United States ex rel. Modglin v. DJO Global Inc.
UNITED STATES of America ex rel. Doris MODGLIN and Russ Milko v. DJO GLOBAL INC., DJO LLC, DJO Finance LLC, Orthofix, Inc., Biomet, Inc. and EBI, LP
Attorneys
David M. Harris, AUSA United States Attorneyâs Office, Los Angeles, CA, Gerald C. Robinson, Gerald Robinson Law Firm PLLC, David B. Ketroser, MD, David B. Ketroser M.D., J.D., Minneapolis, MN, Linda R. MacLean, Phillip E. Benson, Warren Benson Law Group, Newport Beach, CA, Donald R. Warren, Warren Benson Law Group, La Jolla, CA, for Plaintiffs., Andrew C. Bernasconi, Reed Smith LLP, Jessica Lynn Ellsworth, Hogan and Hartson LLP, Michele W. Sartori, Hogan Lovells U.S. LLP, Washington, DC, Francisca M. Mok, Reed Smith LLP, Dean Hansell, Hogan Lovells LLP, Los Angeles, CA, Thomas H. Suddath, Reed Smith LLP, Philadelphia, PA, for Defendants.
Full Opinion (html_with_citations)
ORDER GRANTING DEFENDANTSâ MOTION TO DISMISS THE SECOND AMENDED COMPLAINT
Qui tam relators Doris Modglin and Russ Milko filed this action against defendants DJO Global Inc. (âDJO Globalâ), DJO, LLC (âDJOâ), DJO Finance LLC (âDJO Financeâ), Orthofix, Inc. (âOrtho-fixâ), Biomet, Inc. (âBiometâ), and EBI, LP (âEBIâ) under seal and in camera on August 20, 2012. Relators invoked the courtâs federal question jurisdiction under 28 U.S.C. § 1331, and alleged a single claim for violation of the False Claims Act (âFCAâ), 31 U.S.C. § 3729(a)(1)(A) & (B).
On October 3, 2013, pursuant to a request by relators, the court dismissed Or-thofix.
I. FACTUAL BACKGROUND
Relators assert that defendants â manufacturers and distributors of durable medical equipment (âDMEâ) â fraudulently
A. Background Regarding FDA Approval of Medical Devices
One of the âcore objectivesâ of the Food, Drug, and Cosmetic Act (âthe FDCAâ), 21 U.S.C. § 301 et seq., is to ensure that âthere is reasonable assurance of the safety and effectiveness of devices intended for human use.â Food and Drug Administration v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133-34, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000) (citing 21 U.S.C. § 393(b)(2)). To that end, the FDCA classifies medical devices in three categories: Classes I, I, and III. 21 U.S.C. § 360c(a). Class III devices include those that present a potential unreasonable risk of illness or injury. Id., § 360c(a)(l)(C). Because of the risk associated with such devices, the FDA has determined that manufacturers of such devices must submit premarket approval- (âPMAâ) applications to the FDA and obtain premarketing clearance before offering the devices for sale.
PMA approval is based on a determination by the FDA that the PMA application contains sufficient valid scientific evidence to assure that the device is safe and effective for its intended use. 21 C.F.R. § 814.2(a). It is âa ârigorousâ process in which the manufacturer submits to the FDA extensive study reports, design specifications and descriptions, samples of the device, and proposed labeling, and the FDA conducts a comprehensive review and
If a medical device is used for a purpose other than that for which it has obtained PMA approval, the usage is âoff-label.â Carson v. Depuy Spine, Inc., 365 Fed. Appx. 812, 815 (9th Cir.2010) (Un-pub.Disp.) (âDrugs and medical devices are approved or cleared by the FDA for marketing with labels describing the uses and the patient conditions which have been reviewed in the approval or clearance process. Any use by a physician which differs from the use described in the label or from the patient conditions described in the label is called âoff-labelâ â). The FDCA explicitly protects physiciansâ abilities to prescribe devices for such use. 21 U.S.C. § 396 (âNothing in this chapter shall be construed to limit or interfere with the authority of a health care practitioner to prescribe or administer any legally marketed device to a patient for any condition or disease within a legitimate health care practitioner-patient relationshipâ); see also Houston v. Medtronic, Inc., No. 2:13â cv-01679-SVW (SHx), 2014 WL 1364455, *1 n. 1 (C.D.Cal. Apr. 2, 2014) (âPhysicians are permitted to use Class III devices in off-label mannersâ). Indeed, off-label use of medical devices is âgenerally acceptedâ within the medical community, and section 396 of the FDCA âexpressly disclaims any intent to directly regulate the practice of medicine.â Buckman Co. v. Plaintiffsâ Legal Committee, 531 U.S. 341, 351 & n. 5, 121 S.Ct. 1012, 148 L.Ed.2d 854 (2001) (citing Beck & Azari, FDA, Off-Label Use, and Informed Consent: Debunking Myths and Misconceptions, 53 FOOD & DRUG L.J. 71, 72 (1998) (âOff-label use is widespread in the medical community and often is essential to giving patients optimal medical care, both of which medical ethics, FDA, and most courts recognizeâ)); see also Kashani-Matts, 2013 WL 6147032 at * 1 n. 4 (âThe FDA does not prohibit or regulate off-label use of medical devices by medical professionals, and the Supreme Court has emphasized that off-label use is not merely legitimate but important in the practice of medicine,â citing Buckman, 531 U.S. at 350,121 S.Ct. 1012).
