United States District Court, D. Massachusetts
UNITED STATES OF AMERICA et al.
DEPUY ORTHOPAEDICS, INC., DEPUY, INC., and JOHNSON & JOHNSON SERVICES, INC., Defendants. ex rel. ANTONI NARGOL and DAVID LANGTON, Plaintiffs,
MEMORANDUM AND ORDER ON MOTION TO DISMISS
F. DENNIS SAYLOR, IV, District Judge.
This is a qui tam action alleging the submission of false claims to government health-care programs for a defective hip-replacement device. Relators Dr. Antoni Nargol and Dr. David Langton, who are expert witnesses in a related products-liability case involving the same device, have brought suit against defendants DePuy Orthopaedics, Inc., DePuy, Inc., and Johnson & Johnson Services, Inc. DePuy manufactured and sold, among other hip-replacement devices, the Pinnacle metal-on-metal total hip-replacement device ("Pinnacle MoM"). The second amended complaint alleges that DePuy directly submitted and indirectly caused third parties to submit false claims for payments to government health-care programs for the Pinnacle MoM. According to the second amended complaint, the claims were false because DePuy made numerous misrepresentations to the FDA and surgeons concerning, among other things, the Pinnacle MoM's failure rates.
The relators filed the original complaint in this action under seal on May 18, 2012. On December 2, 2013, the relators filed a first amended complaint. The government declined to intervene on July 29, 2014. On June 5, 2015, the Court granted the relators' request to file a second amended complaint ("SAC"). Although the 168-page SAC alleges that DePuy made numerous misrepresentations about two of their devices-the ASR device and the Pinnacle MoM device-the specific counts in the SAC seek damages only as to the latter device. The SAC alleges claims of (1) causing false or fraudulent claims for payment to be presented to the United States in violation of 31 U.S.C. § 3729(a)(1)(A) (Count One); (2) knowingly making, using, or causing to be made or used false records or statements material to a false or fraudulent claim paid by the United States in violation of 31 U.S.C. § 3729(a)(1)(B) (Count Two); (3) conspiracy to violate the FCA in violation of 31 U.S.C. § 3729(a)(1)(C) (Count Three); and (4) violations of various state and municipal analogues to the Federal FCA (Counts Four through Thirty-Seven).
DePuy has moved to dismiss the SAC under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted and under Fed.R.Civ.P. 9(b) for failure to satisfy the heightened pleading requirements for fraud. The relators have since moved to unseal the SAC, and DePuy has assented to that motion while requesting that documents concerning the motion to dismiss also be unsealed. Finally, while they have not formally filed a motion to amend the SAC, the relators contend in the conclusion of their opposition memorandum, sur-reply, and a post-hearing supplemental filing that they should be granted leave to amend and file a third amended complaint.
The essence of a False Claims Act violation is making, or causing the making, of one or more false claims-that is, claims for payment-against the United States. The statute provides large awards to qui tam relators as an incentive to bring such cases. The prospect of such an award may also, however, provide an incentive for individuals to try to convert virtually any set of allegations arising out of a defective product or faulty service into an FCA case. That is particularly true in the medical field, where the government purchases medical supplies and services on a large scale through Medicare, Medicaid, the VA, and other health-care programs. Normally, it requires no great leap of logic to conclude that if a medical device or a pharmaceutical is defective, the government must have purchased that product in great quantities, and therefore the manufacturer must have caused, directly or indirectly, the submission of false claims.
In order to avoid so-called "parasitic" claims, and to try to guard against misuse of the FCA, the First Circuit has construed the statute fairly strictly. In doing so, the court has emphasized that the statute "attaches liability, not to the underlying fraudulent activity or to the government's wrongful payment, but to the claim for payment." United States v. Rivera, 55 F.3d 703, 709 (1st Cir. 1995). Among other things, FCA complaints must satisfy the particularity requirements of Fed.R.Civ.P. 9(b). The law requires relatively specific allegations of false claims, rather than generalized allegations based on supposition and logic; the relator must set forth with particularity the "who, what, when, where, and how" of actual claims that are alleged to be false. United States ex rel. Ge v. Takeda Pharm. Co., 737 F.3d 116, 123 (1st Cir. 2013).
Here, the SAC includes hundreds of paragraphs of allegations, covering dozens of pages, of claimed fraudulent activity by DePuy. That satisfies one of the components of an FCA claim, but it does not satisfy them all. As set forth below, the allegations as to specific claims for payment for the specific device actually at issue in this case are sparse indeed. For that reason, and the other reasons set forth below, DePuy's motion to dismiss will be granted.
