United States District Court, D. Massachusetts
UNITED STATES OF AMERICA, ET AL, ex rel. ADAM WITKIN, Plaintiffs,
MEDTRONIC, INC., and MEDTRONIC MINIMED, INC., Defendants.
MEMORANDUM AND ORDER
DOUGLAS P. WOODLOCK, UNITED STATES DISTRICT JUDGE
Adam Witkin brings this qui tam action against
Medtronic, Inc. - and its wholly-owned subsidiary Medtronic
MiniMed, Inc. (collectively, “Medtronic”) - as a
relator on behalf of the United States, 26 individual states
and the District of Columbia. He alleges violations of the
federal False Claims Act (“FCA”), 31 U.S.C.
§ 3729 et seq., as well as violations of the
FCAs of those states and the District of Columbia. Witkin
also seeks relief under federal and state law for allegedly
retaliatory discharge. Medtronic moves to dismiss the
complaint for failure to state a claim.
Overview of the Allegations
sells a variety of products for the treatment and management
of diabetes. Sec. Am. Compl. ¶ 73. An estimated 26
million Americans have diabetes, a condition in which the
body is not able to regulate levels of glucose in the blood.
Id. ¶ 61. Less than 10% of diabetes patients
suffer from Type 1 diabetes, an autoimmune disease in which
the body does not produce enough insulin to move glucose from
the blood to the cells. Id. ¶¶ 62-63. More
than 90% of diabetes patients have Type 2 diabetes, a
condition in which the body has developed a resistance making
insulin inefficient at moving glucose from the blood to the
cells. Id. ¶¶ 63-64.
the products Medtronic sells are insulin pumps allowing the
continuous delivery of insulin, Sec. Am. Compl. ¶¶
68-70, 74. These pumps serve as an alternative to multiple
daily injections of insulin. Id. ¶ 67-68.
Medtronic also sells “continuous glucose
monitoring” devices. Id. ¶¶ 71, 74.
The monitoring device is inserted under the patient’s
skin with a needle. Id. ¶ 71. Medtronic sells
one for professional use called the “iPro, ”
id. ¶ 123. A patient is fitted with an iPro
device in a physician’s office and sent home to collect
glucose data over several days, after which the data can be
interpreted for treatment recommendations. Id.
¶ 124. Medtronic also sells an integrated
diabetes management system in which an insulin pump is paired
with a glucose monitoring device. Id. ¶ 78.
was employed with Medtronic’s diabetes division from
November 2004 until his termination on February 28, 2011.
Sec. Am. Compl. ¶ 45. He sold Medtronic medical devices
for the treatment and management of diabetes in his capacity
as a Territory Manager and Senior Territory Manager in
Oregon. Id. Witkin alleges that, in the course of
his employment, he learned about fraudulent behavior by
Medtronic that resulted in false claims to government health
care programs, including Medicare, Medicaid, CHAMPUS/TRICARE,
and CHAMPVA. Id. ¶¶ 92-96.
Witkin’s allegations involve Medtronic’s efforts
to expand insulin pump use among Type 2 diabetes patients.
Insulin pumps historically were used by Type 1 diabetes
patients, id. ¶ 69, and a small set of Type 2
diabetes patients with extreme forms of insulin resistance,
id. ¶ 7. Expanding pump use among Type 2
patients more generally was, Witkin alleges, central to
Medtronic’s national sales strategy. Id.
¶¶ 121. Pump therapy also allowed patients to
receive more complete insurance coverage for their diabetes
care, due to differences in reimbursement for insulin when
purchased independently and when used in conjunction with a
pump. See Id. ¶ 149.
specifically, Witkin alleges that Medtronic paid kickbacks
and other illegal remuneration to physicians to induce them
to prescribe Medtronic insulin pumps to their patients. Sec.
Am. Compl. ¶¶ 121-309. He also alleges that
Medtronic helped Type 2 patients falsify their qualifications
for insulin pump therapy, resulting in claims to government
payors for reimbursement of ineligible and unnecessary pumps.
Id. ¶¶ 493-551.
to Witkin, Medtronic also fraudulently promoted its insulin
pumps for uses not approved by the U.S. Food and Drug
Administration (“off-label” uses). For example,
Medtronic allegedly misrepresented the safety and efficacy of
using high-concentration “U-500” insulin with its
pump, when the pump was approved only for use with
lower-concentration “U-100” insulin. Sec. Am.
