ...................................................................14, 15, 16, 17

United States ex rel. Reagen v. East Texas Medical Center Regional Healthcare System, 384 F.3d 168 (5th Cir. 2004) ........................................................................................... passim

United States ex rel. Richardson v. E-Systems, Inc., No. 3:90-CV-0607-P, 1999 WL 324666 (N.D. Tex. May 18, 1999).........................................8

United States ex rel. Rost v. Pfizer, Inc., 253 F.R.D. 11 (D. Mass. 2008)................................................................................................19

United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720 (1st Cir. 2007)..............................................................................................19, 36


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United States ex rel. Smart v. Christus Health 626 F. Supp. 2d 647 (S.D. Tex 2008) ................................................................................38, 39

United States ex rel. Smith v. Yale University, 415 F. Supp. 2d 58 (D. Conn. 2006)........................................................................................17

United States ex rel. Springfield Terminal Railway Co. v. Quinn, 14 F.3d 645 (D.C. Cir. 1994) .............................................................................................13, 14

United States ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Insurance Co., 944 F.2d 1149 (3d Cir. 1991)...................................................................................................17

United States ex rel. Thomas v. Bailey, No 4:06CV00465-JLH, 2008 WL 4853630 (E.D. Ark. Nov. 6, 2008) ...................................29

United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899 (5th Cir. 1997) ........................................................................................... passim

United States ex rel. Westerfield v. University of San Francisco, No. C 04-03440 JSW, 2006 WL 2884331 (N.D. Cal. Oct. 10, 2006) ............................... 39-40

United States ex rel. Willard v. Humana Health Plan of Texas, Inc., 336 F.3d 375 (5th Cir. 2003) ...................................................................................................28

United States v. Alcan Electrical & Engineering, Inc., 197 F.3d 1014 (9th Cir. 1999) .................................................................................................12

United States v. Bieganowski, 313 F.3d 264 (5th Cir. 2002) ...................................................................................................26

United States v. Emergency Medical Associates of Illinois, Inc., 436 F.3d 726 (7th Cir. 2006) ...................................................................................................12

United States v. Southland Management Corp., 288 F.3d 665, 679 (5th Cir. 2002) ...........................................................................................28

United States v. Southland Management Corp., 326 F.3d 669 (5th Cir. 2003) (en banc) .............................................................................26, 29

STATUTES

21 U.S.C. § 360c(a)(1)(B)................................................................................................................2

21 U.S.C. § 360c(a)(1)(C)................................................................................................................2

21 U.S.C. § 360e ..............................................................................................................................2


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21 U.S.C. § 396................................................................................................................................3

31 U.S.C. § 3729(a)(1) (2007) ...................................................................................................6, 32

31 U.S.C. § 3729..............................................................................................................................1

31 U.S.C. § 3729(a)(1)(A) .........................................................................................................6, 32

31 U.S.C. § 3729(a)(1)(B) .........................................................................................................6, 37

31 U.S.C. § 3729(a)(2) (2007) ...................................................................................................6, 37

31 U.S.C. § 3730(e)(4) (2009) .....................................................................................................2, 7

31 U.S.C. § 3730(e)(4)(A) .........................................................................................................7, 14

42 U.S.C. § 1320a-7b.......................................................................................................................6

42 U.S.C. § 1395d(a) .....................................................................................................................20

42 U.S.C. § 1395k(a) .....................................................................................................................20

42 U.S.C. § 1395ff(f)(1)(B) ...........................................................................................................21

42 U.S.C. § 1395ff(f)(2)(B) ...........................................................................................................21

42 U.S.C. § 1395pp........................................................................................................................27

42 U.S.C. § 1395x(b) .....................................................................................................................20

42 U.S.C. § 1395y(a)(1)(A) ...........................................................................................................20

Patient Protection and Affordable Care Act of 2010, Pub. L. 111-148 (Mar. 23, 2010) ...............................................................................................2

RULES AND REGULATIONS

21 C.F.R. § 99.1(b) ........................................................................................................................16

21 C.F.R. § 812.1(a).......................................................................................................................21

21 C.F.R. § 862.1345.....................................................................................................................25

21 C.F.R. § 870.1025.....................................................................................................................25

21 C.F.R. § 876.5010(b) ..................................................................................................................2

42 C.F.R § 405.201(a)....................................................................................................................21


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42 C.F.R § 405.201(b) .............................................................................................................20, 21

42 C.F.R. § 411.15(k) ....................................................................................................................20

42 C.F.R. § 411.15(o) ..................................................................................................20, 21, 22, 23

Fed. R. Civ. P. 9(b) ................................................................................................................ passim

Fed. R. Civ. P. 12(b)(1)....................................................................................................................1

Fed. R. Civ. P. 12(b)(6).......................................................................................................... passim

OTHER AUTHORITIES

55 Fed. Reg. 18331 (May 2, 1990) ................................................................................................23

55 Fed. Reg. 20896 (May 21, 1990) ..............................................................................................23

68 Fed. Reg. 3640 (Jan. 24, 2003) .................................................................................................23

Dorothy B. Abel Off-label Medical Device Use, Endovascular Today, Mar. 2003, at 60 ..............................................................................10, 11

Am. Med. Ass’n, Current Procedural Terminology (2010 ed.) ....................................................26

Kenneth J. Cavanaugh, Evaluation of Renal Artery Stenting, Endovascular Today, Sept. 2006, at 105..................................................................................10

Daniel A. Leung et al., Selection of Stents for Treating Iliac Arterial Occlusive Disease............11

FDA Circulatory System Devices Panel Hr’g Tr. (Apr. 23, 2001)............................................9, 11

FDA Off-Label Use Concerns Focus on Biliary Stents, Mapping Catheters, The Gray Sheet, June 7, 1999 ..............................................................................................9, 12

IntraTherapeutics IntraCoil PMA Foiled by Widespread Off-Label Stenting, The Gray Sheet, Apr. 30, 2001, at 3 ........................................................................................11

Letter from P. Frappaolo to BSC, Oct. 18, 2002 ........................................................... 9-10, 11, 12

Daniel A. Leung et al., Selection of Stents for Treating Iliac Arterial Occlusive Disease, J. of Vascular & Interventional Radiology, Feb. 2003, at 137.................10

Medicare Benefit Policy Manual, Pub. 100-02........................................................................20, 21

Medicare National Coverage Determinations Manual, Pub. 100-03............................................25


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Mem. from Thomas A. Ault to All Regional Administrators, re: Medicare Coverage of Investigational Devices (Dec. 28, 1994)........................................21

Palmetto GBA, LCD for Non-Coronary Vascular Stents (L6944) (effective Nov. 1, 2000; rev. Oct. 1, 2008) ..............................................................................23

Peripheral Stent Study Design Panel, Endpoint Data Development Urged, The Gray Sheet, Apr. 30, 2001 ............................................................................................9, 10

Steve Phurrough, Director, Coverage & Analysis Group, CMS, et al., Coverage Decision Mem. for Percutaneous Transluminal Angioplasty (PTA) and Stenting of the Renal Arteries (CAG-00085R4) (Feb. 14, 2008).....................22, 25

TriSpan Health Servs., LCD for Outpatient Transcatheter Placement of Non-Coronary Artery Stents (L1523) (effective June 24, 2002; rev. Mar. 8, 2005) ....................................................................................................................24

United States ex rel. George v. Boston Scientific Corp. et al., No. 4:07-02467, United States’ Statement of Interest in Resp. to Deft.’s Mot. to Dismiss Plf.’s First Am. Compl. at 5 (S.D. Tex. June 2, 2010).......................................................19, 21

Warning Letter from FDA’s Office of Compliance to Cordis Corporation, Apr. 28, 1999 ...........................................................................................................................12

Wisc. Phys. Serv. Ins. Corp., LCD for Non-Coronary Vascular Stents/ Endovascular Graft Placement (L19692-L19695) (effective Mar. 1, 1998; rev. Apr. 16, 2008) ............................................................................................26

S. Chiu Wong, et al., Comparison of Clinical and Angiographic Outcomes after Saphenous Vein Graft Angioplasty Using Coronary Versus ‘Biliary’ Tubular Slotted Stents, 91 Circulation 339 (Jan. 1995) ...........................................................10


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Pursuant to Rules 9(b), 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, and

this Court’s Scheduling Order dated June 8, 2010 [Dkt No. 98], Defendant Boston Scientific

Corporation (“BSC”) respectfully submits this motion to dismiss the Third Amended Complaint

of Relator Kevin N. Colquitt (the “Relator”). Pursuant to this Court’s “Motion Practice”

requirements, BSC respectfully requests oral argument on this motion. For the reasons

expressed herein, the Court should grant BSC’s motion and dismiss the Relator’s claims against

BSC with prejudice.

INTRODUCTION

This is Relator’s fourth attempt to state claims as a whistleblower under the qui tam

provisions of the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., and various state FCAs.

Despite having only worked for a BSC competitor and having no insider knowledge about BCS,

Relator’s Third Amended Complaint (“3AC”) [Dkt No. 68] alleges that BCS engaged in a multi-

faceted “fraudulent scheme” along with other device manufacturers to obtain regulatory

clearance from the FDA for “biliary stents” under false pretenses, and then to promote those

devices “off-label” as “vascular stents” to providers in violation of the Food, Drug & Cosmetic

Act (the “FDCA”). (See 3AC ¶ 4.) Relator’s theory is that all claims to government healthcare

programs for use of BSC’s biliary stents are “false claims” because: (1) the devices were only

available in commerce as a result of BSC’s “fraud on the FDA,” and (2) government healthcare

programs like Medicare and Medicaid do not provide coverage for a provider’s “off-label” use of

a biliary stent as a vascular stent. (See id. ¶ 5.)

Relator’s theory of FCA liability is fundamentally flawed on three levels – each of which

supports dismissal of the claims against BSC. The first problem is one of jurisdiction. Under the

FCA’s public disclosure bar, this Court lacks jurisdiction over Relator’s claims against BSC


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because those claims are based on “public disclosures” that predate the filing of this action and

Relator is not an “original source” for any of his allegations against BSC. 31 U.S.C. § 3730(e)(4)

(2009).1 The second problem is that Relator’s claims are premised on legal fallacies. His

understanding of Medicare coverage law is erroneous as a matter of law and his “fraud on the

FDA” theory is not actionable under the FCA. The third problem is Relator’s failure to meet the

Rule 9(b) heightened pleading standard. That failure is unsurprising given that Relator is a

corporate outsider who has attempted (through four iterations of his complaint) to hide his lack

of knowledge of any fraud by BSC behind improper generic group pleading, hunches, and

second-hand speculation. For all of these reasons, Relator’s claims against BSC should be

dismissed with prejudice.

BACKGROUND

“Biliary stents” are tube-shaped devices that are cleared by FDA for use in the ducts of

the “biliary tree.” Because they are regulated as “Class II” devices under the FDA’s three-class

device designation system,2 see 21 C.F.R. § 876.5010(b), biliary stents may not be introduced for

marketing until the manufacturer submits a “premarket notification” (a “510(k) notification”) to

the FDA identifying, inter alia, a “predicate device” to which the device is substantially

equivalent, and the device’s proposed labeling and “intended use.” (3AC ¶¶ 39-40.)

Notwithstanding the indication for which they have been cleared, however, Relator

1/ In connection with the passage of the Patient Protection and Affordable Care Act of 2010, Pub. L. 111-148 (Mar. 23, 2010), Congress modified the “public disclosure” and “original source” provisions of the FCA. These changes do not apply retroactively to pending cases, as the Supreme Court has already noted. See Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 130 S.Ct. 1396, 1400 n.1 (2010). Accordingly, all references herein to section 3730(e)(4) are to the version which predated the 2010 amendments. 2/ In relevant part, Class II devices are those that are subject to certain “special controls” by FDA in order to provide “reasonable assurance of the[ir] safety and effectiveness,” 21 U.S.C. § 360c(a)(1)(B). Class III devices, by contrast, require “premarket approval” by the FDA, based (inter alia) on data submitted by the manufacturer demonstrating that the device is “safe and effective” for the use for which an indication is sought. See id. §§ 360c(a)(1)(C), 360e(c).