The relators' request for leave to amend the SAC and file a third amended complaint will be denied. The present case is nearly four years old, has had three iterations of the complaint, and has seen the desks of three judges in this district. The relators have had ample opportunity to file a complaint that complies with the requirements of Rule 9(b), and have failed to do so. Finally, the parties' motions to unseal the SAC and other filings related to the motion to dismiss will be granted.
The facts summarized below are set forth in the SAC unless otherwise noted.
A. Factual Background
1. The Parties
Relator Dr. Antoni Nargol is an orthopedic surgeon residing in the United Kingdom. (SAC ¶ 63). In 2003 he became one of the earliest British adopters of the Pinnacle MoM device, and DePuy invited him to be on its "Pinnacle user group team." (SAC ¶ 66). Dr. Nargol served as a testifying expert for the plaintiffs in Strum v. DePuy Orthopaedics, Inc. and Premier Orthopaedic Sales, Inc., No. 2011 L 009352 2404 (Cook Cty., Ill., Cir. Ct.) (" Strum litigation"). (SAC ¶ 68). Dr. Nargol also provided expert assistance to the plaintiffs' executive committee in Kransky v. DePuy, Inc., No. BC 456086 (Cal. Sup.Ct.), in which the plaintiffs' allegations focused on perceived design defects in the "ASR, " a device that is similar to the one at issue in this case, the Pinnacle MoM. (SAC ¶ 68). Dr. Nargol also served as a fact witness in Herlihy-Paoli v. DePuy Orthopaedics, Inc., No. 3:11-CV-04975-K (N.D. Tex.) (" Herlihy-Paoli litigation"). (SAC ¶ 68).
Relator Dr. David Langton is an orthopedic surgeon residing in the United Kingdom. (SAC ¶ 69). Dr. Langton has performed research on failed hip-replacement surgeries and devices, including the Pinnacle MoM device. (SAC ¶ 70). The United States Food and Drug Administration ("FDA") has retained Dr. Langton as a consultant regarding "failure rates and dimensions of MoM products sold in the United States, including the Pinnacle." (SAC ¶ 72). Dr. Langton served as an expert witness in the Strum litigation and as a fact witness in the Herlihy-Paoli litigation. (SAC ¶ 72). According to the SAC, both the relators had personal experience in implanting the Pinnacle MoM device in their patients and began to alert defendants of the device's defects in 2009. (SAC ¶ 24).
Defendant DePuy Orthopaedics, Inc. is a designer, manufacturer, and distributor of orthopedic products that is based in Warsaw, Indiana. (SAC ¶ 73). DePuy Orthopaedics manufactured the Pinnacle MoM device. (SAC ¶ 73). DePuy Orthopaedics is a wholly-owned subsidiary of Delaware-based DePuy, Inc., which in turn is a subsidiary of New Jersey-based Johnson & Johnson Services, Inc. (SAC ¶¶ 75-77).
2. Government Health-Care Programs
Medicare is a health-insurance program administered by the United States Department of Health and Human Services ("HHS"). (SAC ¶ 85). Medicare provides payment for, among other things, medical services and equipment to persons over 65 years of age and those who are 18 years of age or older and are eligible for disability benefits. (SAC ¶ 82). For inpatient treatment, Medicare reimburses hospitals and other treating facilities through Medicare Part A. (SAC ¶ 83). For outpatient treatment, Medicare reimburses physicians and health-care providers through Medicare Part B. (SAC ¶ 83).
Under the Medicare program, "no payment may be made under Part A or Part B for any expenses incurred for items or services which... are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of the malformed body member." (SAC ¶ 84) (citing 42 U.S.C. § 1395y(a)(l)(A)). To satisfy that standard, providers must provide, among other things, economical medical services, along with evidence that the service will be of a quality that meets professionally recognized standards of healthcare and will be supported by evidence of medical necessity and quality. (SAC ¶ 84) (citing 42 U.S.C. § 1320c-5(a)(1-3)). The SAC alleges that Medicare reimbursed qualified individuals for the purchase of the Pinnacle MoM device and the surgical procedures necessary to implant the device. (SAC ¶ 99).