The FDCA does, however, expressly prohibit class III device manufacturers from marketing a PMA-approved device for an off-label use. 21 U.S.C. § 331 (proscribing, inter alia, â[t]he introduction ... into interstate commerce of any ... device ... that is adulterated or misbrandedâ); 21 C.F.R. § 814.80 (stating that once the FDA has approved a PMA application, the manufacturer of the approved device may not manufacture, package, store, label, distribute, or advertise the device in a manner that is inconsistent with any conditions of approval specified in the PMA approval order for the device). Because off-label usage of medical devices âis an accepted and necessary corollary of the FDAâs mission to regulate in th[e] [medical field] without directly interfering with the practice of medicine,â however, Buckman, 531 U.S. at 349-50,121 S.Ct. 1012, âa manufacturer is not liable [for having violated the FDCA] merely because it sells a device
B. Facts Alleged in the Second Amended Complaint Regarding FDA Approval of Defendantsâ Stimulators
Relators allege that DJO, Biomet, and EBI â a wholly owned subsidiary of Biom-et' â manufacture and market DME, including stimulators, throughout the United States.
C. Background Regarding Medicare Coverage of Medical Devices
1. Coverage Determinations by Medicare
The Medicare program is a fed- âą erally funded health insurance program for the aged and disabled created by the Social Security Act (âthe Medicare Actâ), 42 U.S.C. § 1395 et seq. See International Rehabilitative Sciences Inc. v. Sebelius, 688 F.3d 994, 997 (9th Cir.2012) (âMedicare is the federal health insurance program for the elderly and disabledâ). Part B of the Medicare Act provides medical insurance for medical and other health services obtained by individual plan participants; this includes stimulators and other DME provided to Medicare patients by a DME provider. Id. (citing 42 U.S.C. §§ 1395j, 1395k(a)(2), 1395m). Under Part B, âMedicare beneficiaries receive medical treatment and the providers submit claims for government reimbursement.â Id. (citing § 1395n). Under the Medicare Act,
â[a] device is not âreasonable and necessary1 â and thus is not eligible for Medicare coverage â if it is: [1) ] Not âsafeâ and âeffectiveâ â that is, if the device has not âbeen proven safe and effective based on authoritative evidenceâ or is not âgenerally accepted in the medical community as safe and effective for the condition for which it is usedâ; [2) ] â[Experimentalâ â that is, âinvestigationalâ; [3) ] Not â[appropriateâ for the individual beneficiaryâs needs; or [4) ] â[Substantially more costly than a medically appropriate and realistically feasible alternative pattern of care.â â Id. (citing § 1395y(a)(l)(A) and 54 Fed.Reg. 4302, 4303-04 (Jan. 30, 1989); 60 Fed.Reg. 48417, 48418 (Sept. 19,1995)). '
Cf. Medicare Program Integrity Manual § 13.7.1. (stating that â[i]n order of preference, [local coverage determinations] should be based on: [1] Published authoritative evidence derived from definitive randomized clinical trials or other definitive studies, and [2] General acceptance by the medical community (standard of practice), as supported by sound medical evidenceâ).
In its Medicare National Coverage Determinations Manual (âthe Medicare Manualâ), the Department of Health and Human Services (âHHSâ) has considered the FDA categorization of devices and determined generally that â[d]evices that may be covered under Medicare include the following categories: [1] Devices approved by the FDA through the Pre-Market Approval (PMA) process; [2] Devices cleared by the FDA through the 510(k) process; [3] FDA-approved IDE Category B devices; and [4] Hospital Institutional Review Board (IRB) approved IDE devices.â
Within these general categories of devices eligible for coverage, HHS âmay make [Medicare] coverage determinations [for certain types of devices] via up-front rules.â The agency, however, has âdiscretion ... whether to make [broad] determinations [as to whether a particular device is reimbursable] ... or [whether to have Medicare contractors make that decision based on a] case-by-case adjudication.â Id. at 1001. When HHS engages in rule-making regarding the scope of coverage for certain devices, it issues National Coverage Decisions (âNCDsâ). âAn NCD is a determination ... of whether a particular item or service is covered nationally under
The reimbursement of stimulators is covered by NCD 150.2.
