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Federal appeals court rules Medtronic whistleblower suit should proceed

Jim Spencer and Joe Carlson, Star Tribune on

Published in Business News

A federal appeals court has ruled that Medtronic can be sued for allegedly defrauding the U.S. Food and Administration in a long-running dispute over whether the medical device maker deceived regulators to avoid costly safety studies.

According to a federal whistleblower lawsuit filed in California by former Medtronic sales representative Bryan Shapiro, the device maker purposely misled FDA reviewers to believe several "Verte-Stack" branded vertebral-replacement devices are designed for use in the lower spine.

The lawsuit, which Medtronic calls "baseless," says the Minnesota-run medical device company got the FDA to label the devices "contraindicated" for the upper spine, which means they should not be used there. In reality, Shapiro said, the devices were designed for and only usable in the upper spine, where vertebrae are smaller.

Getting the Verte-Stack "vertebral body replacement" devices cleared for use in the lower spine allowed Medtronic to save millions of dollars and months, if not years, of testing to bring a lucrative spine surgery device to market quickly, the suit alleges. Medicare and Medicaid have paid millions for the devices to be used in patients.

On Friday, the Ninth U.S. Circuit Court of Appeals ruled that the Dan Abrams Company — a one-person corporation controlled solely by Shapiro — can sue Medtronic on behalf of the federal and state programs using a "fraud on the FDA" theory of liability under the False Claims Act.

Medtronic lawyers say there's nothing unusual about medical devices being labeled for one purpose and then used for something else — a common practice called "off label" use. The FDA generally doesn't prohibit off-label use, and it's not illegal for Medicare and Medicaid to pay for off-label uses.

Medtronic declined to say whether it plans to appeal. It's not clear whether the appeal deadline is 30 days or some other period of time.

"We are confident in the merits of our case and intend to defend ourselves vigorously against the baseless allegations," Medtronic spokesman Ben Petok said in an e-mail.

The case against Medtronic, filed in 2015, has been dismissed three times by the lower courts, with allowances to refile each time. In 2019, Medtronic attorneys convinced a federal district court judge in California to dismiss the "fraud on the FDA" argument on technical grounds in the third amended lawsuit.

On Friday, a three-judge panel of the Ninth U.S. Circuit Court reversed that decision and sent the question back to the trial court. The appeals judges did not revive Shapiro's other claims, including one alleging kickbacks to doctors.

"We are pleased that the Ninth Circuit Court of Appeals has largely affirmed the lower court's decision to dismiss these claims," the Medtronic spokesman's statement said.

Brooks Cutter, one of the plaintiff's lawyers, said he welcomed an opportunity to try the remaining fraud-on-the-FDA charge on its merits.

 

If Medtronic chooses not to appeal, Cutter said, "it give us an opportunity to enter into discovery. I look forward to seeing the internal e-mails and other communications that explain why Medtronic manufactured a device that can't be used where they say it goes, while telling the FDA it was 'contraindicated' for the only place where it works."

The distinction between off-label use and contraindicated use is central to the Ninth Circuit decision. The appeals judges ruled that Shapiro could not sue Medtronic for profiting from a wide range of different spine-replacement devices that were used off-label.

But the judges saw contraindicated devices differently. According to Shapiro, three specific Verte-Stack vertebral replacement devices could only be used for their contraindicated purpose in the upper spine, because of their shape and size.

"Medtronic's alleged fraud went to the 'very essence of the bargain,' " the three-judge panel wrote, summarizing the allegations. "Contraindicated-only Devices were not properly cleared for any use. They cannot be used for their labeled intended use ... and they can only be used for their contraindicated use."

Medtronic attorneys note the lawsuit never explains how the company purportedly "tricked" expert FDA reviewers into approving an upper-spine device for a lower-spine and mid-spine application, despite alleging that any such differences would be obvious from the size and shape of the device.

Medtronic lawyers do not dispute that no Verte-Stack device is indicated for use in the upper spine, and that the device label says use in the upper-spine is a "contraindication."

Surgeries on the upper spine bones, known as cervical vertebrae, are more risky than those lower in the spine because of the risk of paralysis and airway compromise in the neck.

The lawsuit contends that the device was specifically designed for the neck area of the spine and was too small, and curved wrongly, to work in the middle and lower spine. The spine has a natural s-shaped curve, and the vertebrae get larger the lower down they are in the back.

The lawsuit contends that if Medtronic had applied for FDA approval of its vertebra-replacement devices in the upper spine, that would have required an expensive, time-consuming testing regimen. Instead, Medtronic said the device was "substantially similar" to spine products already cleared for use in the middle and lower spine.

Cutter said convincing a jury that Medtronic deceived regulators in order to enrich itself would be an important legal win for patient-advocates who have long complained device companies routinely abuse the "substantially equivalent" device-clearance process to save on expenses in ways that put patients at risk. About 80% of the devices allowed on the market by FDA use that process, also known as the 510(k) program.

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