Medicaid is a health-insurance program administered by HHS jointly with agencies in each state. (SAC ¶ 100). It is designed to assist states in providing medical services, medical equipment, and prescription drugs for low-income persons who qualify for the program. (SAC ¶ 100). The SAC alleges that Medicaid, like Medicare, reimbursed qualified individuals for the purchases of the Pinnacle MoM device and the surgical procedures necessary to implant the device. (SAC ¶ 104).
The United States Department of Veterans Affairs ("VA") provides medical assistance, including comprehensive coverage for hip replacement, to military veterans. (SAC ¶ 105). The SAC alleges that DePuy "sold its Pinnacle hip implants directly to the VA." (SAC ¶ 106). The National Contract Service ("NCS)" provides the VA with acquisition support for medical equipment and pharmaceuticals. (SAC ¶ 112). According to the SAC, "NCS is also responsible for national committed-use contracts and standardized blanket purchase agreements established against the Federal Supply Schedule Program." (SAC ¶ 112). Medical equipment and supplies contracts are governed by the Federal Supply Schedule Group 65 Part II Section A. (SAC ¶ 115). That contract states that a "[c]ontractor warrants and implies that the items delivered hereunder are merchantable and fit for use of the particular purpose described in this contract, " and that "[a]ll offerors must be in compliance with Section 510(k) of the Federal Food, Drug, and Cosmetic Act for those medical device products intended to be delivered to the Government." (SAC ¶¶ 116-17). The 65 II A contract also requires the contractor to notify the Assistant Director of the National Acquisition Center and various other officials if it sells a VA facility a product that "(1) requires modification, (2) is removed or recalled by the contractor or manufacturer due to defects in the product or potential dangers to patients, or (3) is subject to a suggested or mandatory modification, removal, or recall by a regulatory or official agency." (SAC ¶ 120).
The Civilian Health and Medical Program of the United States, now known as TRICARE, provides benefits for health-care services furnished to members of the U.S. military and their family members. (SAC ¶ 124). TRICARE pays for medical devices and surgeries for its beneficiaries, including total hip-replacement devices like the Pinnacle MoM. (SAC ¶ 125).
3. FDA Regulations Governing Medical Devices
The SAC contains significant detail concerning the FDA regulations governing medical devices that need not be fully detailed here. ( See generally SAC ¶¶ 127-66). The FDA, which protects and promotes the public health through regulation of medical devices and pharmaceuticals, has three risk-based regulatory classifications for medical devices. (SAC ¶¶ 127-28). The Pinnacle MoM device was a Class III device and subject to the most stringent level of regulation imposed by the FDA. (SAC ¶¶ 129-30). There are only two ways by which a manufacturer can seek FDA approval for a new Class III medical device: the premarket approval ("PMA") process and the "510(k)" clearance process. (SAC ¶ 131). The "more onerous" PMA process requires, among other things, a full report of all information known to the manufacturer concerning investigations into the device's safety. (SAC ¶ 131). In contrast, under the 510(k) process, the manufacturer is required to demonstrate only that the device is "substantially equivalent in terms of safety and effectiveness to an existing FDA-approved device." (SAC ¶ 131) (citing 21 C.F.R. § 807.92(a)(3)). A device is substantially equivalent if, when comparing it to the predicate, it has both the same intended use and the same technological characteristics as the predicate. (SAC ¶ 133). A device with different technological characteristics can be considered substantially equivalent only if the information submitted to the FDA does not raise new questions of safety and demonstrates that the device is at least as safe and effective as the predicate device. (SAC ¶ 133).
4. The Pinnacle MoM Device
Before the alleged defects in DePuy's Pinnacle MoM device came to light, another DePuy hip-replacement device, the ASR, suffered from alleged defects and was the subject of many products-liability lawsuits. (SAC ¶¶ 56-57). Those actions were ultimately the subject of an MDL proceeding in the Northern District of Ohio. (SAC ¶¶ 56-57). The SAC includes numerous references to ASR defects and allegedly fraudulent behavior by DePuy in connection with that device. ( See, e.g., SAC ¶¶ 15, 24, 31-33, 35, 37-39, 42, 45, 47, 54-58, 64-66, 68, 71-72, 130, 184, 189, 190-91, 199, 238, 246, 262, 327). Those allegations, however, are not particularly relevant to the relators' claims in this case, which is solely focused on the Pinnacle device-and more specifically, the Pinnacle MoM device comprised of a metal head and metal liner, as explained below.