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alleges that biliary stents are overwhelmingly used “off-label” in the peripheral vasculature,

typically to treat the narrowing of arteries caused by disease. (3AC ¶¶ 2-3.) Even as he

complains about off-label use by physicians, Relator admits that FDA does not regulate the

practice of medicine by physicians, see 21 U.S.C. § 396, and the “off-label usage of medical

devices . . . is an accepted and necessary corollary of the FDA’s mission to regulate in this area

without directly interfering with the practice of medicine,” Buckman Co. v. Plaintiffs’ Legal

Committee, 531 U.S. 341, 350 (2001). Relator nevertheless urges that the sheer amount of off-

label use by physicians – constituting “more than 95 percent” of all biliary stent implantations

(3AC ¶ 3) – must mean that something illegal is afoot. Given that “vascular stents” are Class III

devices (see id.¶ 8) which require the submission of a Pre-Market Approval (“PMA”) application

containing data establishing the device’s safety and effectiveness for its intended use before it

can be approved (a process that, typically, is both longer and more expensive than a 510(k)

notification) (see id. ¶ 9), Relator’s charge is that biliary stent manufacturers essentially commit

a regulatory fraud on the FDA by getting vascular stents “cleared” as biliary stents under 510(k)

notifications, permitting them to “circumvent PMA review by FDA and to get to the market

quickly and cheaply” (id. ¶¶ 11-12), and then promote their devices for vascular uses in violation

of the FDCA (see id. ¶ 13).

On September 26, 2006, Relator initiated this action alleging that Abbott Laboratories

f/k/a Guidant Corp. (“Abbott”), Cordis Corp. (“Cordis”), BSC, “and others in the market, have

all pursued a similar scheme in the off-label marketing of [their] biliary stents for off-label

usage” (Compl. ¶ 11) and in so doing caused the submission reimbursement of claims for “non-

indicated” uses (id. ¶ 42.) However, drawing on his experience as a sales representative for

Guidant Corp.’s (“Guidant”’s) Endovascular Solutions Business from 2004 until June 2006


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(when Guidant was acquired by Abbott and he was laid off) (id. ¶ 7; see also 3AC ¶ 22),3 Relator

had very little to say about any specific misconduct he claims to have observed by BSC.4

His subsequent amendments – including the 3AC – all suffer from this same basic defect

(among many others): Relator does not have, and cannot manufacture, personal knowledge about

BSC’s conduct during the relevant time period. So, he must trade in conjecture, speculation, and

supposition, on the theory that if he thinks that his then-employer, Guidant, engaged in alleged

misconduct, then so too must all of Guidant’s competitors.5 Of course, prior to and during this

period Relator’s allegations benefited from a flow of publicly reported information about

(continued) FDA investigations into the practices that formed the basis of his Complaint. (See,

e.g., 3AC ¶ 72.) Thus, what began as a 46-page original Complaint has now bloated into 215

pages (without exhibits) with the recently filed 3AC, despite the fact that the Relator does not

claim to have observed any alleged misconduct during the nearly four years that have transpired

since between his first and most recent pleadings.

As in his original Complaint, Relator continues to rely on sweeping allegations against

the entire biliary stent industry, framing his allegations against the “Defendants” as a whole.

That technique, and in fact the very joinder of these claims is highly suspect given the distinct

3/ Relator alleges that BSC acquired Guidant in April 2006, but “sold Defendant Guidant Corp.’s vascular intervention and endovascular business to Defendant Abbott in 2006, including the biliary stent product lines that were illegally promoted and marketed by Defendant Guidant prior to the acquisition by Defendant Abbott,” to resolve antitrust concerns. (3AC ¶ 24.) Relator does not allege that he was ever employed by BSC directly, or that he was ever employed by Guidant Corp. at any time that it was a wholly-owned subsidiary of BSC. 4/ His sole BSC-specific allegation was that BSC sponsored a “peripheral vascular interventional training course” at which “[its] products were marketed and demonstrated in an off-label manner” by a “third-party doctor” whose participation in the course “was a superficial pretext for disclaiming any off-label marketing by [BSC].” (Compl. ¶ 34.) As set forth below, this allegation (among the others he has since purported to add) is defective under Rule 9(b). See infra § III.A. 5/ Although Relator sues Abbott as Guidant’s “successor in interest” for Guidant’s pre-acquisition conduct (3AC ¶ 23), Relator has also named Guidant Corp. (n/k/a Guidant LLC) – now a wholly owned subsidiary of BSC – as a defendant in the 3AC for the same pre-acquisition conduct. (See id. ¶ 24; see also Deft. Guidant LLC’s Mot. to Dismiss the Relator’s Third Am. Compl..) For the avoidance of confusion, all references herein to “Guidant” are to the pre-acquisition entity, and not to the current BSC subsidiary.


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absence of any allegations of conspiracy or concerted action. Nevertheless, BSC can discern

certain basic allegations.

First, Relator alleges that the Defendants designed and manufactured stents that, based on

their design and configurations, were “objectively intended for [vascular] placement” and

“unsuitable for the palliation of malignant strictures of the biliary tree.” (E.g., id. ¶ 304.)

Nevertheless, he alleges, Defendants sought 510(k) clearance of these devices from the FDA as

Class II biliary stents in order to “circumvent the[] statutory and regulatory requirements” for

Class III devices (i.e., the submission of a more demanding PMA application) “and quickly get

to the market.” (Id. ¶ 2.) According to Relator, this entailed making “false statements and

certifications to FDA” in 510(k) notifications,6 “including misrepresentations that the vascular

devices were intended for only palliative uses in the biliary.” (Id.) Had Defendants been truthful

about their intended use for the devices, according to Relator, the devices would not have been

cleared by FDA, and thus would not have been covered by Medicare. (See id. ¶¶ 5, 340.)

Second, Relator alleges – again, based on his experience as an employee of Guidant (see

id. ¶ 13) – that all of the “Defendants” engaged in a variety of misconduct aimed at promoting

the off-label and investigational use of the Devices in the vasculature (see id. ¶¶ 4(C)-(D), 13(A)-

(AA)), including in the training and compensation of sales representatives (id. ¶¶ 119-124, 151-

56, 161-63, 209), in the marketing and reimbursement materials that were given to providers (id.

¶¶ 125-139, 150, 192-208), in medical journal and internet promotional activities (id. ¶¶ 166-

180), and in direct, personal interactions and relationships with physicians (id. ¶¶ 142-149, 157-

160, 164-65, 210-11). As an employee of Guidant, Relator unsurprisingly can muster little by

6/ FDA makes available on its website a searchable database of information regarding 510(k) notifications, which includes “510(k) summaries” for the BSC devices at issue in this lawsuit. See 510(k) Premarket Notifications, available at: http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfPMN/pmn.cfm (last accessed July 14, 2010).


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way of allegations specifically against BSC. And where he does, these allegations are based on

public information (i.e., websites and vascular journals (see, e.g., id. ¶¶ 166, 170, 172, 177)), on

what he claims he saw Guidant doing (and, thus, what its competitors must also have been doing)

(see id. ¶¶ 124, 134, 156, 164, 165, 167, 210-11), and on a sprinkling of isolated interactions in

the field that he claims to have “witnessed” (see, e.g., id. ¶¶ 141, 143, 149, 150, 160).

As a result of this “illegal promotion” by the “Defendants,” according to Relator, “more

than 95 percent of Defendants’ biliary stents were implanted in patients’ vascular systems and

not in the biliary tree.” (Id. ¶ 3.) This off-label use, in turn, caused the submission of “false”

claims for reimbursement because, according to Relator, Medicare does not cover off-label

placement of biliary stents in the vasculature. (Id. ¶¶ 5(c)-(d), 82-103, 341-42.)

Finally, Relator for the first time asserts direct claims for violation of the Anti-Kickback

Statute (“AKS”), 42 U.S.C. § 1320a-7b, in his 3AC. He alleges that the “Defendants” provided

“kickbacks in the form of discounts, rebates and other forms of remuneration to healthcare

providers to induce the use of biliary stents in vascular procedures,” in violation of the AKS. (Id.

¶ 181.) Again, however, his specific allegations against BSC are sketchy, and are notable only

for the fact that they are repeated third-hand (see id. ¶ 188) and do not actually allege a violation

of the AKS.

Based on this fourth round of allegations, Relator pleads claims under the FCA, 31 U.S.C.

§§ 3729(a)(1)(A) (formerly (a)(1)) and 3729(a)(1)(B) (formerly (a)(2)) (3AC ¶¶ 337-345); the

AKS, 42 U.S.C. § 1320a-7b (3AC ¶¶ 346-351), and the FCA’s of several states (3AC ¶¶ 352-

494). As set forth below, all of these claims should be dismissed.


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ARGUMENT

Relator’s claims against BSC should be dismissed for three independent reasons: (1) they

are jurisdictionally barred by the FCA’s public disclosure bar; (2) they fail to state claims upon

which relief can be granted; and (3) they are not pled with particularity under Rule 9(b).7

I. The Court Lacks Subject Matter Jurisdiction over the Claims Against BSC.

As a threshold matter, Relator’s claims against BSC are fundamentally defective, because

his claims are based on “public disclosures” under the FCA, and he is not otherwise an “original

source” as to any of the information underlying those claims. Accordingly, the Court lacks

subject matter jurisdiction over the Relator’s claims against BSC.

The FCA’s “jurisdictional bar” provides that “[n]o court shall have jurisdiction over an

action . . . based upon the public disclosure of allegations or transactions 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, unless . . . the person bringing

the action is an original source of the information.” 31 U.S.C. § 3730(e)(4)(A) (emph. added).8

“The purpose of this jurisdictional bar is to accommodate the primary goals of the False Claims

Act: (1) ‘promoting private citizen involvement in exposing fraud against the government’ and

(2) ‘preventing parasitic suits by opportunistic late-comers who add nothing to the exposure of

fraud’.” Reagan, 384 F.3d at 174 (quoting Laird, 336 F.3d at 351).9 Accordingly, in applying

the jurisdictional bar, a court must determine “(1) whether there has been a ‘public disclosure’ of

7/ Moreover, these same defects condemn his state law claims. See infra § IV. 8/ The jurisdictional bar was designed “to strike a balance between those individuals who, with no details regarding its whereabouts, simply stumble upon a seemingly lucrative nugget and those actually involved in the process of unearthing important information about a false or fraudulent claim.” United States ex rel. Reagan v. E. Tex. Med. Ctr. Reg’l Healthcare Sys., 384 F.3d 168, 177 (5th Cir. 2004) (quoting United States ex rel. Laird v. Lockheed Martin Eng’g & Sci. Servs. Co., 336 F.3d 346, 356 (5th Cir. 2003) (internal quotations omitted)). 9/ See also United States ex rel. Feingold v. AdminaStar Fed., Inc., 324 F.3d 492, 496 (7th Cir. 2003) (“the purpose of a public disclosure is to alert the responsible authority that fraud may be afoot”).


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allegations or transactions, (2) whether the qui tam action is ‘based upon’ such publicly disclosed

allegations, and (3) if so, whether the relator is the ‘original source’ of the information.” Id. at

173 (quoting Laird, 336 F.3d at 352); see also Fed. Recovery Servs., Inc. v. United States, 72

F.3d 447, 451 (5th Cir. 1995). In this case, Relator cannot overcome this jurisdictional bar.

A. Relator’s Allegations Are Based on Public Disclosures Occurring Prior to the Filing of the Original Complaint in this Action.

First, Relator’s allegations are all based on public disclosures that predate the institution

of this action in September 2006, much less the filing of the 3AC in May 2010.

Where the “essence of the [relator’s] allegations” have been publicly disclosed, the

relator’s action is “based upon” those public disclosures. United States ex rel. Fried v. W. Indep.

Sch. Dist., 527 F.3d 439, 442 (5th Cir. 2008). Under this standard, “an action need not actually

be derived from the publicly disclosed allegations or transactions,” United States ex rel.

Richardson v. E-Systems, Inc., No. 3:90-CV-0607-P, 1999 WL 324666, at *3 (N.D. Tex. May 18,

1999) (citing United States ex rel. Findley v. FPC-Boron Employees’ Club, 105 F.3d 675, 682

(D.C. Cir. 1997)), nor must the action’s allegations be identical to the publicly disclosed

allegations or transactions, see Fried, 527 F.3d at 442. Indeed, “[a]n FCA qui tam action even

partly based upon publicly disclosed allegations or transactions is nonetheless ‘based upon’ such

allegations or transaction.” Fed. Recovery Servs., 72 F.3d at 451.10 Thus, it is not enough for a

relator to “uncover[] some nuggets of new, i.e., non-public, information, [if] his claims of fraud

are based at least in part on allegations already publicly disclosed.” Fried, 527 F.3d at 442.