NCD 280.1, the âDurable Medical Equipment Reference Listâ is a âquick reference toolâ that applies â(where appropriate) to all DME national coverage determinations (NCDs).â
âgeneric categories of equipment on which NCDs have been made by ... CMS.... In the case of equipment categories that have been determined by CMS to be covered under the DME benefit, the list outlines the conditions of coverage that must be met if payment is to be allowed for the rental or purchase of the DME by a particular patient, or cross-refers to another section of the manual where the applicable coverage criteria are described in more detail. With respect to equipment categories that cannot be covered as DME, the list includes a brief explanation of why the equipment is not covered.... When the contractor receives a claim for an item of equipment which does not appear to fall logically into any of the generic categories listed, the contractor has the authority and responsibility for deciding whether those items are covered under the DME benefit. These decisions must be made by each contractor based on the advice of its medical consultants, taking into account: [1] The Medicare Claims Processing Manual, Chapter 20, âDurable Medical Equipment, Prosthet-ics and Orthotics, and Suppliesâ (DME-POS)[;] [2] Whether the item has been approved for marketing by the Food and Drug Administration (FDA) and is otherwise generally considered to be safe and effective for the purpose intended; and [3] Whether the item is reasonable and necessary for the individual patient.â34
NCD 280.1 thus serves as a first point of reference for contractors attempting to determine whether a certain device or a certain use of a device is covered. Specifically, it provides an index of some of the national coverage determinations Medicare has made. It lists some devices that are covered and refers the reader to the NCD controlling that device. It also lists some devices that are not covered and articulates why HHS has determined that that device cannot be covered. For devices that HHS has not explicitly declared covered or uncovered, NCD 280.1 sets forth the factors a contractor must consider in making a case-by-case coverage determination. NCD 280.1 is not comprehensive, however. Certain devices that are covered by a particular NCD are not referenced in NCD 280.1. This is because NCD 280.1 was meant only to aid in determining coverage for âcertain pieces of DME and especially for those items commonly referred to by both brand and generic names.â
2. The Reimbursement Process
To submit a claim for reimbursement, DME providers fill out and submit to
Together with CMS Form 1500, the provider must submit a Certificate of Medical Necessity.
The DME provider must also include the Healthcare Common Procedure Coding System (âHCPCSâ) number for the device for which it is requesting reimbursement on both CMS Form 1500 and CMS 847.
By regulation, DME providers seeking reimbursement must furnish sufficient information to Medicareâs claim processing contractors that they can determine whether payment is due. 42 C.F.R. § 424.5(a)(6) (âAs a basis for Medicare payment, the following conditions must be met: ... The provider, supplier, or beneficiary, as appropriate, must furnish to the intermediary or carrier sufficient information to determine whether payment is due and the amount of paymentâ).
D. Facts Alleged in the Second Amended Complaint Regarding Defendantsâ Submission of Claims to the Medicare Program
Relators allege that defendants are approved Medicare DME providers.
Relators allege that when a physician prescribes a stimulator manufactured by one of the defendants, a local distributor under contract to the defendant collects relevant medical records and prescriptions and forwards them to an insurance administrator at the defendantâs home offices.
As proof that defendants have submitted such claims for reimbursement, rela-tors plead facts concerning their interactions with defendants over the years. They allege that in 1997, relator Milko was hired as a direct sales representative for Orthofix to promote and sell stimulators.
Relators allege that on July 1, 2005, Milko became an Orthofix distributor and that he has continued in that capacity since then, marketing and selling the Cervical-Stim and Orthofixâs other, non-cervical stimulators.
In April 2011, a sales associate working for Milko left his employ and went to work for DJO; the associate sold the SpinaLogic in the same geographic area in which Mil-ko sold Orthofix products. âą Milko lost âsome of his best physician referral sources, including physicians who regularly referred Medicare patients for cervical bone growth stimulators, even though [as noted,] Orthofix sold the only approved cervical device.â
Relators assert that Milko sued his former associate for violating a non-competition agreement.
Relators allege that on June 21, August 30, and September 1, 2011, the Spine and Brain Institute in Las Vegas, Nevada,' faxed prescriptions on behalf of Dr. John Anson, the ordering physician, to the local DJO sales representative for SpinaLogic;
In August 2012, DJOâs Regional Sales Director and a DJO sales representative told relator Modglin, a private investigator licensed by the state of California, that DJO routinely billed federally sponsored health care programs like Medicare and Medicaid for off-label distribution of Spina-Logic for use on the cervical spine.