Hip-replacement devices replace the bone components of a hip joint, including the ball (femoral head) and socket (acetabulum). (SAC ¶¶ 167-69). A hip-replacement device generally includes four components: (1) a femoral stem; (2) a femoral head; (3) an acetabular cup; and (4) a liner that fits inside the cup and interacts with the head. (SAC ¶ 170). In metal-on-metal hip-replacement devices, the head, cup, and liner are all metal; MoM devices are expected to last longer than devices comprised of ceramic or polyethylene. (SAC ¶ 169). The space between the head and cup is referred to as "diametrical clearance." (SAC ¶ 179). Bodily fluid fills in the diametrical clearance between the head and cup to prevent friction and wear caused by the two pieces rubbing together. (SAC ¶ 180).
Under the brand of "DePuy Orthopaedics Pinnacle Hip Solutions, " DePuy marketed three head-on-liner categories of Pinnacle devices: "metal-on-metal, ceramic-on-polyethylene, and metal-on-polyethylene." (SAC ¶ 176; Def. Mem. Ex. C at 5). DePuy offered three types of Pinnacle heads: (1) aSphere M-Spec and M-Spec (both metal); (2) Standard Metal (metal); and (3) BIOLOX delta (ceramic). (Def. Mem. Ex. C at 3). DePuy offered three types of Pinnacle liners: (1) Ultamet and Ultamet XL (both metal); (2) Marathon (polyethylene); and (3) AltrX (polyethylene). (Def. Mem. Ex. C at 3). The Standard Metal head was not compatible with Pinnacle metal liners; it could be used only with polyethylene liners. ( Compare Def. Mem. Ex. C at 8, with Def. Mem. Ex. C at 10, 16). Thus, there was one combination of Pinnacle components that combined to create a Pinnacle MoM device: an aSphere M-Spec or M-Spec metal head with an Ultamet or Ultamet XL metal liner. (SAC ¶ 176; Def. Mem. Ex. C at 3). The Pinnacle device-consisting of a head, cup, and liner-could be used with a variety of separate DePuy femoral stems, including the CORAIL stem, the SUMMIT stem, the AML stem, the TRI-LOCK stem, and the S-ROM stem. ( See Def. Mem. Ex. D at 29). But those stems were not part of the Pinnacle MoM device, as they could be used with other DePuy hip-replacement devices, such as the ASR. ( Id. ).
As alleged in Counts One through Thirty-Seven of the SAC, the relators seek recovery under 31 U.S.C. § 3729(a)(1)(A)-(C) for claims involving only DePuy's Pinnacle MoM device (which must use an M-Spec head and an Ultamet liner).
On December 13, 2000, the FDA approved the Pinnacle Ultamet 36mm metal liner as part of the 510(k) approval process, based on "substantial equivalence with the DePuy Ultima Unipolar Adapter Sleeves ("Ultima"), cited as the Ultamet's predicate device." (SAC ¶ 177). The diametrical clearance set forth in the Ultamet's 510(k) application was in the "40-80 micron tolerance band." (SAC ¶ 181). According to the SAC, DePuy purposely manufactured the Pinnacle MoM device with a lower diametrical clearance than other devices. (SAC ¶ 183). It marketed the Pinnacle MoM's lower diametrical clearance under the theory that as diametrical clearance decreases, the volume of fluid lubricating the joint increases. (SAC ¶ 183). The SAC alleges that when diametrical clearance is small, "the consequences of any deformation of the cup, even if slight, are dire for the patient." (SAC ¶ 183). When DePuy added the 36mm Ultamet liner to its Pinnacle product line in 2005, DePuy advised the FDA that the diametrical clearance dimension was not 40-80 microns, but was in fact 80-120 microns. (SAC ¶ 186). The SAC alleges that the FDA, upon learning of the inaccuracy, "specifically advised DePuy that, had it known that the 36mm liner's dimensions were not as DePuy had represented, the device would not have been granted a substantial equivalence' waiver.... Instead, DePuy would have had to make a full application for PMA." (SAC ¶ 187).
5. DePuy's Allegedly Fraudulent Acts Involving the Pinnacle Device
The relators allegedly learned of the defects in the ASR and Pinnacle MoM devices through their own work with the hip implants. (SAC ¶¶ 24, 47). They began reporting those defects to DePuy in 2007, and continued to do so through 2011. (SAC ¶¶ 24, 47). Those defects included (1) surface wear resulting in metal ion exposure causing patient necrosis (tissue death), metallosis (metallic staining of tissues), and osteolysis (degradation of the bone) (SAC ¶ 29); (2) "diametrical clearance" and "taper trunnion" defects causing high device-failure rates (SAC ¶ 42); and (3) femoral neck fractures at high rates. (SAC ¶ 45).