Distilled to its “essence,” Relator’s 3AC alleges, on an industry-wide basis, that (1)

devices cleared as biliary stents under section 510(k) are overwhelmingly used in the vasculature,

10/ “Not a single circuit has held that a complete identity of allegations, even as to time, place, and manner is required to implicate the public disclosure bar . . . .” United States ex rel. Boothe v. Sun Healthcare Group, Inc., 496 F.3d 1169, 1174 (10th Cir. 2007).


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(2) manufacturers of biliary stents (including BSC) obtained regulatory clearance for the stents

based on a stated “intended use” (i.e. palliation of malignant biliary strictures) that was

inconsistent with the vascular use for which they were actually intended, and (3) manufacturers

(including BSC) then promoted the stents for their true “intended” vascular use in violation of

the FDCA (see 3AC ¶¶ 116-211).11 These allegations are all based on public disclosures that

predate not only the filing of his 3AC,12 but also that of his original Complaint in 2006.

First, there can be no dispute that the extensive use of biliary stents in vascular settings

has been the subject of numerous public disclosures, some dating back over a decade. For

example, as early as 1999, FDA began acknowledging in 510(k) clearance letters for biliary

stents that there was a “reasonable likelihood that this device will be used for an intended use not

identified in the proposed labeling,” and thus required the devices’ labeling to state that “[t]he

safety and effectiveness of this device for use in the vascular system has not been established.”

(3AC ¶ 81; see FDA Off-Label Use Concerns Focus on Biliary Stents, Mapping Catheters, The

Gray Sheet, June 7, 1999, at 6 (“6/7/99 Gray Sheet”) (J. Def. App. 291-92).) To name just a few

“public disclosures” following this regulatory action:

• in April 2001, an FDA Circulatory System Devices (“CSD”) Panel discussed the “widespread off-label use of stents for iliac and other peripheral indications,” see Peripheral Stent Study Design Panel, Endpoint Data Development Urged, The Gray Sheet, Apr. 30, 2001, at 5 (“4/30/01 Gray Sheet”) (J. Def. App. 317-18); FDA Circulatory System Devices Panel Hr’g Tr. (Apr. 23, 2001) (“CSD Panel Tr.”) (J. Def. App. 29, 49-50, 57-58, 77-78, 189-90, 193-96, 203-05, 211, 215-16, 222-24, 229-30, 231-32);

• in October 2002, FDA issued letters to biliary stent manufacturers stating that it had “been aware of the prolific use of expandable metal biliary stents for peripheral and carotid indications,” and that “many more of these stents are used in the vasculature, for which they are not indicated, than the biliary tree, for which they are indicated,” Letter

11/ Accord Compl. ¶ 11 (“The defendant companies, and others in the market, have all pursued a similar scheme in the off-label marketing of the biliary stents for off-label usage.”). 12/ Indeed, Relator expressly relies on many of these public disclosures. (See, e.g., 3AC ¶¶ 73, 75, 76.)


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from P. Frappaolo to BSC, Oct. 18, 2002 (“2002 FDA Letter”), at 1 (J. Def. App.406-07),

• in March 2003, an FDA Regulatory Review Scientist noted in the medical trade journal, Endovascular Today, that the large number of biliary stent 510(k) clearances was attributable directly to the off-label use of biliary stents in the vasculature, see Dorothy B. Abel Off-label Medical Device Use, Endovascular Today, Mar. 2003, at 60 (“Abel 2003”) (J. Def. App. 335); and

• in September 2006, another FDA Regulatory Review Scientist, commenting in the same journal, noted that “virtually all of the renal stenting procedures currently conducted in the US are preformed using stents not indicated for use in the renal vasculature, most commonly including biliary stents,” Kenneth J. Cavanaugh, Evaluation of Renal Artery Stenting, Endovascular Today, Sept. 2006, at 105, 106 (emph. added) (J. Def. App. 359, 360).

Indeed, not only do these sources acknowledge and disclose this off-label use, but many of them

explicitly recognize that such use represents the standard of care, see 4/30/01 Gray Sheet (panel

discussed that “[p]eripheral stenting, particularly for longer lesions, is already regarded as the

standard of care, even though the procedure is off-label”) (J. Def. App. 317) – a view that is

echoed by the relevant medical literature. See, e.g., Daniel A. Leung et al., Selection of Stents

for Treating Iliac Arterial Occlusive Disease, J. of Vascular & Interventional Radiology, Feb.

2003, at 137, 149-50 (noting off-label use and concluding that “the choice of stent may not be

critical for the success of the procedure,” but that clinical trials to support this conclusion were

unlikely due to “rapidly changing technology related to stents”) (J. Def. App. 331-32); S. Chiu

Wong, et al., Comparison of Clinical and Angiographic Outcomes after Saphenous Vein Graft

Angioplasty Using Coronary Versus ‘Biliary’ Tubular Slotted Stents, 91 Circulation 339 (Jan.

1995) (J. Def. App. 270) (noting that “the use of coronary and biliary tubular slotted stent

designs was associated with comparable procedural success rate” in treating saphenous vein graft

stenosis). These reports unquestionably are “public disclosures” within the meaning of the


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FCA,13 and they occurred prior to the filing of Relator’s original Complaint.

Many of these sources also disclosed the second component of Relator’s alleged

fraudulent scheme: that biliary stent manufacturers pursued the biliary regulatory pathway to

avoid more stringent FDA requirements for obtaining vascular indications. See CSD Panel Tr.

(panelist stating that more vascular stents are not approved because “the malignant biliary

indication is pretty simple and it is inexpensive,” and “the absence of approval for vascular

indication has no clear marketing or sales impact”) (J. Def. App. 216); IntraTherapeutics

IntraCoil PMA Foiled by Widespread Off-Label Stenting, The Gray Sheet, Apr. 30, 2001, at 3

(“There is little marketing advantage created by a stent indication in a market awash with off-

label use.”) (J. Def. App. 316); Abel 2003, at 2 (“One reason so many manufacturers have

elected to avoid labeling their devices for vascular use is related to the regulatory pathway

required for these devices.”) (J. Def. App. 336). Also publicly disclosed were allegations that

biliary stent manufacturers sought 510(k) clearances for devices that, based on their “objective”

characteristics, “appear[ed] to be made to optimize performance in the vasculature.” 2002 FDA

Letter at 1 (citing, in particular, “smaller diameters, longer stent lengths, longer delivery systems,

more flexible lattices, and increased radial strength”) (J. Def. App. 406). These are precisely the

allegations that the Relator has levied in his 3AC – namely, that BSC and other industry

participants “[r]ecogniz[ed] an opportunity to circumvent PMA review by FDA and to get to the

market quickly and cheaply . . . by falsely stating that the devices were Class II biliary stents

13/ Both medical trade journals, see United States ex rel. Radcliffe v. Purdue Pharma, L.P., 582 F. Supp. 2d 766, 770 (W.D. Va. 2008), rev’d in part on other grounds, 600 F.3d 319 (4th Cir. 2010), and FDA letters and public hearing transcripts, see Gross ex rel. United States v. AIDS Research Alliance-Chicago, No. 01 C 8182, 2004 WL 905952, at *7 (N.D. Ill. Apr. 27, 2004) (FDA warning letter), aff’d, 415 F.3d 601 (7th Cir. 2005); United States ex rel. Jamison v. McKesson Corp., No. 2:08CV214-SA-DAS, 2010 WL 1276712, at *6 (N.D. Miss. Mar. 25, 2010) (“documents issued and published by . . . federal agencies”), have been held to constitute “public disclosures” under the FCA.


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intended for use only in the palliation of malignant biliary strictures.” (3AC ¶ 11.)14

Finally, the allegation that biliary stent manufacturers market their devices for vascular

uses in violation of the FDCA has also been the subject of previous public disclosures. In 1999,

The Gray Sheet and numerous other outlets reported on a warning letter issued by the FDA to

Defendants Johnson & Johnson and Cordis, which cited those entities for “promotional

violations stemming from the placement of an ad for the [biliary] stent in the journal

Endovascular Surgery.” FDA Off-Label Use Concerns Focus on Biliary Stents, Mapping

Catheters, The Gray Sheet, June 7, 1999, at 6 (J. Def. App. 291-92); Warning Letter from

FDA’s Office of Compliance to Cordis Corporation, dated Apr. 28, 1999 at 2 (“The ad makes an

implied claim for vascular use because it appears intended for vascular specialists.”) (J. Def. App.

392). FDA publicly disclosed these off-label promotion allegations once more in 2002, when it

expressed concern in its letter to all manufacturers (including BSC) “that many expandable metal

biliary stents continue to be marketed for vascular use.” 2002 FDA Letter at 1 (J. Def. App. 406).

These public disclosures are identical to specific off-label promotion techniques alleged by

Relator in this action (see 3AC ¶¶ 169-180 (allegations regarding the defendants’ “off-label

marketing in vascular journals” during the 2002 to 2004 time period)) – all of which, themselves,

14/ Where, as here, a complaint alleges “industry-wide abuses,” then “[i]ndustry-wide public disclosures bar qui tam actions against any defendant who is directly identifiable from the public disclosures,” even if the defendant was not actually identified in the disclosure itself. United States v. Emergency Med. Assocs. of Ill., Inc., 436 F.3d 726, 729 (7th Cir. 2006) (emph. added); see also In re Natural Gas Royalties, 562 F.3d 1032, 1042 (10th Cir. 2009) (public disclosure which “allows the government to target its investigation toward specific actors and a specific type of fraudulent activity,” even if specific actors not named, triggers jurisdictional bar); United States v. Alcan Elec. & Eng’g, Inc., 197 F.3d 1014, 1018 -1019 (9th Cir. 1999) (even if public disclosure involving “narrow class of suspected wrongdoers” does not identify specific defendants, the jurisdictional bar is triggered if “public disclosures contained enough information to enable the government to pursue an investigation against” the defendants); United States ex rel. Fine v. Sandia Corp., 70 F.3d 568, 571 (10th Cir.1995) (public disclosure that identified two of eight industry participants “sufficiently alerted the government to the likelihood” that other industry participants were involved in same misconduct).


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constitute “public disclosures” in the “news media.”15

Not only that, but the effect of this public disclosure extends to all of Relator’s off-label

promotion allegations, because the off-label promotion in vascular journals is but one of a

number of “interrelated parts” of the same allegedly fraudulent off-label promotion scheme

engaged in by all industry participants. (See id. ¶¶ 13 (“Defendants promoted and marketed the

devices as vascular stents to treat peripheral vascular disease” by “the following illustrative

evidence”), 13(A) – 13(AA) (identifying various techniques by which defendants promoted their

devices off-label).) Thus, it is clear that Relator’s off-label promotion allegations “are based at

least in part on allegations already publicly disclosed,” Fried, 527 F.3d at 442, and are in any

event “interrelated parts” of the same allegedly fraudulent off-label marketing scheme that had

already been publicly disclosed. See In re Natural Gas Royalties, 562 F.3d at 1040 (fact that

some “mismeasurement techniques” by which defendants allegedly defrauded government had

not been publicly disclosed does not allow relator to avoid jurisdictional bar, because all such

techniques were “interrelated parts” of the same fraudulent scheme).

In sum, Relator has brought an industry-wide case alleging that stent manufacturers (like

BSC) obtained 510(k) clearances for their devices as biliary stents with the intent that the devices

would be used principally in the vasculature, and then proceeded to market those devices for that

off-label vascular use. As set forth above, these allegations had been publicly revealed in

disclosures that, in some instances, were identical to the allegations of his 3AC, and in others

15/ For example, Relator alleges that BSC promoted the launch of its “Express Biliary LD Stent System” in the November/December 2002 edition of Endovascular Today, which he alleges to be a vascular journal. (See, e.g., 3AC ¶ 170). Assuming these allegations are true (as the Court must), the “transactions” underlying Relator’s FCA claims premised on off-label promotion – even if not the “allegations” of fraud themselves – were “publicly disclosed” by virtue of these allegedly open and notorious examples of off-label promotion. See United States ex rel. Barrett v. Johnson Controls, Inc., No. 3:01-CV-1641-M, 2003 WL 21500400, at *6 (N.D. Tex. Apr. 9, 2003) (Lynn, J.) (noting that the jurisdictional bar prohibits qui tam actions “when either the allegations of fraud or the critical elements of the fraudulent transaction themselves were in the public domain” (quoting United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 654 (D.C. Cir. 1994)) (emph. added)).