In May 2013, Orthofixâs sales representative in Temecula, California, switched companies and began to sell the SpinaLogic. After two weeks, the representative returned to Orthofix. Relators contend that while working for DJO, DJO upper management told the sales representative that 40% of the companyâs SpinaLogic business involved off-label, cervical spine applications.
As respects the SpinalPak manufactured by Biomet and EBI, relators allege that Milko has provided replacement Cervical-Stims to Medicare patients who complained that their use of the SpinalPak on the cervical spine caused skin irritation on their necks.
On February 16 and March 10, 2010, and on March 18, 2011, Biomet and EBI submitted claims to the Minnesota Health Care Programs for off-label stimulators under Code E0748, for use following cervical spinal fusion surgery. They were paid $817.05, $3,901.41, and $3,897.50 on the claims, respectively.
Relators allege that on September 5, 2012, Dr. David Ketroser, a neurologist, contacted the office of a neurosurgeon in Minnesota. An employee confirmed that the office routinely prescribed the Spinal-Pak for cervical and lumbar fusions, for both Medicare and non-Medicare patients, and that it had done so for a particular patient Ketroser had referred.
On May 20, 2013, Milko asked a former Biomet distributor who now sells Orthofix devices how Biomet succeeded in securing Medicare payment for a lumbar-only device when the physicianâs order indicated cervical application. The individual pur
E. The Partiesâ Requests for Judicial Notice
The parties request, in both their original and supplemental briefs, that the court take judicial notice of certain documents they contend are relevant to this motion.
1. Relatorsâ Request for Judicial Notice
Relators request that the court judicially notice thirty-two documents. The documents fall into several general categories:
(1) Documents available on the FDAâs website: Comments by the BGS Reclassification Opposition Group in opposition to a petition for reclassification of bone-growth stimulators from Class III to Class II;82 FDA guidance on the PMA requirement;83 FDA guidance on PMA*1380 Supplements and Amendments;84 FDA guidance on âGood Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices;â85 Implementation of the FDA/HCFA Interagency-Agreement Regarding Reimbursement Categorization of Investigational Devices;86 âGuidance Document for Industry and CDRH Staff for the Preparation of Investigational Device Exemptions and Premarket Approval Applications for Bone Growth Stimulator Devicesâ;87 âGuidance for Industry and FDA Staff: Modifications to Devices Subject to Pre-market Approval (PMA) â The PMA Supplement Decision-Making Processâ;88 FDA Docket re: petition that âNon-invasive Bone Growth Stimu-latorfs] be reclassified from Class III to Class IIâ;89 FDA decision denying âOrthopedic Devices: Reclassification of Non-invasive Bone Growth Stimulatorâ;90 PMA Supplements filed by DJO Global;91 FDA Approval Materials for SpinaLogic;92 PMA Supplements filed by EBI/Biomet;93 FDA Approval Materials for SpinalPak;94 FDA Approval Materials for Cervical-Stim;95
(2) Documents available on the CMS Website: Medicare National Coverage Determinations Manual, Forward;96 Medicare National Coverage Determinations Manual, NCD 280.1;97 Medicare Program Integrity Manual, Chapter 13 â Local Coverage Determinations;98 Medicare Benefit Policy Manual, Chapter 14 â Medical Devices;99 Durable Medical Equipment, Prosthetics, Orthot-ics, and Supplies Quality Standards;100 *1381 Medicare Enrollment Application â Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Supplier;101 CMS Form 1500;102
(3) A document available on the MediCal website: Medi-Cal Provider Agreement;103
(4) Defendantsâ SEC filings: DJO Financeâs Form 10-K for the fiscal year ending December 31, 2013,104 Biometâs Form 10-K for fiscal year ending May 31, 2013;105
(5) Court filings in other cases: Complaint in United States ex rel. Allen v. Guidant LLC, et al.;106 Order in United States ex. rel. Bui v. Vascular Solutions, Inc.;107 Brief for the United States as Amicus Curiae in United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., et al.;108 State of Texasâ Statement of Interest in United States ex. rel. Bergman v. Abbott Laboratories;109
(6) Various insurance policies excluding from coverage stimulators used on the cervical spine: Federal Employee Program Policy Statement, Lifewise Health-plan of Oregon Policy Statement, Pre-mara Blue Cross Policy Statement;110 and
(7)Documents available on defendantsâ and Orthofixâs websites: âCMF Spina-Logicâ on DJO Globalâs website;111 âPatient FAQ Brochure,â on Biometâs website;112 Image of Cervical-Stim on Orthofixâs website. 113