The SAC includes nearly fifty pages detailing DePuy's allegedly fraudulent actions in concealing those defects while pursuing FDA approval for the Pinnacle MoM device, marketing the device to surgeons, and selling the device to government health-care programs. ( See generally SAC ¶¶ 201-412). The Court will not detail every allegation of DePuy's claimed improper conduct, many of which are irrelevant to the Pinnacle MoM device and the present FCA claims. The Court will, however, attempt to summarize the allegations, which fall into two broad categories.
First, the SAC alleges that DePuy knowingly made material false statements and omissions to the FDA and to medical providers about the "specifications, manufacturing process, safety, and failure rates" of its Pinnacle MoM device. (SAC ¶ 201). Those false statements, according to the SAC, "armed and induced surgeons to make similar certifications when seeking reimbursement from the [g]overnment" and "had a natural tendency to influence the [g]overnment's payment for the Pinnacle devices." (SAC ¶ 203). The SAC identifies nine subcategories of materially false statements that DePuy made to the FDA and surgeons. The SAC alleges that but for those false statements, the FDA would not have approved the device and "surgeons would not have utilized Pinnacle hip replacements or certified them to government health programs as reasonable and medically necessary." (SAC ¶ 256).
1. The SAC alleges that "in official communications with the FDA, DePuy falsely represented that Pinnacle implants had a 96 percent to 96.5 percent success rate." (SAC ¶ 204). Specifically, it alleges that on June 27, 2012, a DePuy director gave a presentation to the FDA's Orthopedic and Rehabilitation Devices Panel of the Medical Devices Advisory Committee. (SAC ¶ 205). The purpose of that meeting was to "seek expert scientific and clinical opinion on the risks and benefits of these types of devices based on available scientific data." (SAC ¶ 205). At the meeting, the DePuy director told the panel that "Ultamet metal-onmetal articulation is performing consistent with or better than other metal-onmetal products: 4 to 4.5 percent cumulative revision rate at five years, regardless of head size." (SAC ¶ 206). According to the SAC, as of February 29, 2012, DePuy's own internal database showed that "metal Pinnacle hips" had a cumulative revision rate of 15 percent after five years of use. (SAC ¶ 207). The SAC alleges that "had DePuy truthfully stated its internal results indicating a 15 percent revision rate at five years, the FDA would likely not have continued to clear the product for the market... [and] the government would likely have discontinued use of the Pinnacle device for government health-care recipients." (SAC ¶ 210). When the FDA approved the Pinnacle for implantation in patients, the FDA stated "[i]t is, however, [DePuy's] responsibility to determine if the change [or] modification to the device or its labeling could significantly affect the device's safety or effectiveness and thus require submission of a new 510(k)." (SAC ¶ 211).
2. The SAC alleges that "DePuy made false statements to surgeons claiming that Pinnacle boasted a 99.9 percent success rate" and that those statements caused surgeons to submit false claims to the government. (SAC ¶ 212). Specifically, it alleges that DePuy began circulating marketing materials in 2007 that touted a 99.9 percent success rate for "Pinnacle products" based on data and research that was "conducted and written up by DePuy itself and funneled to a third-party author to create the appearance of impartiality." (SAC ¶¶ 212-13). It alleges that DePuy continued to advertise this false figure until 2013, even though its internal data showed a 15 percent cumulative revision rate as early as February 29, 2012. (SAC ¶¶ 228-29).
3. The SAC alleges that DePuy made false statements to surgeons "claim[ing] that the Pinnacle device's low diametrical clearances created a benefit to patients that distinguished the devices from competing products." (SAC ¶ 233). Beginning in early 2010, the relators conducted research on a "large volume of failed Pinnacle... implants" and concluded that the device suffered from a "diametrical clearance defect" such that "the diametrical clearance of the  device was considerably lower than the specification required by the FDA." (SAC ¶ 238). After the research, the relators repeatedly alerted DePuy executives about the improper clearances. (SAC ¶¶ 245-48). DePuy, in apparently undated marketing materials to surgeons, touted that the Pinnacle's "cup-to-head bearing clearance, enhances the potential for fluid lubrication and minimizes wear to maximize survivorship." (SAC ¶ 250). According to the SAC, "DePuy knew that patients were not obtaining the purported benefits of Pinnacle's low diametrical clearances" and "was fully aware that many patients and surgeons-most notably Dr. Nargol-were complaining of high ion rates and high failure rates." (SAC ¶ 255).