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disclosed the “material facts” of the transactions upon which his allegations of fraud were

premised. United States ex rel. Reagan v. E. Tex. Med. Ctr. Regional Healthcare Sys., 274 F.

Supp. 2d 824, 842 (S.D. Tex. 2003) (quoting Springfield Terminal, 14 F.3d at 655), aff’d, 384

F.3d 168. Accordingly, Relator has contributed “nothing to the exposure of [the] fraud” alleged

in this case, Reagan, 384 F.3d at 174, and unless Relator can establish that he is an “original

source” under the FCA, his claims must be dismissed.

B. Relator Is Not an Original Source of the Allegations Asserted Against BSC. Because Relator’s allegations are based upon previously made public disclosures, Relator

must be an “original source” of the information in order to overcome the FCA’s jurisdictional

bar. 31 U.S.C. § 3730(e)(4)(A). Relator cannot satisfy this test as to his allegations against BSC.

To qualify as an original source, Relator must meet two requirements: first, he must have

“direct and independent knowledge of the information on which the allegations are based”; and

second, he must have promptly and “voluntarily provided” the Government with the essential

elements or information on which the qui tam allegations are based before filing the qui tam

action. Reagan, 384 F.3d at 177 (quoting Laird, 336 F.3d at 352). In addition, Relator must be

an original source as to his specific allegations against BSC, because the FCA “does not permit

jurisdiction in gross just because a relator is an original source with respect to some claim.”

Rockwell Int’l Corp. v. United States, 549 U.S. 457, 476 (2007). Here, Relator has not

established any “direct and independent knowledge” of the information on which his allegations

against BSC are based, see id. at 475 (relator who “was no longer employed by Rockwell” could

not have had direct and independent knowledge), and therefore these claims are jurisdictionally

barred.16

16/ Relator may also have failed to meet the second requirement of the “original source” test – namely, that he failed to “voluntarily provide[]” the Government with the essential elements or information on which the qui tam


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Relator proceeds principally on a theory that because BSC competed with his employers

Guidant and later Abbott, BSC must have been engaged in the same alleged misconduct he

claims to have witnessed at Guidant and Abbott. For example, because Relator alleges he

witnessed sales force training in off-label promotion at Guidant, and because (according to

Relator) BSC was one of “the primary competitors of Defendant Guidant in the vascular stent

market,” (3AC ¶ 121) Relator somehow concludes that BSC must have “utilized similar [off-

label] training methods” (id. ¶ 124). However, Relator asserts no basis whatsoever – much less

any “direct and independent” knowledge – for this leap of logic. To establish original source

status knowledge, “a qui tam plaintiff must allege specific facts – as opposed to mere

conclusions – showing exactly how and when . . . [he or she] obtained direct and independent

knowledge of the fraudulent acts alleged in the complaint. . . . ” Reagan, 274 F. Supp. 2d at 853

(quoting United States ex rel. Hafter D.O. v. Spectrum Emergency Care, Inc., 190 F.3d 1156,

1162 (10th Cir. 1999)); see also United States ex rel. Branch Consultants, L.L.C. v. Allstate Ins.

Co., 668 F. Supp. 2d 780, 798 (E.D. La. 2009) (where “complaint seeks to extrapolate from

plaintiff’s experience, but . . . has no factual basis other than the motive and opportunity of the

[defendant],” relator is not an original source); United States ex rel. Aflatooni v. Kitsap

Physicians Servs., 163 F.3d 516, 526 (9th Cir. 1999) (“the purposes of the [FCA]would not be

served by allowing a relator to maintain a qui tam suit based on pure speculation or conjecture”).

allegations” against BSC are based before filing this lawsuit. Reagan, 384 F.3d at 177. For example, Relator’s initial Complaint in this action – the Complaint that is most indicative of Relator’s “original source” status, because it is “the one framed before any possible distortions associated with discovery took place,” United States ex rel. Ackley v. IBM, 76 F. Supp. 2d 654, 659-60 (D. Md. 1999) – is almost entirely bereft of any specific allegations of misconduct by BSC. (See generally Compl. [Dkt No. 1].) If Relator provided only the “essential elements or information” on which the original Complaint’s allegations are based to the government, then those are the only allegations for which he can claim to be an original source. Natural Gas Royalties, 562 F.3d at 1045 (original source assessment “is limited to information [Relator] voluntarily provided to the government before filing suit”). Resolution of this aspect could only be ascertained through discovery, but for the reasons discussed in this pleading, the Court need not reach this issue.


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Here – and elsewhere in the 3AC17 – Relator’s conclusory allegations and rank speculation that

BSC, as a competitor of Guidant, must have been engaged in the same alleged misconduct do not

satisfy this burden.

Even where Relator purports to have observed or been informed about the BSC

misconduct alleged in the Complaint, his allegations fail. For starters, Relator’s allegation that

“BSC offered kickbacks to healthcare providers” (3AC ¶ 188) can be quickly dispensed with.

Relator’s sole basis for this allegation is the self-interested statement by a vascular surgeon – to

the effect that BSC was providing him with funds and that if “Guidant wanted his business, so

would they” – relayed to the Relator by a third party. (Id.) This hearsay upon hearsay is quite

plainly “learned second-hand through the efforts of others,” and thus cannot constitute “direct

and independent” knowledge. Reagan, 384 F.3d at 177. Relator also alleges that he “observed”

a BSC sales representative engage in off-label promotion with specific providers (3AC ¶¶ 141,

143, 149) and “witnessed” BSC “manage” its consignment of biliary stents in catheterization (i.e.

vascular) laboratories (id. ¶¶ 149, 160), but here, too, this supposed “direct and independent”

knowledge falls short. Relator does not allege that he was a party to any of these alleged

interactions, and thus he cannot know if the alleged “promotion” or inventory “management” he

witnessed was, in fact, unlawful.18 See Reagan, 274 F. Supp. 2d at 853-54 (Relator must allege

17/ See 3AC ¶¶ 130 (conclusory allegation that “BSC also sponsored peripheral endovascular stenting courses to instruct physicians on how to utilize [BSC]’s biliary stents off-label for vascular purposes”), 134 (conclusory allegation that “[BSC] had a competing practice building program distributed to physicians on CD, in written promotional material, online, and in unsolicited materials,” having the same alleged off-label marketing objectives as Relator’s employer); 139 (“Mr. Maestes provided Relator with guidance on how to sell Guidant’s biliary stents for vascular purposes, including how to market Defendant Guidant’s stents against the biliary stents of . . . [BSC], which also were marketed for vascular purposes.”), 156 (conclusory allegation that “[BSC] similarly instituted compensation structures, quotas, and bonuses that rewarded and incentivized sales representatives to promote and sell the biliary stent systems to vascular specialists and required representatives to promote the devices off-label”) 18/ Providers and hospitals are free to purchase biliary stents for off-label use, and under the FDCA manufacturers are free to respond truthfully to questions posed by providers regarding off-label use, see 21 C.F.R. § 99.1(b) (regulations regarding dissemination of information regarding off-label use “do[] not apply to a manufacturer’s dissemination of information that responds to a healthcare practitioner’s unsolicited request”); see


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“facts,” not “conclusions” or speculation, to be original source). In any event, these allegations,

too, are based on information learned “second-hand” from others, Reagan, 384 F.3d at 177.

Here, Relator is not a “direct and independent source” even of this alleged misconduct.

Finally, Relator’s allegations regarding BSC’s alleged off-label marketing on its

“website” (3AC ¶ 166) and in “vascular journals” (id. ¶¶ 170, 172, 177), as well as BSC’s

allegedly false 510(k) submissions to the FDA (id. ¶¶ 303-28), are not based on any “direct and

independent” knowledge. Relator does not allege that he had some particular role in or insight

into the preparation of these materials (nor could he); his “knowledge” about these allegations is

no more “direct and independent” than that of any other observer. To the extent Relator

contends that his experience and understanding of the industry confer upon him the status of

“original source” with regard to such publicly disclosed materials, Relator is wrong: “[m]erely

possessing background information which enables the relator to understand the significance of a

publicly disclosed transaction or allegation . . . is insufficient.” United States ex rel. Smith v.

Yale Univ., 415 F. Supp. 2d 58, 72 (D. Conn. 2006) (quoting United States ex rel. Stinson, Lyons,

Gerlin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1160 (3d Cir. 1991)); see also

Reagan, 274 F. Supp. 2d at 860 (Relator “must possess substantive information about the

particular fraud, rather than mere background information which enables a putative relator to

understand the significance of a publicly disclosed transaction or allegation” (quoting Stinson,

944 F.2d at 1160)). Accordingly, Relator’s 3AC contributes no “direct and independent”

information about these particular allegations, and thus he is not an original source.

also id. § 99.101 (regulations regarding dissemination of written information regarding off-label use, even in the absence of unsolicited request).


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II. Relator Fails to State a Claim Against BSC Upon Which Relief Can Be Granted.

Besides the public disclosure jurisdictional bar, Relator faces dismissal on separate and

independent grounds under Rule 12(b)(6). Each of Relator’s bases for FCA liability against BSC

are fundamentally flawed as a matter of law. First, even if true, Relator’s allegations of off-label

promotion do not give rise to any “false” claims for reimbursement, because Medicare covers the

off-label uses in question. Second, Relator’s “fraud on the FDA” allegations are similarly

defective, because Relator has failed to establish how BSC’s allegedly fraudulent submissions

“caused” the submission of false claims by providers to Medicare. Moreover, Relator’s state

FCA claims premised on this theory are preempted by the FDCA.19

In order to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must

contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007) . “[A] pleading that offers ‘labels and conclusions’ or ‘a

formulaic recitation of the elements of a cause of action will not do.’” Ashcroft v. Iqbal, 129

S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 555). Also, “‘naked assertions’ devoid

of ‘further factual enhancement’” are insufficient. Id. (quoting Twombly, 550 U.S. at 557). In

essence, the plausibility standard requires “more than a sheer possibility that a defendant has

acted unlawfully.” Id.; see Steen v. Medtronic, Inc., No. 3:10-CV-936-L, 2010 WL 2573455, at

*4 (N.D. Tex. June 25, 2010) (dismissing allegations amounting to no more than “sheer

possibility that Defendant is liable” under Rule 12(b)(6)); see also United States ex rel. Duxbury

v. Ortho Biotech Prods., L.P., 579 F.3d 13, 28 (1st Cir. 2009) (affirming dismissal of allegations

that “simply parrot the elements of the [FCA]” under Iqbal).

19/ Relator’s purported direct claim under the AKS is also defective as a matter of law. Unlike the FCA, the AKS does not contain qui tam provisions, and there is otherwise no express or implied private right of action under that statute. See United States ex rel. Barrett v. Columbia/HCA Healthcare Corp., 251 F. Supp. 2d 28, 37 (D.D.C. 2003).


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A. Relator Fails to Allege the Existence of a False Claim Because the Off-Label Use of Biliary Stents Is Reimbursable by Medicare.20

It is well-settled that “[m]erely alleging off-label marketing . . . is not sufficient, without

more, to plead a false claims act violation.” United States ex rel. Rost v. Pfizer, Inc., 253 F.R.D.

11, 16-17 (D. Mass. 2008).21 Instead, to state a claim under the FCA premised solely on off-

label promotion and/or claims for reimbursement for off-label uses, Relator must establish that

the relevant public payor does not cover the off-label use in question. See id. at 13-14.22 Here,

Relator fails to state a claim regarding BSC’s alleged promotional misconduct aimed at causing

providers to seek reimbursement for the off-label use of biliary stents, because Medicare covers

the off-label uses in question.