Under Rule 201, the court can take judicial notice of â[pjublic records and government documents available from reliable sources on the Internet,â such as websites run by governmental agencies. See Hansen Beverage Co. v. Innovation Ventures, LLC, No. 08-CV-1166-IEG, 2009 WL 6597891, *1 (S.D.Cal. Dec. 23, 2009) (citing Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir.1999)). See also Daniels-Hall v. National Education Association, 629 F.3d 992, 999 (9th Cir.2010) (taking judicial notice of information on the websites of two school districts because they were government entities); Paralyzed Veterans of Am. v. McPherson, No. C 06-4670, 2008 WL 4183981, *5 (N.D.Cal. Sept. 8, 2008) (âInformation on government agency websites has often been treated as properly subject to judicial noticeâ). The court could, therefore, take
As respects court orders and filings in other FCA cases, these documents, too, are the proper subject of judicial notice. See Reynâs Pasta Bella, LLC v. Visa USA, Inc. 442 F.3d 741, 746 n. 6 (9th Cir.2006) (taking judicial notice of pleadings, memoranda, and other court filings); Asdar Group v. Pillsbury, Madison & Sutro, 99 F.3d 289, 290 n. 1 (9th Cir.1996) (court may take judicial notice of pleadings and court orders in related proceedings); United States ex rel. Robinson RancherĂa Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir.1992) (a court may take judicial notice âof proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issueâ). The court, however, declines to do so as it concludes that the documents are not relevant. The position the government took in the complaint in United States ex rel. Allen v. Guidant Corp. and the courtâs analysis in the order issued in United States ex rel. Bui v. Vascular Solutions are not relevant to decision of the motion because both involved the marketing of a device for . off-label use, something relators do not allege here. The governmentâs position regarding the requirements of Rule 9(b) in United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., et al. is not binding on the court and thus is not relevant in deciding the motion. Finally, because the court declines to exercise supplemental jurisdiction over rela-torsâ state law claims, it need not consider the State of Texasâ Statement of Interest in United States, ex rel. Bergman v. Abbott Laboratories.
The court also declines to take judicial notice of the sixth category of documents relators identify because there is no basis upon which to take judicial notice of these documents. Policy statements by private insurance companies are not information generally known within the geographic territory of the court. Nor are they capable of accurate and ready determination .by resort to sources whose accuracy cannot reasonably be questioned. Al
Finally, the cohrt declines to take judicial notice of the seventh category of documents: documents available on defendantsâ and Orthofixâs websites. Relators contend that courts can take judicial notice of âcommercial website posts and product labeling.â
2. Defendantsâ Request for Judicial Notice
In their opposition, defendants request that the court take judicial notice of seven documents, all of which are available either on the CMS or FDA website, or on the website of CMMSâ Durable Medical Equips ment Medicare Administrative Contractor, NHIC Corp.: (1) The NCD for Osteogenic Stimulation (NCD 150.2);
II. DISCUSSION
A. Legal Standard Governing Motions to Dismiss
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. A Rule 12(b)(6) dismissal is proper only where there is either a âlack of a cognizable legal theory,â or âthe absence of sufficient facts alleged under a cognizable legal theory.â Balistreri v. Pa-cifica Police Dept., 901 F.2d 696, 699 (9th Cir.1988). The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir.1995).
The court need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations.
B. Relatorsâ Federal FCA Claim
Because relatorsâ FCA claim provides the only basis for subject matter jurisdiction, the court addresses it first.
1. Legal Standard Governing Federal FCA Claims
The FCA, 31 U.S.C. §§ 3729 et seq., provides for âthe recovery of civil penalties from those who knowingly present a false or fraudulent claim to the federal government for payment, or knowingly use a false record to avoid or decrease an obligation to pay the federal government.â Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1467 n. 1 (9th Cir.), cert, denied, 519 U.S. 865, 117 S.Ct. 175, 136 L.Ed.2d 116 (1996). Originally enacted to^ punish and prevent massive frauds perpetrated by large contractors during the Civil War, the FCAâs chief goal was to provide for restitution to the government of money taken from it by fraud. See United States v. Bomstein, 423 U.S. 303, 309, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976): The Supreme Court has refused to adopt a restrictive reading of the statutp, however, holding that the FCA is a âremedial statute [that] reaches beyond âclaimsâ which might be legally enforced, to all fraudulent attempts to cause the Government to pay out sums of money.â United States v. Neifert-White Co., 390 U.S. 228, 233, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968); United States v. McLeod, 721 F.2d 282, 284-85 (9th Cir.1983).