Compl. ¶¶ 310-423. The resulting claims for
reimbursement as to the pump and the insulin were thereby
further alleges that Medtronic used false representations to
promote off-label use of its adult diabetes management
systems by pediatric patients, id. ¶¶
424-91. An earlier complaint also alleged that Medtronic used
fraudulent practices to induce unnecessary orders for insulin
pump upgrades and replacements, First Am. Compl. ¶¶
428-76, although these claims were voluntarily dismissed on
May 30, 2013 and have not been reasserted in the Second
seeks to hold Medtronic liable under the FCA, based on
fraudulent conduct which caused or was material to false
claims made to federal health care programs, and based on its
avoidance of obligations to repay the government by failing
to report overpayments received as a result of false claims.
Count II seeks to hold Medtronic liable under false claims
statutes of the 26 named states and the District of Columbia
(collectively, the “state FCAs”). Count III seeks
damages under California and Illinois insurance fraud
statutes. Cal. Ins. Code § 1871.7; 740 Ill. Comp. Stat.
Count IV, Witkin alleges that his termination in February
2011 constituted illegal retaliation for his efforts to
investigate and stop Medtronic’s FCA violations, in
violation of the federal FCA, 31 U.S.C. § 3730(h).
See Sec. Am. Compl. ¶¶ 562-94. Witkin also
seeks relief for his allegedly wrongful termination under
Oregon’s whistleblower protection law, Or. Rev. Stat.
Ann. § 659A.199 (Count V), and the common law of Oregon
and California (Count VI).
filed this action on May 5, 2011. The complaint was kept
under seal until the United States declined to intervene in
the action. Cf. 31 U.S.C. § 3730(b)(2). The
states, too, have declined to intervene.
moved to dismiss Witkin’s initial complaint on January
7, 2013. Witkin responded by filing an Amended Complaint on
February 11, 2013. Medtronic thereafter filed a motion to
dismiss for failure to state a claim. Witkin opposed the
motion. In doing so, he also conditionally sought leave to
amend the complaint by representing that he could
“provide additional factual detail” if necessary.
I granted leave to amend and the operative Second Amended
Complaint was filed on August 1, 2013. Medtronic has again
moved to dismiss for failure to state a claim.
point, I note that I am unlikely to grant any additional
requests to amend the complaint in this matter. Of course,
“Amendments may be permitted . . . even after a
dismissal for failure to state a claim, and leave to amend is
‘freely given when justice so requires.’”
Palmer v. Champion Mortgage, 465 F.3d 24, 30-31 (1st
Cir. 2006) (quoting Fed.R.Civ.P. 15(a)). But it is also true
that in “appropriate circumstances, ” including
“undue delay, bad faith, futility, and the absence of
due diligence on the movant's part, ” leave to
amend may be denied. Id. The “balance of
pertinent considerations” in deciding whether to allow
an amendment requires an inquiry into the totality of the
circumstances. Id. One important consideration is
judicial economy. “[T]rial courts, in the responsible
exercise of their case management functions, may refuse to
allow plaintiffs an endless number of trips to the well,
” particularly where they have already “afforded
the plaintiffs an ample opportunity to put their best foot
forward.” Aponte-Torres v. Univ. Of Puerto
Rico, 445 F.3d 50, 58 (1st Cir. 2006). This action is
now on its second amended complaint - one significantly
expanded from relator’s original submission - and I
have already informed relator that this second amended
complaint was to be his best, and final, effort at stating
his claims. Accordingly, I expect that there is nothing left
for relator to add that would not futilely result in another
dismissal, at the expense of defendants and the legal system
generally. He will not be permitted, absent circumstances
unforeseen at this juncture, to try to reformulate his
allegations, yet again, to avoid their legal deficiencies.
order to survive a motion to dismiss pursuant to Fed.R.Civ.P.
12(b)(6), “a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (citation and internal quotation marks
omitted). Dismissal for failure to state a claim is
appropriate when the pleadings fail to set forth
“factual allegations, either direct or inferential,
respecting each material element necessary to sustain
recovery under some actionable legal theory.”
Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir. 1997)
(quoting Gooley v. Mobil Oil Corp., 851 F.2d 513,
515 (1st Cir. 1988) (internal quotation marks omitted)).