Relator proffers two contradictory theories for why Medicare does not provide coverage

for the off-label use of biliary stents in the vasculature: first, he asserts that off-label use renders

the devices “investigational and [thus] not established to be reasonable and necessary” as a

matter of law (3AC ¶ 89; see also id. ¶ 342); and second, he asserts that Local Coverage 20/ Although Relator purports to assert claims based on alleged false claims submitted to various Medicaid programs, Relator alleges that “Medicaid state programs adhere to Federal guidelines as set forth herein.” (3AC ¶ 99.) Relator also purports to assert claims based on false claims submitted to the Departments of Defense and Veterans Affairs, which provide medical services to active duty and retired military officers and their families. (Id. ¶¶ 100-03.) 21/ See also United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 727 (1st Cir. 2007) (“FCA liability does not attach to violations of federal law or regulations, such as marketing of drugs in violation of the FDCA, that are independent of any false claim.”); United States ex rel. Polansky v. Pfizer, Inc., No. 04-cv-0704 (ERK), 2009 WL 1456582, at *7 (E.D.N.Y. May 22, 2009) (“[T]he mere fact that Pfizer may have been violating FDA regulations [by engaging in off-label marketing] does not translate into liability for causing a false claim to be filed.”). 22/ See also United States ex rel. Hess v. Sanofi-Synthelabo, Inc., No. 4:05CV570MLM, 2006 WL 1064127, at *9 (E.D. Mo. Apr. 21, 2006) (“[B]ecause in November 2002 the . . . Medicare administrator included off-label uses of Eloxatin for reimbursement purposes, Plaintiff can prove no set of facts to establish that Defendant violated the FCA after that date.”); United States ex rel. Franklin v. Parke-Davis, Div. of Warner-Lambert Co., No. Civ. A. 96-11651PBS, 2003 WL 22048255, at *3 (D. Mass. Aug. 22, 2003) (“If the Medicaid statute gives states the discretion to cover off-label . . . prescriptions, and a state exercised its discretion to cover such prescriptions, then an off-label . . . prescription in that state would not be a false claim.”); accord United States ex rel. George v. Boston Scientific Corp. et al., No. 4:07-02467, United States’ Statement of Interest in Resp. to Deft.’s Mot. to Dismiss Plf.’s First Am. Compl. at 5 (S.D. Tex. June 2, 2010) [Dkt No. 73] (the “Statement of Interest”) (“To the extent that a healthcare provider seeks reimbursement for a . . . procedure that is ineligible for payment under a federal healthcare program – either because the program bars coverage for the off-label use of a medical device or because the program places other conditions on coverage that were not satisfied – the claim is false.”) (J. Def. App. 248).


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Determinations (“LCDs”) regarding the coverage for non-coronary vascular stents authorize

coverage for off-label use (notwithstanding Relator’s theory that all off-label uses are

“investigational” and thus non-covered) only if a stent that has been “approved” for another

vascular use is used (see id. ¶ 93). Both of Relator’s theories are wrong.

1. Medicare Does Not Categorically Preclude Coverage for the Off-Label Use of 510(k)-Cleared Devices.

Relator first alleges that the Devices are “investigational” – and, therefore, not covered

by Medicare – because they are “Class II biliary stent[s] promoted and marketed off-label as . . .

Class III vascular stents . . . without premarket approval.” (3AC ¶ 90.) In effect, Relator

proposes a rule that would preclude Medicare coverage for any off-label use of any medical

device – including devices that have otherwise been cleared or approved for marketing by FDA –

except pursuant to limited exemptions for “experimental” or “investigational” devices set forth in

42 C.F.R. §§ 405.201 and 411.15(o). Relator’s theory is without merit.

In relevant part, the Medicare program covers physician and hospital services, including

services involving the use of 510(k)-cleared devices, unless the service is specifically excluded

by statute or regulation. See 42 U.S.C. §§ 1395d(a), 1395k(a); see also id. § 1395x(b) (defining

“inpatient hospital services” to include medical supplies and devices used during the hospital

admission); Medicare Benefit Policy Manual, Pub. 100-02, Ch. 14, § 10 (“[d]evices that may be

covered under Medicare include . . . [d]evices cleared by the FDA through the 510(k) process”).

Among items or services excluded from coverage are those that are not “reasonable and

necessary” for diagnosis or treatment, 42 U.S.C. § 1395y(a)(1)(A); see also 42 C.F.R. §

411.15(k), including “[e]xperimental or investigational devices” that have not, among other


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things, received an Investigational Device Exemption (“IDE”) from the FDA.23 Id. §§ 411.15(o),

405.201(a)(2); see also Medicare Benefit Policy Manual, Pub. 100-02, Ch.14, § 30 (CMS does

not cover certain investigational devices “because they do not satisfy the statutory requirement

that Medicare pay for devices determined to be reasonable and necessary.”).

Medicare has consistently defined an “investigational” device as one that “has not

completed the applicable clearance (510(k)) or approval (PMA) process that a manufacturer, in

accordance with FDA’s requirements, must complete before it is allowed to fully market its

product.” Mem. from Thomas A. Ault to All Regional Administrators, re: Medicare Coverage of

Investigational Devices 7 (Dec. 28, 1994) (emph. added) [hereinafter the “Ault Mem.”] (J. Def.

App. 821); accord 21 C.F.R. § 812.1(a); 42 C.F.R. § 405.201(b).24 Once a device is cleared or

approved for marketing, services involving the use of that device – including any off-label use –

are covered by Medicare unless CMS or one of its contractors determines that a particular use of

a 510(k)-cleared device is not reasonable and necessary. See Ault Mem. at 6 (J. Def. App. 821).25

CMS may make such a determination in a National Coverage Determination (NCD), or a local

contractor may limit coverage pursuant to an LCD. See 42 U.S.C. §§ 1395ff(f)(1)(B), (2)(B);

23/ An IDE “permits a device that otherwise would be required to comply with a performance standard or to have premarket approval to be shipped lawfully for the purpose of conducting investigations of that device.” 21 C.F.R. § 812.1(a) (emph. added); accord 42 C.F.R § 405.201(b). 24/ This view is consistent with the United States’ recently submitted Statement of Interest in United States ex rel. George v. Boston Scientific Corp. See Statement of Interest at 4 (“Medical devices that are not cleared or approved by the FDA are considered ‘investigational’ by federal healthcare programs and are not ‘reasonable and necessary.’”) (J. Def. App. 247). 25/ The Ault Memorandum advises that Medicare coverage may be available “for an unlabeled use as long as this does not conflict with FDA requirements.” Ault Mem. at 6. One such “FDA requirement” may occur when a particular unlabeled use is “contraindicated,” which “is essentially a direction [from the FDA] to the physician not to use the drug [or device] in certain circumstances.” Thomas v. Hoffman-LaRoche, Inc., 949 F.2d 806, 815 (5th Cir. 1992). Otherwise, “[t]he Medicare Act neither requires nor specifically authorizes the Secretary to deny reimbursement for medical devices based upon FDA approval for marketing.” Glucotec, Inc. v. United States Dep’t of Health & Human Servs., C.A. No. 6:07-2995-HMH, 2008 WL 1766709, at *3 (D.S.C. Apr. 11, 2008) (internal quotations and citations omitted).


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Erringer v. Thompson, 371 F.3d 625, 628 (9th Cir. 2004) (describing NCDs and LCDs).26 Here,

there is no dispute that BSC’s devices have received 510(k) clearance notifications. Thus, they

are not “investigational,” and are not subject to the coverage limitations set forth at 42 C.F.R. §

411.15(o). Accordingly, in the absence of a determination by CMS or one of its contractors that

the off-label use in question is not reasonable or necessary, Relator’s argument for non-coverage

fails.

Indeed, a recent Coverage Decision Memorandum (“CDM”)27 by CMS addressing some

of the precise off-label procedures at issue confirms beyond debate that Medicare does not, as a

matter of law, preclude coverage of the off-label vascular use of 510(k)-cleared biliary stent.

The CDM addressed, in part, coverage for the stenting of the renal arteries, and concluded that

coverage should remain at local contractor discretion. CDM at 1 (J. Def. App. 827). In

reaching its determination, however, CMS acknowledged that “virtually all of the renal stenting

procedures . . . are performed using stents not indicated for use in the renal vasculature, most

commonly including biliary stents.” Id. at 3 (emph. added) (J. Def. App. 829); see also id. at 21

(J. Def. App. 847) (“While there are no FDA approved devices for primary renal stenting, it is

now clear that virtually all renal stenting procedures conducted in the U.S. are preformed

utilizing hepatobiliary stenting systems not indicated for use in the renal arteries.”). In other

words, CMS expressly acknowledged this off-label use, and expressly authorized local

26/ Notably, contractors are directed to issue LCDs “when the contractor identifies an item or service that is never covered in certain circumstances and wishes to establish automated review or when widespread, significant risk to Medicare funds dictates.” Erringer, 371 F.3d at 628; see also Medicare Program Integrity Manual, Pub. 100-08, Ch. 13, § 13.4 (A)-(B). Thus, the absence of an NCD or LCD for a given procedure does not imply non-coverage by Medicare. 27/ Steve Phurrough, Director, Coverage & Analysis Group, CMS, et al., Coverage Decision Mem. for Percutaneous Transluminal Angioplasty (PTA) and Stenting of the Renal Arteries (CAG-00085R4) (Feb. 14, 2008) (J. Def. App. 827-60).


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contractors to continue to cover it.28 Accordingly, Relator’s position that all off-label uses of

cleared devices are investigational and, therefore, non-covered outside of the requirements of 42

C.F.R. § 411.15(o), is at odds with CMS’s own coverage determinations regarding some of the

very procedures at issue in this lawsuit. Relator’s erroneous view should be rejected out of hand.

2. Applicable LCDs Do Not Preclude Coverage for the Off-Label Use of Biliary Stents in the Vasculature.

In a hasty retreat from his argument that Medicare never covers off-label device usage,

Relator quickly changes tack. He admits that applicable LCDs by regional Medicare contractors

cover the off-label use of stents in the vasculature (see 3AC ¶ 93 (quoting unidentified, “typical”

LCD; emph. added)), but instead argues that these LCDs do not apply to biliary stents, because

the LCDs require the use of an “FDA approved stent” (as opposed to a 510(k)-cleared stent) and

because “no peer review medical literature supported the safe and effective use of the [biliary]

devices in vascular anatomy” during the relevant time period (id. ¶ 93-97).29 Relator also alleges

that these LCDs “specify revenue codes” for the placement of “intravascular” stents “under CPT

terminology,” and that these codes evidence the local contractors’ intent that vascular and not

biliary stents be used in these procedures. (3AC ¶ 95.) Relator is wrong on all of these points.

1. Relator’s contention that 510(k)-cleared stents are not “approved” by FDA for

purposes of these LCDs is without merit. CMS’s regulatory pronouncements30 and the case

28/ The CDM also demonstrates that the holding in Svidler v. United States Department of Health and Human Services, No. C 03-3593 MJJ, 2004 WL 2005781, at *4-6 (N.D. Cal. Sept. 8, 2004) – that an off-label use of a 510(k)-cleared or PMA-approved device is necessarily “experimental” for purposes of Medicare coverage – is incorrect. Under the rule in Svidler, CMS would have lacked the authority to permit the continued coverage of renal stenting with supposedly “experimental” biliary devices, as it did in the CDM. 29/ Although Relator characterizes this generic LCD he cites as “typical,” other applicable LCDs also provide coverage when the off-label use “represents current standard practice in the medical community.” E.g., Palmetto GBA, LCD for Non-Coronary Vascular Stents (L6944), at 2 (J. Def. App. 887). Relator’s allegations of the pervasive off-label use of biliary stents in the vasculature actually support coverage under these particular LCDs. 30/ See 68 Fed. Reg. 3640, 3653 (Jan. 24, 2003) (promulgating final rule relating to quality control requirements for certain tests “approved by the FDA through the premarket notification 510(k)” process); 55 Fed. Reg. 20896, 20901 (May 21, 1990) (interpreting statutory reference to “tests which ‘have been approved by the


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law31 make clear that the term “approved” in this context encompasses devices that are “cleared”

for marketing by FDA pursuant to the 510(k) notification process. Other LCDs and NCDs

issued by CMS and its contractors confirm this point. For example, TriSpan Health Services (a

contractor with jurisdiction over, among other states, Louisiana and Mississippi) issued an LCD

regarding the placement of non-coronary artery stents which states: “This LCD applies only to

off-label use of FDA approved stents. Stent devices that have not been cleared for marketing by

the FDA may be covered as FDA-approved IDE Category B devices.” TriSpan Health Servs.,

LCD for Outpatient Transcatheter Placement of Non-Coronary Artery Stents (L1523), at 3

(effective June 24, 2002; rev. Mar. 8, 2005) (J. Def. App. 877 (emphases added).) The import of

this language is clear: “FDA approved stents” are those stents which have been “cleared for

marketing,” a category that, by definition, includes 510(k)-cleared devices. Similarly, CMS has

issued NCDs which referred to “FDA-approved” or “approved” ambulatory cardiac monitoring

devices and blood glucose testing devices in its NCDs, when these devices are subject only to