The FCA authorizes individuals, known as ârelators,â to file civil suits, known as âqui tam actions,â against persons who present false claims to the government.
âA civil action for False Claims Act liability requires four essential elements: â(1) a false statement or fraudulent course of conduct, (2) made with scienter, (3) that was material, causing (4) the government to pay out money or forfeit moneys due.â â United States ex rel. Ruhe v. Masimo Corp., 977 F.Supp.2d 981, 991 (C.D.Cal.2013) (citing United States ex rel. Hendow v. University of Phoenix, 461 F.3d 1166, 1174 (9th Cir.2006)); see also Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 997 (9th Cir.2010) (same). A plaintiff âmust show an actual false claim for payment being made to the Governmentâ; â[e]vidence of an actual false claim is the sine qua non of a False Claims Act violation.â United States ex rel. Aflatooni v. Kitsap Physicians Serv., 314 F.3d 995, 1002 (9th Cir.2002); see also, Cafasso, United States ex rel. v. General Dynamics Cl Systems, Inc., 637 F.3d 1047, 1055 (9th Cir.2011) (â âIt seems to be a fairly obvious notion that False Claims Act suit ought to require a false claim.â â[T]he [FCA] attaches liability, not to the underlying fraudulent activity or to the governmentâs wrongful payment, but to the âclaim for payment,â â â citing Aflatooni 314 F.3d at 997, and United States v. Rivera, 55 F.3d 703, 709 (1st Cir.1995) (internal alterations original)); United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266-67 (9th Cir.1996) (âViolations of laws, rules, or regulations alone do not create a cause of action under the FCA. It is the false certification of compliance which creates liability when certification is a prerequisite to obtaining a government benefit.... [Thus there is no FCA liability] where regulatory compliance was not a sine qua non of receipt of state fundingâ).
Relators who assert that a defendant has made a false claim can allege that defendant has submitted a factually false claim, or that defendant has given a false
âExpress certification simply means that the entity seeking payment certifies compliance with a law, rule or regulation as part of the process through which the claim for payment is submitted. Implied false certification occurs when an entity has previously undertaken to expressly comply with a law, rule, or regulation, and that obligation is implicated by submitting a claim for payment even though a certification of compliance is not required in the process of submitting the claim.â Ebeid, 616 F.3d at 998.
To show that claims were false under a false certification theory, a complaint âmust plead with particularity allegations that provide a reasonable basis to infer that (1) the defendant explicitly undertook to comply with a law, rule or regulations that is implicated in submitting a claim for payment and that (2) claims were submitted (3) even though the defendant was not in compliance with that law, rule or regulation.â Id.
Like other allegations of fraud in federal court, claims âbrought under the FCA must fulfill the requirements of Rule 9(b)â of the Federal Rules of Civil Procedure. United States ex rel. Lee v. Smith-Kline Beecham, Inc., 245 F.3d 1048, 1051 (9th Cir.2001); see also Cafasso, 637 F.3d at 1054 (âThe heightened pleading standard of Rule 9(b) governs FCA claimsâ). Under Rule 9(b), â[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particĂșlarity.â Fed. R.CrvPROC. 9(b). Conclusory allegations are insufficient, and the facts constituting the fraud must be alleged with specificity. Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir.1989). âA pleading is sufficient under Rule 9(b) if it identifies the circumstances constituting fraud so that a defendant can prepare an adequate answer to the allegations. While statements of the time, place and nature of the alleged fraudulent activities are sufficient, mere conclusory allegations of fraud are insufficient.â Id. at 540 (citation omitted). See also Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir.1997) (to satisfy Rule 9(b), âthe complaint [must] identify] the circumstances of the alleged fraud so that defendants can prepare an adequate answerâ (internal quotations omitted)); DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990) (âAlthough states of mind may be pleaded generally, the âcircumstancesâ must be pleaded in detail. This means the who, what, when, where, and howâ); Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir.1973) (concluding that allegations stating the time, place, and nature of allegedly fraudulent
Thus, to satisfy Rule 9(b), a plaintiff must specify the content of the fraudulent representation, the person who made it, when and where the representation was made, and the manner in which it was untrue and misleading, or the circumstances indicating that it was false. See In re GlenFed Securities Litigation, 42 F.3d 1541, 1548 (9th Cir.1994) (en banc). See also Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1107 (9th Cir.2003) (plaintiff âalleges that the APA misrepresented its connection to Novartis, but he does not identify any specific misrepresentations or specify when and where they occurred. These allegations are not particular enough to satisfy Rule 9(b)â).