4. The SAC alleges that even though "DePuy knew that its devices were responsible for dangerous concentrations of metal ions in the bloodstreams of patients, " it told the FDA that "metal ions were not a source of concern for metal-on-metal patients." (SAC ¶ 257). In the June 2012 presentation to the FDA, the DePuy director said that the Pinnacle generated "metal wear debris" in patients' bloodstreams in "low amounts." (SAC ¶ 258). The SAC alleges that surgeons began notifying DePuy "as early as 2001 that metal ions generated by metal-onmetal implants were a cause for concern." (SAC ¶ 260).
5. The SAC alleges that DePuy made false statements to surgeons about the causes of the Pinnacle MoM's high failure rates. Specifically, "[b]eginning in 2009, Dr. Nargol repeatedly contacted DePuy to warn it of explosive growth in the number of Pinnacle hip revision surgeries he was performing." (SAC ¶ 269). According to the SAC, DePuy told Dr. Nargol that the "problems resulted from his implantation technique." (SAC ¶ 270). At the time, "DePuy knew... that the problems in Dr. Nargol's patients stemmed from device defects, not from [his] surgical methods" because, in part, other surgeons were "experiencing and notifying DePuy of widespread failures with the Pinnacle implant." (SAC ¶¶ 271-72).
6. The SAC alleges that DePuy made false statements to surgeons about the Pinnacle MoM's angle of inclination in its use instructions. (SAC ¶ 276). It cites an internal DePuy e-mail written by an engineer expressing confusion about the proper angle of inclination for the Pinnacle's cup positioning. (SAC ¶ 277). Accordingly, the SAC alleges, "DePuy did not know the proper angle of implantation for Pinnacle hips, and  any recommendation it made in its manuals disseminated to hospitals and surgeons was therefore false." (SAC ¶ 278).
7. The SAC alleges that DePuy "intentionally withheld disclosure of the Pinnacle's diametrical clearance manufacturing defects to [the] FDA, contrary to its FDAmandated obligation to report them in an updated 510(k) application." (SAC ¶ 280). In 2000, DePuy submitted its 510(k) application along with various certifications that it "conducted a reasonable search of all information known or otherwise available about the types and causes of safety and effectiveness problems that have been reported for metal-on-metal hip systems." (SAC ¶ 282). On July 26, 2005, a DePuy regulatory-affairs associate wrote to the FDA attaching a chart "replac[ing] the chart originally included as Exhibit 4 of the submission, which contained a miscalculation." (SAC ¶ 286). The SAC alleges "[o]n information and belief, the corrected' 2005 table contained measurements or analysis of measurements of DePuy's devices that DePuy learned were not accurate." (SAC ¶ 287). On August 5, 2005, a member of the FDA cautioned DePuy that it would be the company's "responsibility to determine if the change or modification to the device or its labeling could significantly affect the device's safety or effectiveness and thus require submission of a new 510(k)." (SAC ¶ 291). According to the SAC, that notification "imposed an affirmative obligation on DePuy to provide the FDA with updated information, " and even when the relators notified DePuy of the Pinnacle diametrical clearance issues beginning in 2008, "[o]n information and belief, DePuy never corrected its July 26, 2005 submissions to reflect Relator Langton's measurements." (SAC ¶¶ 292-96).
8. The SAC alleges that DePuy "intentionally withheld disclosures of the Pinnacle device's taper trunnion and surface roughness defects in presentations to the FDA." (SAC ¶ 300). The alleged "taper trunnion" defect concerns the area where the end of the femoral stem (the trunnion) is inserted into the area of the head (the taper); that taper trunnion "is not meant to move and thus should not generate any wear." (SAC ¶¶ 188-89). However, the SAC alleges that the relators discovered a defect in the Pinnacle device where, due in part to the large head size of the Pinnacle, the "taper toggles against the trunnion, causing the release of metal debris." (SAC ¶ 190). The alleged "surface roughness" defect also concerns the taper trunnion area of the device, but involves friction between the trunnion, which is designed to be rough, and the taper, which is designed to be smooth. (SAC ¶ 195). The SAC alleges that the relators discovered a defect in many Pinnacle devices where the surface of the taper was rough and created friction with the trunnion, which in turn caused friction and release of metal debris. (SAC ¶ 197). The relators allege that they notified DePuy of the two defects beginning in 2011 and continued to do so into 2012. (SAC ¶¶ 305-06). The SAC alleges that DePuy willfully omitted any discussion of the reported taper trunnion and surface roughness defects during the June 2012 meeting with the FDA. (SAC ¶¶ 307-10).