FDA for home use’” to encompass “cleared” devices for rulemaking purposes); 55 Fed. Reg. 18331, 18332 (May 2, 1990) (referencing “Medical devices that have been approved for marketing by FDA on the basis of . . . a section 510(k) application”). 31 / See, e.g., Dyer v. Danek Medical, Inc., 115 F. Supp. 2d 732, 735-736 (N.D. Tex. 2000) (“Class III devices are approved for marketing through one of three different procedures,” including by “a limited FDA review to establish that the device is ‘substantially equivalent’ to a grandfathered device (‘§ 510(k)’ process).” (emph. added)); see also Medtronic, Inc. v. Lohr, 518 U.S. 470, 479 (1996) (noting that “the § 510(k) premarket notification process became the means by which most new medical devices - including Class III devices - were approved for the market” (emph. added)); In re Orthopedic Bone Screw Liab. Litig., 159 F.3d 817, 819-20 (3d Cir. 1998) (“For a device to be approved under the § 510(k) process, the FDA must determine that the new device has the same intended use as the predicate device and that it possesses the same technological characteristics or is as safe and effective as the predicate device.” (emph. added)), rev’d on other grounds, Buckman, 530 U.S. at 1273; Funk v. Stryker Corp., 673 F. Supp. 2d 522, 525 (S.D. Tex. 2009) (“The United States Supreme Court has . . . distinguished claims involving PMA-approved devices from claims involving devices approved under the less stringent § 510(k) process” (emph. added)); Johnson & Johnson Vision Care, Inc. v. CIBA Vision Corp., 648 F. Supp. 2d 1294, 1361 (M.D. Fla. 2009) (“The [510(k) pre-market application to the FDA] was approved in December 1994 and an abbreviated summary of the 510(k) application was made public.” (emph. added)); Notmeyer v. Stryker Corp., 502 F. Supp. 2d 1051, 1053 (N.D. Cal. 2007) (“The first model of the Alumina C-Taper Head component was approved for use by the Food and Drug Administration (“FDA”) in 1997 pursuant to the 510(k) process. . . .” (emphases added)); United States ex rel. Paranich v. Sorgnard, 286 F. Supp. 2d 445, 448 (M.D. Pa. 2003) (“In June 1994, the [FDA] approved the Matrix for sale under Section 510(k) of the Food, Drug, and Cosmetic Act . . . .” (emphases added)), aff’d, 396 F.3d 326 (3d Cir. 2005).


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510(k)-clearance requirements.32 Here, too, the term “FDA-approved” could not have been

limited solely to PMA-approved devices. Taken together, these NCDs and LCDs are clear:

Relator’s contention that Medicare precludes coverage for off-label use of biliary stents is

incorrect as a matter of law.

2. Next, Relator’s conclusory argument that “no peer review medical literature

supported the safe and effective use of the devices in vascular anatomy” for any of the

(unidentified) indications discussed in the (unidentified) LCD cited in the 3AC, is similarly

defective. As the extensive public disclosures of the off-label use of biliary stents in the

vasculature make clear, there is a wealth of medical literature supporting the off-label use of

biliary stents in the vasculature, and even FDA has recognized that in many instances such off-

label use reflects the standard of care. See supra § I.A. Indeed, in issuing its CDM on renal

artery stenting, CMS itself recognized the off-label use of biliary stents in the renal arteries and

cited medical literature supporting that use. See CDM at 3, 10-11, 21 (J. Def. App. 829, 836-37,

847). Relator’s allegations to the contrary are implausible on their face, and certainly do not

suggest “more than a sheer possibility that defendant has acted unlawfully.” Steen, 2010 WL

2573455, at *1 (quoting Iqbal, 129 S.Ct. at 1949)).

3. Finally, Relator’s reliance on the use of the term “intravascular stent” in CPT

codes allegedly used in (again, unidentified) LCDs betrays an ignorance of the origin and

purpose of the CPT. The CPT codes were developed by the American Medical Association to

32/ Compare Medicare National Coverage Determinations Manual (“NCD Manual”), Ch. 1, § 20.15(C)(6) (referring to “any marketed [FDA]-approved ambulatory cardiac monitoring device or service”), with 21 C.F.R. § 870.1025 (“arrhythmia detector and alarms” are “class II” devices); compare NCD Manual, Ch. 1, § 190.20 (noting that blood glucose may be tested “using a device approved for home monitoring” (emph. added)), with 21 C.F.R. § 862.1345 (“glucose test systems” are “class II” devices); see also NCD Manual, Ch. 1, § 280.1 (noting that for particular Durable Medical Equipment (“DME”) not included in CMS’s list of covered and non-covered DME, contractor must determine coverage based, in part, on “[w]hether the item has been approved for marketing by the [FDA] and is otherwise generally considered to be safe and effective for the purpose intended (emph. added)”).


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describe procedures, not the FDA approval status of devices. See Am. Med. Ass’n, Current

Procedural Terminology x (2010 ed.) (“[CPT] is a set of codes, descriptions and guidelines

intended to describe procedures and services performed by physicians and other health care

providers.” (emph. added).) (J. Def. App. 811);33 accord United States v. Bieganowski, 313 F.3d

264, 269 (5th Cir. 2002) (a CPT code is “a numerical code that represents a specific service or

procedure for which an insurance company will pay on behalf of an insured” (emph. added)).

Thus, the reference to an “intravascular stent” in the CPT is not intended to designate or refer in

any way to the FDA approval status of the stent that is placed.34

In sum, the core premise of Relator’s FCA claims – that off-label use of BSC’s stents is

not covered by Medicare – is simply wrong, and with it crumbles any legal basis for alleging an

FCA violation. At the very most, Relator has raised purely speculative questions about whether

certain LCDs covered certain off-label procedures at certain points of time (depending, for

example, on whether the “medical literature” or the “current standard practice in the medical

community” supported the particular use). But the FCA was not designed to reach such

regulatory gray areas. See, e.g., United States ex rel. Farmer v. City of Houston, 523 F.3d 333,

340 n.12 (5th Cir. 2008) (“[I]f the regulations were thoroughly unclear, as a matter of law, the

FCA’s knowledge and falsity requirements have not been met.”); United States v. Southland

Mgmt. Corp., 326 F.3d 669, 684 (5th Cir. 2003) (en banc) (“Where there are legitimate grounds

for disagreement over the scope of a contractual or regulatory provision, and the claimant’s

33/ Relator’s reference to the CPT in the 3AC (see 3AC ¶¶ 192-99) permits the Court to consult these materials in ruling on this motion to dismiss. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000). 34/ Indeed, an applicable LCD issued by Wisconsin Physicians Service Insurance Corporation cites medical literature which documents the use of biliary stents in the peripheral vasculature, while instructing physicians to use the CPT Codes cited by Relator that reference “intravascular stents.” Wisc. Phys. Serv. Ins. Corp., LCD for Non-Coronary Vascular Stents/Endovascular Graft Placement (L19692-L19695) (effective Mar. 1, 1998; rev. Apr. 16, 2008) (J. Def. App. 915 (citing CPT codes 37205-08), 921-26 (citing medical literature titles which, on their face, document use of biliary stents in vascular settings).)


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actions are in good faith, the claimant cannot be said to have knowingly presented a false

claim.”); see also United States ex rel. Lamers v. City of Green Bay, 168 F.3d 1013, 1018 (7th

Cir. 1999) (“imprecise statements or differences in interpretation growing out of a disputed legal

question are . . . not false under the FCA”). A claim that turns on whether specific procedures

were supported by “medical literature” or “standard practice” would face insurmountable hurdles

with regard to such critical FCA elements as “knowledge” and “falsity.”35 Accordingly,

Relator’s claims should be dismissed.

B. Relator Fails to State a Claim as to Any Allegedly False Statements in BSC’s 510(k) Clearance Notifications.

Relator’s second FCA theory focuses not on BSC’s alleged off-label promotional

activities or on the truth or falsity of any individual claim for payment, but rather on BSC’s

allegedly fraudulent 510(k) notifications to the FDA. In effect, Relator alleges that claims for

payment involving biliary stents, even if literally true, are “false” because those devices should

never have been commercially available in the first place. Such “fraud on the FDA” claims

under the FCA should be dismissed as a matter of law.

1. Allegedly False Statements in a 510(k) Clearance Notification Do Not Give Rise to False Claims Act Liability.

It is hornbook law that the “violations of laws, rules, or regulations,” by themselves, “do

not create a cause of action under the FCA.” United States ex rel. Thompson v. Columbia/HCA

Healthcare Corp., 125 F.3d 899, 902 (5th Cir. 1997) (quoting United States ex rel. Hopper v.

Anton, 91 F.3d 1261,1266 (9th Cir. 1996)).36 Relator’s “fraud on the FDA” theory seeks to do

35/ Even the Medicare statute recognizes that, in circumstances where a provider and patient “did not know, and could not reasonably have been expected to know” that the procedure would not be covered, the claim should still be paid. See 42 U.S.C. § 1395pp. 36/ Even the “receipt of money from the government where one is not entitled to receive the money, [does not] automatically give rise” to such a claim. United States ex rel. Graves v. ITT Educ. Servs., Inc., 284 F. Supp. 2d 487, 495 (S.D. Tex. 2003) (quoting Hopper, 91 F.3d at 1265), aff’d, 111 Fed. Appx. 296 (5th Cir. 2004).


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just that – i.e., elevate BSC’s alleged violation of FDA filing requirements to an actionable claim

under the FCA, simply because the violation related to devices which may ultimately have been

provided to Medicare beneficiaries.

Under the FCA, a cause of action based on claims for payment that are literally true – for

example, where the relator “does not allege that any of the claims were false in the sense that

they contained false statements or were for services not performed or the like” – will lie only if

the claims are accompanied by false certifications of compliance with regulatory or statutory

provisions that are conditions of payment. United States ex rel. Willard v. Humana Health Plan

of Tex., Inc., 336 F.3d 375, 381 (5th Cir. 2003); see also United States ex rel. Longhi v. Lithium

Power Techs., Inc., 513 F. Supp. 2d 866, 874 n.8 (S.D. Tex. 2007), aff’d, 575 F.3d 458 (5th Cir.

2009).37 FCA liability premised on a “false certification” attaches where the defendant “makes a

knowingly false certification of compliance with a statute or regulation,” and “the certification is

a prerequisite to payment.” United States ex rel. Bailey v. Ector County Hosp., 386 F. Supp. 2d

759, 764 (W.D. Tex. 2004) (citing United States v. Southland Mgmt. Corp., 288 F.3d 665, 679

(5th Cir. 2002), aff’d en banc, 326 F.3d 669 (5th Cir. 2003)).

Relator attempts to avail himself of the false certification doctrine by invoking

certifications of compliance with Medicare “program requirements” submitted by providers and

hospitals (3AC ¶¶ 202-03, 207-08). This effort, however, does not salvage his FCA claims. The

hospitals’ and providers’ certifications of compliance cannot be false on account of BSC’s

37/ As set forth in Willard and Longhi, a claim will also lie in such circumstances where a government contract has been procured by the defendant’s fraudulent inducement. See Willard, 336 F.3d at 381, 384-86; Longhi, 513 F. Supp. 2d at 874 n.8. However, no court has extended this “fraudulent inducement” doctrine beyond the government procurement context, which is clearly not at issue here. See Longhi, 575 F.3d at 467 n.8 (noting that “‘to succeed on a fraud-in-the-inducement theory under the FCA,’” the relator must prove that the defendant (1) “had no intention to perform according to the [contract’s] terms,” and (2) “obtained payments under the [contract] to which it was not legitimately entitled” (quoting United States ex rel. Laird v. Lockheed Martin Eng’g & Sci. Servs., Co., 491 F.3d 254, 259 (5th Cir. 2007)).


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alleged misconduct in submitting inaccurate 510(k) notifications, because neither the hospitals

nor providers certify compliance with applicable requirements by any other entity than

themselves. See United States ex rel. Hutcheson v. Blackstone Med., Inc., 694 F. Supp. 2d 48, 66

(D. Mass. 2010) (dismissing claims against hospital under Rule 12(b)(6) because “[t]he

Amended Complaint contains no allegations that the hospitals themselves received kickbacks, or

that they knew or should have known about the kickbacks received by the doctors”); United

States ex rel. Thomas v. Bailey, No 4:06CV00465-JLH, 2008 WL 4853630, at *13 (E.D. Ark.

Nov. 6, 2008) (hospital certifications of compliance in cost reports “did not impliedly or

expressly certify that the physicians who attended patients in the[] hospital” complied with any

statute or regulation).38 And even if these certifications could be construed to extend to the

conduct of third parties, there can be no allegation that these allegedly false certifications were

submitted “knowingly” – especially where, as here, Relator has alleged that BSC concealed its

alleged “fraud on the FDA” from providers and hospitals (see, e.g., 3AC ¶ 193).