“[W]here the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct, the
complaint has alleged - but it has not ‘show[n]’
- ‘that the pleader is entitled to
relief.’” Maldonado v. Fontanes, 568
F.3d 263, 269 (1st Cir. 2009) (quoting Iqbal, 556
U.S. at 679).
allegations and their state counterparts are also subject to
the heightened pleading standards of Fed.R.Civ.P. 9(b).
U.S. ex rel. Duxbury v. Ortho Biotech Prods.,
L.P., 579 F.3d 13, 29 (1st Cir. 2009). Rule 9(b)
requires that “[i]n alleging fraud or mistake, a party
must state with particularity the circumstances constituting
fraud or mistake.” To satisfy Rule 9(b), “a
complaint must specify the time, place, and content of an
alleged false representation.” U.S. ex
rel. Rost v. Pfizer, Inc., 507 F.3d at 720, 731 (1st
Cir. 2007) (citations and internal quotation marks
omitted). Conclusory allegations are insufficient,
but Rule 9(b) may be satisfied “when some questions
remain unanswered, provided the complaint as a whole is
sufficiently particular to pass muster.” U.S.
ex rel. Gagne v. City of Worcester, 565 F.3d 40, 45
(1st Cir. 2009) (citation omitted).
First Circuit has recognized a “distinction between a
qui tam action alleging that the defendant made
false claims to the government, and a qui tam action
in which the defendant induced third parties to file
false claims with the government.” Duxbury,
579 F.3d at 29. In the latter case, a relator may satisfy
Rule 9(b) by providing “factual or statistical evidence
to strengthen the inference of fraud beyond possibility
without necessarily providing details as to each false
claim.” Id. (internal quotation omitted).
FALSE CLAIMS ACT
imposes liability on any person who “knowingly
presents, or causes to be presented, a false or fraudulent
claim for payment or approval, ” 31 U.S.C. §
3729(a)(1)(A), or “knowingly makes, uses, or causes to
be made or used, a false record or statement material to a
false or fraudulent claim, ” id. §
3729(a)(1)(B). The FCA also prohibits what have come to be
called “reverse” false claims, and imposes
liability on any person who “knowingly makes, uses, or
causes to be made or used, a false record or statement
material to an obligation to pay or transmit money or
property to the Government, or knowingly conceals or
knowingly and improperly avoids or decreases an obligation to
pay or transmit money or property to the Government.”
Id. § 3729(a)(1)(G).
discuss in turn the various ways in which Witkin alleges
Medtronic is subject to false claims liability to determine
if any satisfy the pleading requirements of Rule 9(b).
federal Anti-Kickback Statute (“AKS”), 42 U.S.C.
§ 1320a-7b, broadly prohibits the offer or payment of
“any remuneration (including any kickback, bribe, or
rebate) directly or indirectly, overtly or covertly, in cash
or in kind” in return for referrals to any individual
for the purpose of furnishing items or services reimbursable
by federal health care programs, id. §
1320a-7b(b)(1)(A), or in return for recommendations for
purchasing items reimbursable by federal health care
programs, id. § 1320a-7b(b)(1)(B). The Stark
Act, 42 U.S.C. § 1395nn, prohibits physicians having
“compensation arrangement[s]” with any entity,
involving “any remuneration, directly or indirectly,
overtly or covertly, in cash or in kind, ” from making
a referral to that entity for furnishing health services,
id. § 1395nn(a), (h)(1)(B); 42 C.F.R. §
411.351 (“remuneration” includes “any
payment or other benefit”).
under the AKS also requires intent to induce a referral or
recommendation. 42 U.S.C. § 1320a-7b(b)(2). The Stark
Act contains no such intent requirement but prohibits
referrals based solely on the existence of a specified
compensation arrangement. 42 U.S.C. § 1395nn(a). Safe
harbors are available under both statutes for compensation
for part-time services, provided a variety of requirements
are met, including, as relevant here, that payment be
established in advance at a fair market value rate.
See 42 U.S.C. § 1395nn(e)(3); 42 C.F.R. §
to Witkin’s kickback allegations are so-called
“iPro clinics.” An “iPro clinic”
refers to a session in a doctor’s office in which
diabetes patients were invited to be fitted with the iPro
device to evaluate their current diabetes management. Sec.