âThe knowledge or scienter element of a fraud claim need not be pleaded with particularity, but may be [] alleged generally pursuant to Rule 9(b). However, knowledge must still be pleaded sufficiently to make entitlement to relief plausible.â Owens v. Bank of America, N.A., No. ll-cv-4580-YGR, 2013 WL 1820769, *4 (N.D.Cal. Apr. 30, 2013); see also Odom v. Microsoft Corp., 486 F.3d 541, 554 (9th Cir.2007) (âWhile the factual circumstances of the fraud itself must be alleged with particularity, the state of mind â or scienter â of the defendants may be alleged more generallyâ); In re GlenFed Inc. Securities Litigation, 42 F.3d at 1547 (âWe conclude that plaintiffs may aver scienter generally, just as the rule states â that is, simply by saying that scienter existedâ).
2. Whether Relators Have Adequately Alleged the Submission of False Claims to Medicare
The partiesâ primary point of disagreement is whether claims submitted to Medicare for reimbursement of stimulators that had been approved by the FDA for lumbar use, but that defendants knew had been prescribed by physicians for cervical use, can under any circumstances and regardless of the nature of defendantsâ certifications or disclosures to Medicare, constitute false claims. Defendants argue that claims seeking reimbursement for cervical use of their stimulators can never be âfalse claimsâ under the FCA because Medicare specifically authorizes reimbursement of all stimulators for all uses, regardless of the use for which the FDA approved them.
Relators disagree. They argue that when prescribed for cervical use, defendantsâ stimulators are categorically excluded from Medicare coverage. As a result, they contend, defendantsâ submission of claims that did not disclose the stimulators would be used on the cervical spine, and that certified compliance with Medicare rules and regulations, were false. To show that off-label use of stimulators is not covered by Medicare, relators advance two alternative arguments. First, they contend that properly understood, the provision in the Medicare Manual that limits reimbursement, inter alia,
Relatorsâ second argument â which appears to assume that the Medicare Manualâs limitation of coverage to PMA-approved devices does not preclude coverage for off-label use of defendantsâ stimu-lators
Based on their view that off-label use of defendantsâ stimulators is not reimbursable, relators allege that defendants have submitted false claims for reimbursement of stimulators they knew were prescribed for off-label use both because such claims are factually false and because they constitute a false certification that defendants have complied with all Medicare rules and regulations. They assert the claims are factually false because they listed the PMA-approval number for the stimulators on CMS Form 1500 but did not explicitly disclose in the narrative portion of CMS 847 that the stimulators were intended for cervical use. In combination, relators assert, the inclusion of the PMA approval number and the non-disclosure of cervical
Relators also contend that defendants gave impliedly false certifications by certifying to Medicare every three years that they were in compliance with all applicable statutes and regulations. Specifically, they assert, defendants certified that they provide DME that meets the FDAâs medical device effectiveness and safety standards under 42 C.F.R. § 424.57(c)(24), and that they honestly and accurately report all information necessary for Medicare to determine whether the devices for which they seek reimbursement are covered by Medicare under 42 C.F.R. § 424.57(b)(5).
a. Whether Defendantsâ Stimulators Are Categorically Excluded from Coverage When Prescribed for Cervical Use
In their reply, defendants assert that relatorsâ argument that defendantsâ devices are never covered by Medicare when prescribed for cervical use is an incorrect interpretation of the Medicare Manualâs restriction of coverage to devices approved by the FDA.
The parties thus fundamentally disagree as to whether the Medicare Act and the requirements set forth in the Medicare Manual give CMS authority to cover off-
The court agrees with defendants. The Medicare Manual states that âdevicesâ approved through the PMA process are eligible for coverage, not that âthe use of a deviceâ that has been approved by the FDA is eligible for coverage. âMedicare reimbursement[ ] for off-label uses of medical devices [is] not addressed within the Medicare Act itself.â United States ex rel. Bennett v. Medtronic, Inc., 747 F.Supp.2d 745, 752 (S.D.Tex.2010). Courts have recognized, however, that Medicare does not impose an absolute ban on coverage for off-label use of drugs and devices. See, e.g., id. at 754 (âWhile Medicare and Medicaid typically do not reimburse off-label prescriptions for drugs, the relators have not pointed to a similar categorical restriction on reimbursement for Category B medical devices. For medical devices, eligibility for reimbursement depends on whether the procedure performed is âmedically necessaryâ or âreasonable and necessaryââ); United States ex rel. Nowak v. Medtronic, Inc., 806 F.Supp.2d 310, 345, 347 (D.Mass.2011) (âMedicare and Medicaid reimbursement for off-label uses of medical devices is more permissive than reimbursement for off-label uses of pharmaceuticals.â ... Off-label promotion cases involving medical devices are uniquely complicated by the relatively more permissive and undefined nature of Medicare and Medicaid cover of âoff-labelâ medical devicesâ); Strom ex rel. United States v. Scios, Inc., 676 F.Supp.2d 884, 886 (N.D.Cal.2009) (âMedicare does indeed cover off-label uses of drugs in some contextsâ).