Moreover, even if hospitals and providers did certify compliance on behalf of third

parties, and did have knowledge of the alleged “fraud on the FDA” by BSC when making those

certifications, nothing in their respective certifications indicates that they were certifying

compliance with FDA (as opposed to Medicare) regulations or requirements as a condition of

payment. (See id. ¶ 202 (hospitals and providers certify compliance with “Medicare laws,

regulations and program instructions that apply to [them]” (emph. added)).) In sum, to hold that

BSC’s compliance with FDCA obligations is somehow a “condition of payment” by Medicare to

a hospital or provider – as Relator asks of this Court – would strain the false certification

38/ See also Southland Mgmt. Corp., 288 F.3d at 680 (“[O]nce a claimant has made a certification of compliance with a statutory or regulatory provision or a provision of a contract mandated by statute or regulation, the claimant is subject to liability under the Act for submitting a false claim if that certification of compliance is known by the claimant to be false.” (emph. added, orig. emph. omitted)).


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doctrine well past its breaking point, and effect a drastic and unsupported expansion of FCA

liability into the realm of “all violations of statutes, rules and regulations.” The Fifth Circuit

rejected that view over a decade ago. See Thompson, 125 F.3d at 902.

2. Relator’s State Claims Premised on BSC’s Alleged “Fraud on the FDA” Are Preempted.

Relator’s state FCA claims fail for all of the same reasons that his federal, Medicare-

based claims fail. His claims under state law premised on BSC’s alleged “fraud on the FDA”

also fail because that they are preempted by the FDCA.

In Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001), the Supreme Court

addressed similar allegations of “fraud on the FDA” in the context of an action asserting claims

under state law. In finding that the claims at issue were preempted by the FDCA, the Court

concluded that state claims which required proof that the defendant committed fraud on the FDA

“would exert an extraneous pull on the scheme established by Congress” pursuant to which

“FDA pursues difficult (and often competing) objectives.” Id. at 349, 353. In reaching this

conclusion, the Court reasoned that FDA had numerous administrative tools at its disposal

“aimed at detecting, deterring, and punishing false statements made during . . . approval

processes,” and that this “flexibility is a critical component of the statutory and regulatory

framework under which the FDA” pursued these objectives. Id. at 349. Permitting state claims

could upset the FDA’s careful balance by, among other things, “discourag[ing]” applicants “from

seeking § 510(k) approval of devices with potentially beneficial off-label uses for fear that such

use might expose the manufacturer . . . to unpredictable [state] civil liability.” Id. at 350.

Relator’s state FCA claims premised on BSC’s alleged “fraud on the FDA” in its 510(k)

notifications fall squarely within the ambit of Buckman. By alleging that BSC made false

statements to the FDA in its 510(k) clearance notifications, and that such statements caused the


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submission of false claims to state Medicaid agencies in violation of state FCAs, Relator

purports to seize the role of “detecting, deterring, and punishing false statements” made in 510(k)

clearance notifications from the FDA, on behalf of the various state governments for which he

purports to proceed. Relator’s state claims are barred under Buckman.39

III. Relator Fails to Plead His Claims Against BSC with the Particularity Required by Rule 9(b).

There is a third, independent basis for the dismissal of Relator’s claims: he has not pled

his claims against BSC – with whom he was never employed or affiliated – with the particularity

required by Rule 9(b). It is well-settled that “[c]laims brought under the FCA must comply with

Rule 9(b),” Thompson, 125 F.3d at 903, which means that the circumstances constituting the

alleged fraud must be pled with particularity. Fed. R. Civ. P. 9(b). To plead fraud with

particularity, “a plaintiff must state the factual basis for the fraudulent claim with particularity

and cannot rely on speculation or conclusional allegations.” United States ex rel. Rafizadeh v.

Cont’l Common, Inc., 553 F.3d 869, 873 (5th Cir. 2008). In other words, “a plaintiff [must] set

forth the ‘who, what, when, where, and how’ of the alleged fraud.” Thompson, 125 F.3d at 903

(citation omitted). As set forth below, while Relator generically alleges that BSC engaged in a

scheme to obtain marketing clearance for its biliary stents under false pretenses and then promote

those devices for off-label use, Relator fails to plead these allegations with the particularity

required by Rule 9(b).40

39/ Indeed, for these same reasons, Buckman also calls into question Relator’s federal “fraud-on-the-FDA”-premised claims. FDA has taken numerous, calibrated measures to balance its need to enforce the FDCA and ensure patient safety against its statutory mandate not to interfere with the practice of medicine. Relator’s blunt efforts to enforce the FDCA via the FCA are destined to upset this careful balance. See Defts. Abbott Labs.’ & Abbot Vascular Solutions, Inc.’s Mem. of Points & Authorities in Support of Mot. to Dismiss Relator’s Third Am. Compl. (the “Abbott Mem.”) § II.B. 40/ In addition, with regard to his purported FCA claims premised on false claims submitted to the Departments of Defense and Veterans Affairs (see 3AC ¶ 100-03), Relator has failed to make any factual allegations whatsoever. Relator has failed to allege any communications between BSC (or any of the defendants) and these agencies, the sales of any of BSC’s devices to these agencies, the submission of any claim by BSC to these agencies,


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A. Relator’s Section 3729(a)(1) Claims Are Not Pled with Particularity as to BSC.

The FCA imposes liability on “any person who . . . knowingly presents, or causes to be

presented, to an officer or employee of the United States Government . . . a false or fraudulent

claim for payment or approval.” 31 U.S.C. § 3729(a)(1) (2007).41 “Because the linchpin of an

FCA claim is a false claim, the time, place and contents of the false representations, as well as

the identity of the person making the misrepresentation and what that person obtained thereby

must be stated.” Rafizadeh, 553 F.3d at 873 (internal quotations and citation omitted). To plead

a section 3729(a)(1) claim with particularity, a relator must plead details of an actual false claim,

or if he cannot do that, he must plead “particular details of a scheme to submit false claims

paired with reliable indicia that lead to a strong inference that claims were actually submitted.”

United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009). Here, as to BSC,

Relator has done neither.

1. Relator Fails to Plead BSC’s Role in Causing the Submission of False Claims with Particularity.

Relator’s conclusory and speculative allegations regarding BSC’s conduct in promoting

the off-label use of its devices and instructing providers how to submit claims for reimbursement

for such off-label use fail to meet the requirements of Rule 9(b).

For example, while Relator devotes an entire section of his 3AC to the Defendants’

alleged “inducement of false reimbursement claims” (see 3AC ¶¶ 192-208), he fails to mention a

single BSC employee who supposedly did this. Instead, he offers only impermissible group

pleading about “Defendants” as a group (see id. ¶¶ 192-94, 200, 204, 208) without “segregat[ing] or the submission of any alleged false certification of compliance on which payment was conditioned – by BSC or any other provider – to any of these agencies. These allegations are clearly deficient under Rule 9(b). 41/ The current version of the statute, under which Relator pleads claims “for violations on or after June 7, 2008,” does not differ materially from this formulation. See 31 U.S.C. § 3729(a)(1)(A) (“knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval”).


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the alleged wrongdoing of one from those of another,” Barrett, 2003 WL 21500400, at *10, and

entirely fails to identify any specific conduct by BSC in discussing specific “reimbursement

guides” purportedly prepared by the individual Defendants. But allegations that refer simply to

“Defendants”42 are clearly deficient under 9(b). Id. (“[a]llegations that lump all defendants

together . . . do not satisfy the requirements of Rule 9(b)”). Similarly, Relator’s conclusory

allegations that BSC was engaged in specific wrongdoing simply because it was a competitor of

his then-employer Guidant (and therefore must have been engaged in the same activities he

claims he witnessed at Guidant),43 do not satisfy the requirements of Rule 9(b). See Rafizadeh,

553 F.3d at 873 (“speculation or conclusional allegations” insufficient).

Relator’s allegations that BSC marketed its devices off-label on the internet and in

vascular journals (see 3AC ¶¶ 166, 170, 172, 177) fare no better. Relator alleges that BSC

“promoted the Express SD Biliary Stent System on its website as a vascular stent,” but then

refers to a statement allegedly found on BSC’s website touting its “Express Vascular SD Stent

System.” (Id. ¶ 166 (emph. added).) Relator’s speculation that this is the same device being

marketed as a “vascular” stent is just that – speculation.44 As for the alleged off-label promotion

by BSC in the journal Endovascular Today, Relator alleges that the launches of certain of BSC’s

biliary stents “were announced” in that publication, (id. ¶ 170, 177) but he does not allege by

42/ See also 3AC ¶¶ 124 (“The other Defendants utilized similar [off-label] training methods.”), 164 (“Relator regularly spoke with sales representatives employed by the other Defendants, all of whom were promoting their biliary stents off-label in a similar manner.”), 165 (“In addition to the sales representatives that Defendants hired to illegally promote the off-label usage, Defendants also paid clinical sales representatives.”), 167 (“Defendants routinely issued press releases about their biliary stent systems that promoted the use of the stents in vascular procedures.”) 210-11 (“Defendants failed to provide” or “downplayed” the “mandatory warning that the safety and effectiveness of this device for use in the vascular system have not been established.”). 43/ See, e.g., 3AC ¶¶ 134 (BSC’s alleged “competing practice building program” designed to increase off-label use of biliary stents by providers), 156 (BSC’s alleged “compensation structures, quotas, and bonuses” designed to incentivize off-label promotion by sales representatives”). 44/ In fact, as his own allegations elsewhere in the 3AC make clear, “Express Vascular SD” is a product that is “available outside [the] US,” (3AC ¶ 172) and Relator does not – and cannot – allege that any product labeled “Express Vascular SD” was used in any procedure for which reimbursement from Medicare or Medicaid was sought.


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whom. That is, Relator does not state whether these were advertisements (by BSC) or simply

industry developments being reported by the journal.45 As the Fifth Circuit held in Grubbs, Rule

9(b) requires allegations of the “circumstances constituting fraud” that “make relief plausible,

not merely conceivable, when taken as true.” Grubbs, 565 F.3d at 186 (citing Twombly, 550 U.S.

544). Relator’s speculative and ambiguous allegations regarding BSC’s alleged “off-label

promotion” on the internet and in vascular journals do not meet this standard.

Finally, the specific allegations of actual conduct by BSC that the Relator is able to

conjure are similarly defective. Relator alleges that he “witnessed” or “observed” BSC

representatives promote the “off-label” use of its biliary stents to two physicians in a Las Vegas-

area hospital in 2004 and to one physician in a DC-area hospital in 2005 (3AC ¶¶ 143, 149), and

“reconcil[e] consignment inventory” of biliary stents in the catheterization labs at these hospitals

(id. ¶¶ 143, 149, 160). But as already noted, the mere fact that an off-label use was discussed

with (or sold to) a provider is not, itself, illegal. See supra n.18. Relator does not – and cannot –

allege that he was party to these interactions, and thus necessarily fails to plead anything about

what message was communicated, and how it was communicated, in these alleged interactions.46

See Grubbs, 565 F.3d at 186 (relator must allege “plausible,” as opposed to merely

“conceivable,” circumstances constituting fraud). Relator also alleges that BSC “sponsored a

peripheral vascular interventional training course,” for which it hired an interventional

45/ If the latter, then they can hardly be deemed to be part of some “off-label promotion scheme” by BSC. 46/ In addition, Relator suggests that the promotion or consignment of biliary stents to “catheterization labs” at hospitals is inappropriate, because “biliary stenting procedures generally are not performed” in these settings. (3AC ¶ 157.) Relator does not allege, however, that, biliary procedures were not performed at any of the catheterization labs to which he alleges that BSC consigned its biliary stents. Moreover, the lab technicians and hospitals themselves do not determine whether a device will be used for a particular procedure; that decision is always the physician’s. Thus, BSC’s alleged marketing of its biliary stents to catheterization labs where biliary procedures may or may not have been performed, by physicians who may or may not have decided to use biliary stents for those or any other off-label procedures, cannot amount, as a matter of law, to an allegation that BSC caused providers to submit “false” claims for off-label uses.


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cardiologist to demonstrate the use of its biliary stents off-label as a “pretext for disclaiming any

off-label marketing by the company,” (3AC ¶ 150) but Relator pleads no basis whatsoever for his

allegation that BSC’s hiring of a physician to teach the course was “mere[] pretext[].” Absent

such a basis, this allegation is just like the rest – pure speculation that fails to satisfy Rule 9(b).