Am. Compl. ¶ 126. Medtronic used the clinics to gain
“one-on-one access” to patients who had been
treating their diabetes through multiple daily injections, in
hopes of converting them to use Medtronic insulin pumps and,
allegedly, to compensate providers in order to generate
additional pump orders. Id. ¶¶ 127, 142,
alleges illegal remuneration in essentially two forms. First,
Witkin alleges that Medtronic paid or offered remuneration by
running iPro clinics in doctors’ offices, often without
physician involvement, e.g., Sec. Am. Compl.
¶¶ 127-61 (describing clinics), ¶¶
210-212 (Medtronic paying nurses to staff clinics), while
promoting the ways in which the physician could bill Medicare
for patient iPro clinic visits, see id. ¶¶
Witkin alleges that Medtronic paid providers at above-market
rates to train patients in the use of Medtronic’s
insulin pumps, id. ¶¶ 178-98, and also
provided a variety of other collateral benefits such as free
sample devices, meals, and travel and accommodations for
conferences at luxury venues. Id. ¶¶
remuneration, Witkin argues, led providers to refer patients
to Medtronic for the purchase of insulin pumps and to
recommend the purchase of Medtronic insulin pumps, payment
for which would be made by federal health care programs. The
resulting claims, tainted by the antecedent kickbacks, were
thereby false. Cf. 42 U.S.C. § 1320a-7b(g)
(“[A] claim that includes items or services resulting
from a violation of [the federal anti-kickback statute]
constitutes a false or fraudulent claim [for purposes of the
FCA].”); New York v. Amgen Inc., 652 F.3d 103,
110-11 (1st Cir. 2011) (claims induced by kickbacks false
when they “misrepresent compliance with a material
precondition of payment forbidding the alleged
address whether Witkin has stated a claim under this theory
before turning to whether he has pled fraud in this respect
with adequate particularity to satisfy Rule 9(b).
with Medtronic that merely explaining to physicians the
manner in which iPro services could be billed to Medicare
does not in itself constitute an offer of remuneration by
Medtronic. Cf. United States v. Shaw, 106 F.Supp.2d
103, 120 (D. Mass. 2000) (“profit motive does not
necessarily trigger criminal liability”). The
Department of Health and Human Services Office of the
Inspector General has indicated that a manufacturer’s
“reimbursement support services in connection with its
own products” have “no independent value.”
OIG Compliance Program Guidance for Pharmaceutical
Manufacturers, 68 Fed. Reg. 23731, 23735 (2003).
Medtronic’s alleged activity here is a step removed
from reimbursement support for a product user; Witkin alleges
primarily promotional activity regarding
reimbursement rather than active support for a product user.
Medtronic’s explanation of the benefits to physicians
of using the iPro device does not in and of itself confer a
benefit on those physicians.
said, the character of these promotional activities changes
when combined with Witkin’s allegation that Medtronic
staff often ran iPro clinics at no cost to the host
physicians and entirely independently of a physician or his
or her staff. See, e.g., Sec. Am. Compl.
¶¶ 154-62. The allegation that Medtronic
effectively instructed physicians on billing Medicare for
procedures that Medtronic provided for free transforms what
would be an otherwise innocuous patient-promotion practice
into an offer of remuneration to the physicians. Medtronic
responds by outlining the circumstances in which physicians
are permitted to bill for services provided by ancillary
professionals like nurses or diabetes educators. That would
be a legitimate defense against the independent falseness of
claims by physicians for reimbursement of iPro services.
Witkin, however, does not pursue this theory of false claims
and, even if he did, there are no particularized allegations
to support this theory. See Part III.A.3,
the theory of false claims pursued here involves claims for
reimbursement of insulin pumps, the falsity of which derived
from referrals or recommendations by doctors who had in turn
been influenced by kickbacks from Medtronic. And, more
importantly for present purposes, even a physician
legitimately billing Medicare for
properly-supervised iPro clinic services has received
remuneration when he otherwise would have had to expend
additional money or time to administer the services himself
or pay staff to do so. Witkin has therefore adequately
alleged remuneration through the iPro clinics.
also alleges that Medtronic paid providers to train patients
in the use of its insulin pumps. Medtronic relies on the
statutory safe harbors to argue that these payments do not
amount to illegal remuneration. See 42 U.S.C. §
1395nn(e)(3); 42 C.F.R. § 1001.952(d). The Amended
Complaint itself indicates that many of the requirements of
the safe harbors would be ...