9. The SAC alleges that "DePuy intentionally failed to disclose adverse events to the FDA." (SAC ¶ 312). On June 7, 2011, following an Establishment Inspection of DePuy's Indiana facility, the FDA issued a report concluding that DePuy had "delayed reporting adverse [Pinnacle] MoM events by five months to three-and-ahalf years, well beyond the acceptable timeframe under FDA regulations." (SAC ¶ 314). The report also noted that DePuy failed to investigate complaints involving the possible failure of its device to meet production specifications; a DePuy employee stated that the company received approximately 450 complaints per month about hip-replacement devices but that DePuy assigned only one employee to investigate them. (SAC ¶ 315).
Second, the SAC alleges that DePuy knowingly caused the submission of direct claims for "medical devices with dimensions materially different than those the government bargained for." (SAC ¶ 201). The SAC identifies three sub-categories of DePuy's allegedly materially false statements or omissions that caused the government to pay for "nonconforming, nonfunctioning, and unsafe devices that would not have been purchased but for DePuy's fraudulent conduct." (SAC ¶ 325).
1. As detailed above, the SAC alleges that DePuy knowingly or recklessly disregarded evidence, allegedly first provided to it by the relators, that the Pinnacle MoM's nonconforming diametrical clearances were causing device failures. (SAC ¶¶ 327-32). It alleges that DePuy was on notice of the Pinnacle MoM's improper measurement testing procedures as early as 2009, when it acquired a competitor and began to use its own "state-of-the-art measuring equipment." (SAC ¶ 335). In June 2010, after the relators notified DePuy of the Pinnacle's improper clearance measurements, a DePuy employee e-mailed Dr. Langton, stating that if DePuy concluded from the relators' research that its MoM parts "were out of specification, " the company would "need to notify patients if [DePuy] had made a serious manufacturing error." (SAC ¶ 338). In its 2011 report, the FDA found that "33 Pinnacle metal liners were out of conformance" because they "fell below the lower specification limit" for diametrical clearance. (SAC ¶ 342). The FDA report notified DePuy that "[t]he production capabilities for the Pinnacle MoM liners and MoM femoral heads at the Leeds facility should be reviewed." (SAC ¶ 343). According to the SAC, "DePuy continued to manufacture Pinnacle components with full knowledge that the manufacturing process was producing yet more parts with the same conformance issues." (SAC ¶ 343). The SAC also alleges "on information and belief" that DePuy provided the FDA with statistical analyses about the failure rates of its Pinnacle device that excluded "critical analyses [that] relators provided to DePuy." (SAC ¶ 345). After the FDA expanded the scope of its request to include data back to January 2007, the SAC alleges that DePuy "responded by producing very little data." (SAC ¶ 348). According to the SAC, "DePuy's failure to conduct and report such statistical analyses violated 21 C.F.R. § 820.250, which requires statistical analysis to assess trending." (SAC ¶ 350). It also alleges that because DePuy employed only one person to "review and analyze the approximately 450 complaints received per month, " it "willfully ignored and mischaracterized the causes of the complaints in order to avoid its obligation to adequately verify and validate its manufacturing processes." (SAC ¶¶ 355-56). It alleges that DePuy's "failure to respond to relators' complaints regarding the clearance deformities" violated 21 C.F.R. § 820.198(a), which establishes a duty to "maintain adequate procedures for receiving, reviewing, and evaluating complaints." (SAC ¶ 357).
2. The SAC alleges that beginning in 2005, DePuy "knowingly or recklessly failed to adopt adequate process validation methods" that were "necessary to consistently manufacture  Pinnacle devices within specification." (SAC ¶ 358). It alleges that the "relators, with additional expert assistance, have determined that DePuy's inspection and testing procedures were unable to verify whether DePuy's Pinnacle devices [were] manufactured within their required specifications, " both for diametrical clearance and surface roughness. (SAC ¶¶ 359-60). It alleges that DePuy, by failing to ensure that its manufacturing process was capable of producing devices within required specifications, "produced, marketed, and sold... a device that [was] different than the subject of the 510(k)" and caused the government to purchase devices that it would not have otherwise purchased without 510(k) approval. (SAC ¶¶ 363-65).