2. Relator Fails to Plead Reliable Indicia That Lead to the Strong Inference that False Claims Were Actually Submitted.

In any event, Relator’s section 3729(a)(1) claims must fail under 9(b), because he fails to

plead “reliable indicia that lead to a strong inference that claims” for reimbursement for the off-

label use of BSC’s devices “were actually submitted.” Grubbs, 565 F.3d at 190.

Although there has been little development in the case law as to what constitute such

“reliable indicia,” the court in Grubbs held that the “dates and descriptions of recorded, but

unprovided [and therefore fraudulent], services and a description of the billing system that the

[fraudulent] records were likely entered into” amounted to such reliable indicia in the

circumstances before it. Id. at 191. The allegations found sufficient in Grubbs are nothing like

Relator’s raw speculation in this case. More apt are the circumstances confronting the Eleventh

Circuit in Hopper v. Solvay Pharmaceuticals, Inc., 588 F.3d 1318 (11th Cir. 2009). There, the

court confronted allegations – similar to those presented here – of an extensive off-label

marketing scheme by the defendant “for the purpose of inducing physicians to prescribe

[defendant’s product] for uses not approved by the FDA” and not covered by Medicare, id. at

1323, and analyzed whether “some indicia of reliability” supported the allegation that a false

claim was actually submitted to the government as a result of the defendant’s conduct, id. at

1325 (citation omitted). The court concluded that there were not, because the complaint failed to

“identify a single physician who wrote a prescription with . . . knowledge [that its cost would be

borne by the government], . . . a single pharmacist who filled such a prescription, . . . [or] a


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single state healthcare program that submitted a claim for reimbursement to the federal

government.” Id. at 1326.47

Here, the flaws in the 3AC are identical to those of the complaint in Hopper. Relator

fails to identify a single provider who used a BSC device off-label with the knowledge that its

costs would be borne by the government, or even a single instance in which a BSC device was

used off-label at all. Rather than provide reliable indicia that false claims were submitted, the

3AC simply “piles inference upon inference to suggest that [BSC’s] marketing campaign

influenced some unknown parties to file false claims.” Hopper, 588 F.3d at 1326; see also Rost,

507 F.3d. at 733 (holding that the complaint did “not give notice to [the defendant] of false

claims submitted by others for federal reimbursement of off-label uses, only of illegal practices

in promotion of the drug”); Polansky, 2009 WL 1456582, at *5 (complaint failed to satisfy Rule

9(b) where it had not “identified any false claims or physicians who were induced to write a

prescription for an off-label use”). Accordingly, Relator’s section 3729(a)(1) claims against

BSC should be dismissed under Rule 9(b).

B. Relator’s Section 3729(a)(2) Claims are Not Pled with Particularity as to BSC.

Just as Relator’s section 3729(a)(1) claims against BSC fail under Rule 9(b), so too do his

claims under section 3729(a)(2).

Section 3729(a)(2) imposes liability on “any person who . . . knowingly makes, uses, or

causes to be made or used, a false record or statement to get a false or fraudulent claim paid or

47/ Compare Duxbury, 579 F.3d at 29-30 (noting that whether FCA complaint met Rule 9(b) was “a close call,” but finding allegations sufficient under a “more flexible” standard because the relator identified specific hospitals that submitted false claims along with “the dates and amounts of the false claims filed by these providers with the Medicare program”); United States ex rel. Gonzalez v. Fresenius Med. Care N. Am., No. EP-07-CV-247, 2008 WL 4277150, at *5 (W.D. Tex. Sept. 2, 2008) (denying motion to dismiss allegations providing names of physicians perpetrating fraud, “the number of instances” of fraudulent services, “exact dates,” the “medical histories” of relevant patients, “the number of claims submitted,” “the number of payments fraudulently obtained,” and “how and by whom false records were generated”).


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approved by the Government.” 31 U.S.C. § 3729(a)(2) (2007).48 Liability under this section

arises only where the defendant intended “that the false record or statement be material to the

Government’s decision to pay or approve [a] false claim.” Allison Engine Co. v. United States

ex rel. Sanders, 128 S.Ct. 2123, 2126 (2008). Thus, “[i]t is insufficient for a plaintiff to show

merely that ‘a false statement resulted in the use of Government funds to pay a false or

fraudulent claim.’” Hopper, 588 F.3d at 1330 (quoting Allison Engine, 128 S.Ct. at 2128).

Instead, the relator must “allege that the defendants intended for the government to rely on their

false statements in deciding whether to pay a false claim.” Id. (emph. added).

Here, Relator has alleged that BSC made “material false statements and certifications” in

its 510(k) clearance notifications (see 3AC ¶¶ 302-328), and that these “false statements were

material to the decision of the United States to clear, and subsequently pay for,” BSC’s biliary

stents.49 (Id. ¶ 334.) However, these conclusory allegations fail to meet the pleading standard of

Rule 9(b), because Relator has failed to allege how BSC’s allegedly false 510(k) clearance

notifications are material to any reimbursement decision by Medicare. See Rafizdeh, 553 F.3d at

874 (affirming dismissal of section 3729(a)(2) claims under Rule 9(b) because, inter alia, relator

failed to allege “‘how’ [the alleged false statement] was used to get government funds”). Under

Relator’s theory of the case, BSC’s false statements in its 510(k) notifications could not have

been “material” to Medicare’s decision to pay any claim for reimbursement for use of BSC’s

biliary stents in the vasculature, because it was the devices’ 510(k) clearances themselves that

48/ As with section 3729(a)(1), section 3729(a)(2) was recently modified, see 31 U.S.C. § 3729(a)(1)(B) (“knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim”), and Relator asserts claims under this revised section 3729(a)(1)(B) “for violations on or after June 7, 2008.” (3AC ¶¶ 337-345.) These modifications are not material to the analysis above. 49/ Relator also alleges that the “[d]efendants prepared reimbursement guidelines to provide false coding and reimbursement information to” providers (3AC ¶ 192), but as already discussed, Relator fails to allege that BSC specifically engaged in such conduct. See supra § III.A.1. These allegations clearly fail to plead any false statements by BSC with the particularity required by Rule 9(b).


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were ostensibly being concealed from Medicare so that the reimbursement claims would be paid.

(See, e.g., id. ¶ 6 (alleging that Medicare coverage for placement of vascular stents “was

restricted to FDA premarket approved vascular stents, not investigational biliary stents marketed

off-label for an unapproved intended use”).) In other words, Relator has alleged that (1) BSC

made false statements to the FDA in order to get its devices cleared under section 510(k) as

biliary stents, and (2) providers submitted claims for reimbursement to Medicare that concealed

the regulatory status of the devices being used. Under these circumstances, far from being

“material,” BSC’s alleged false statements could not have “play[ed] any role in the government’s

decision to reimburse.” Hopper, 588 F.3d at 1331. Accordingly, Relator’s section 3729(a)(2)

claims against BSC must fail.

C. Relator’s Anti-Kickback Statute Allegations Are Not Pled with Particularity as to BSC

Finally, Relator’s barebones AKS allegations are not pled with particularity as to BSC.

“The Medicare anti-kickback statute prohibits (1) the solicitation or receipt of

remuneration in return for referrals of Medicare patients, and (2) the offer or payment of

remuneration to induce such referrals.” Thompson, 125 F.3d at 901 (citing 42 U.S.C. § 1320a-

7b(b)). Claims for violation of the AKS, however, do not give rise to a violation of the FCA

unless the government’s payment of a claim “is conditioned upon certification of compliance”

with the AKS, and such certification is provided falsely. Id. at 902. Moreover, both the

circumstances of the AKS violation, see United States ex rel. Foster v. Bristol-Myers Squibb Co.,

587 F. Supp. 2d 805, 823-24 (E.D Tex. 2008), and of the false certification, see United States ex

rel. Smart v. Christus Health 626 F. Supp. 2d 647, 657 (S.D. Tex 2008), must be pled with

particularity under Rule 9(b). Relator’s AKS allegations against BSC fail to meet this standard.

Relator’s lone AKS allegation against BSC is derived from third-hand statements that


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BSC was “paying” a physician certain funds for his vascular fellowship program and for each

peripheral training course he conducted, and that “if Defendant Guidant wanted [this physician’s]

business, so would they.” (3AC ¶ 188.) Even setting aside the double hearsay of this allegation,

it does not even plead a violation of the AKS. “A medical device company’s funding of research

and training is not per se illegal.” United States ex rel. Laucirica v. Stryker Corp., No. 1:09-CV-

63, 2010 WL 1798321, at *5 (W.D. Mich. May 3, 2010). Here, Relator fails to allege that any

“payments” from BSC to this physician were made “in return for,” or “to induce,” anything at all,

much less the “referrals of Medicare patients” required by the statute. Thompson, 125 F.3d at

901. Nor has Relator alleged that these supposed “payments” actually caused the physician to

use BSC products over those of competitors in Medicare or Medicaid patients. See Foster, 587 F.

Supp. 2d at 824 (AKS claims dismissed under Rule 9(b) where relator “provide[d] no factual

support or explanation for his belief that kickbacks induced doctors to prescribe BMS drugs”).

As in Foster, “without information to suggest that kickbacks induced any recommendations

connected to federal healthcare patients,” the AKS claim “is simply an unsubstantiated allegation,

which the Court is not required to accept.” Id.50

IV. Relator’s State FCA Claims Should Be Dismissed

For all of the reasons requiring dismissal of Relator’s federal FCA claims, Relator’s state

FCA claims should also be dismissed. In the alternative, should the Court dismiss Relator’s

federal FCA claims on other than jurisdictional grounds, it should follow the “general rule” in

the Fifth Circuit “to decline to exercise jurisdiction over pendent state law claims” and dismiss

the state law claims on those grounds. Foster, 587 F. Supp. 2d at 828; see United States ex rel. 50/ Relator also fails to plead with particularity the submission of any false certifications of compliance with the AKS – the only mechanism by which an AKS violation could be actionable under the FCA. Relator fails to identify a single hospital or provider submitting any such false certification, when such certification was submitted, what the contents of the certification were, and why the certification was false at the time it was submitted. See Smart, 626 F. Supp. 2d at 657. This failure, alone, is grounds for dismissal of this claim under Rule 9(b).


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Westerfield v. Univ. of San Francisco, No. C 04-03440 JSW, 2006 WL 2884331, at *6 (N.D. Cal.

Oct. 10, 2006) (court may not exercise pendant jurisdiction where federal claims were dismissed

for lack of jurisdiction). In addition, Relator’s state law claims should be dismissed for

independent reasons. (See generally Abbott Mem. § IV.)

CONCLUSION

The operative complaint is Relator’s fourth attempt to plead claims under the FCA based

on misconduct he claims to have witnessed over four years ago as an employee of Guidant.

Relator has “had more than ample opportunity to plead [his] best claim against” BSC, and

“further amendment” – almost certainly futile, given the unlikelihood that Relator will develop

new information from his employment at Guidant half a decade ago – “will unnecessarily delay

disposition of this action, which has been pending for almost four years.” United States ex rel.

Becker v. Tools & Metals, Inc., Civ. Action Nos. 3:05-CV-0627-L, 3:05-CV-2301-L, 2009 WL

855651, at *11 (N.D. Tex. Mar. 31, 2009). For all of the foregoing reasons, and pursuant to

Rules 9(b), 12(b)(1), and 12(b)(6) of the Federal Rules of Civil Procedure, the Court should grant

BSC’s Motion to Dismiss and dismiss Relator’s claims with prejudice.

Dated: July 16, 2010 Respectfully Submitted,

/s/ Wayne B. Mason . Wayne B. Mason Joseph P. Griffith SEDGWICK, DETERT, MORAN & ARNOLD LLP 1717 Main Street Suite 5400 Dallas, Texas 75201-7367 Tel: (469) 227-8200 Fax: (469) 227-8004


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Stephen J. Immelt (pro hac vice) Andrea W. Trento (pro hac vice) HOGAN LOVELLS US LLP Harbor East 100 International Drive Suite 2000 Baltimore, MD 21202 Tel: (410) 659-2700 Fax: (410) 659-2701 Mitchell J. Lazris (pro hac vice) HOGAN LOVELLS US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 Tel: (202) 637-5600 Fax: (202) 637-5910 Counsel for Defendant Boston Scientific Corp.


united states district court for the northern ...\\\ba - 066785/000044 - 284693 v1 united states...

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