3. The SAC alleges that "DePuy's failure to implement validation procedures necessary to ensure consistent manufacture of products confirming to their specifications was material to the government's purchase of DePuy's Pinnacle devices." (SAC ¶ 397). Specifically, it alleges that the "FDA premised its postmarket approval of the Pinnacle's diametrical clearance dimensions upon DePuy's representation that the Pinnacle's failure rates were comparable to those of its competitors, " and without that approval, the government would not have approved the device for reimbursement. (SAC ¶ 397). When the FDA learned in 2005 that DePuy's 510(k) application in 2000 for the Ultamet 36mm liner contained incorrect diametrical clearance dimensions, it stated that "given this new information, the Pinnacle 36mm system would not have been cleared in 2000." (SAC ¶¶ 399-400). According to the SAC, the FDA "nevertheless did not require DePuy to file a supplemental 510(k), much less obtain PMA, expressly because DePuy represented that the device's failure rates were within industry standards." (SAC ¶ 401). But the SAC alleges that DePuy "was aware [at that time] that the Pinnacle substantially deviated from specifications and had disproportionately high failure rates, " and "[i]n order to maintain FDA approval and continue to sell the Pinnacle, DePuy obscured this information from the FDA, medical providers, and the public for several years." (SAC ¶ 403).
In May 2013, DePuy announced that it would stop selling the Pinnacle MoM device as of August 2013. (SAC ¶ 55). More than 5, 000 personal injury lawsuits involving the Pinnacle MoM device were eventually transferred to an MDL proceeding in the Northern District of Texas. (SAC ¶ 58).
The SAC alleges that "all claims made to the government for costs associated with the Pinnacle device at any time from DePuy's 510(k) application to the date the Pinnacle was withdrawn from the market constitute false claims under the FDA." (SAC ¶ 412).
Finally, the SAC twice refers to 42 U.S.C. § 1395y(a)(1)(A), which prohibits Medicare payments for treatments that are not "reasonable and necessary." The SAC alleges:
Hospital certifications involving claims for Pinnacle hip implants were false because claim reimbursements for these products constituted payment for services which were "not reasonable and necessary for the diagnosis and treatment of illness or injury, " in violation of 42 U.S.C. § 1395y(a)(l)(A). By marketing these products as safe, effective, and medically appropriate, and concealing overwhelming evidence to the contrary, DePuy willfully caused hospitals to file such false certifications when seeking Medicare reimbursement.
DePuy caused physicians, hospitals and other providers to submit false certifications on all these forms concerning claims for Pinnacle hip surgery procedures. Surgeries to implant these irredeemably faulty devices were not "reasonable and necessary for the diagnosis and treatment of illness or injury, " within the meaning of 42 U.S.C. § 1395y(a)(l)(A).
(SAC ¶¶ 88, 99).
6. Alleged False Claims
The SAC alleges that "the government directly purchased or reimbursed hundreds of thousands of Pinnacle products." (SAC ¶ 7). It alleges that DePuy made false statements that caused health-care providers to submit indirect false claims for the Pinnacle MoM to Medicare and Medicaid, and that DePuy itself also submitted direct false claims to the VA.
a. Alleged Indirect False Claims
The SAC alleges one representative indirect false claim and then supports that claim with statistical evidence of the Pinnacle sales to Medicare and Medicaid patients. ( See SAC ¶¶ 413-72). As to the indirect claim, the SAC alleges:
One such device was implanted into patient "F.I.". On or about November 12, 2007, patient F.I. was implanted with a DePuy Pinnacle hip implant by a surgeon at Stony Brook University Medical Center, 10 I Nicolls Road, Stony Brook, New York 11794. The surgeon was, upon information and belief, Dr. "J.N.". In November 2007, Mr. F.I. received Medicaid insurance through HealthFirst, a managed care organization that provides government-sponsored health insurance plans in New York.
On information and belief, DePuy's surgical instructions and materials provided to Dr. J.N. regarding implantation of F.I. with the Pinnacle device represented that the device was a safe and effective hip implant device when implanted in accordance with such instructions.
DePuy's product label accompanying the Pinnacle device stated that the product was indicated for use as the acetabular component in total hip-replacement procedures. On information and belief, under the heading "Information for Use, " the product label stated that an "instrumentation system, as well as a system of trial components, is available to assure proper fit and alignment ...