CMSâ December 17, 2003 coverage decision memorandum regarding its reconsideration of coverage of the use of electrostimulation devices for the treatment of chronic wounds supports the courtâs conclusion that the âdevice approved by the FDAâ language in the Medicare Manual means that if a Class III device has been approved for any use by the FDA, CMS can conclude that a particular use is reimbursable even if that use is off label. In the memorandum, CMS stated:
âThe FDA [ ] considers the use of [elec-trostimulation] devices for the treatment (healing) of wounds to be significantly different than the use of these devices for the indications currently covered under a 510(k) clearance. When used to treat wounds, these devices are considered by the FDA to be Class III devices, which requires the manufacturer to go through the Premarket Approval (PMA) process. Therefore, manufacturers would have to submit valid scientific evidence to show that their products provide reasonable assurance of safety and effectiveness for the treatment of wounds before the FDA would approve a PMA application. As of this time, the law prohibits manufacturers from marketing the use of electromagnetic devices for wound healing. Lack of approval for this particular indication, however, does not preclude physicians and other health care providers from*1393 providing this therapy for an unapproved use. In addition, lack of FDA approval or clearance for a specific non-labeled indication, when there are other labeled indications, is not an automatic disqualification for Medicare coverage. In addition, CMS assesses relevant health outcomes, above and beyond the safety and effectiveness regulatory mandate of the FDA. Although a device must receive FDA approval or clearance for at least one indication to be eligible for Medicare coverage ..., FDA approval/clearance alone does not entitle that device to coverage.... CMS has the authority to conduct a separate assessment of a deviceâs appropriateness for Medicare coverage, including whether it is reasonable and necessary specifi-eally for its intended use for Medicare beneficiariesâ143
This passage makes clear CMSâ practice and understanding that if the FDA has approved a device for at least one purpose, an off-label use can be reimbursed by Medicare. Cf. Medicare Benefit Policy Manual, § 50.4.2 (âAn unlabeled use of a drug is a use that is not included as an indication on the drugâs label as approved by the FDA. FDA approved drugs used for indications other than what is indicated on the official label may be covered under Medicare if the carrier determines the use to be medically accepted, taking into consideration the major drug compendia, authoritative medical literature and/or accepted standards of medical practice. In the case of drugs used in an anti-cancer chemotherapeutic regimen, unlabeled uses are covered for a medically accepted indication as defined in § 50.5â). It therefore supports the courtâs conclusion that CMSâ use of the phrase âdevice approved by the FDAâ in the Medicare Manual does not mean âthe use of a device that has been approved by the FDA,â and that there is therefore no categorical ban on coverage of Class III devices for off-label uses.
The explicit terms of certain of the NCDs and LCDs also support this conclusion. Some NCDs and LCDs, for example, specifically limit the use of class III devices to the uses for which they obtained FDA approval. See NCD 20.9, § B.1-B.3 (stating that ventricular assist devices (âVADsâ) âused for support of blood circulation post-cardiotomy are covered only if they have received approval from the [FDA] for that purpose, and are used according to the FDA-approved labeling instructions .... VADs used for bridge-to-transplant are covered only if they have received approval from the FDA for that purpose, and the VADs are used according to the FDA-approved labeling instructions .... VADs used for destination thera
Some LCDs specify that both on-label use and off-label use of devices is covered when supported by peer-reviewed literature. See, e.g., LCD L35084 (covering non-coronary vascular stents âonly when an FDA-approved stent isâ either (1) â[u]sed for the FDA-approved indicationsâ or (2) for certain other enumerated indications âsupported by the peer medical literatureâ);
As defendants argue in their supplemental brief, none of these distinctions would be necessary if coverage of off-label uses of devices were categorically prohibited.
Relators argue in their supplemental brief that the court in Svidler v. U.S. Department of Health and Human Services, No. C 03-3593 MJJ, 2004 WL 2005781, *5 (N.D.Cal. Sept. 8, 2004), rejected the conclusion the court reaches here â that once the FDA approves a de
At bottom, relatorsâ argument that defendantsâ devices can never reimbursed when prescribed for cervical use conflates the requirements of the Medicare Act and the requirements of the FDCA. Relators argue âdevices approved by the FDAâ can only mean devices used for the purposes for which the FDA approved them because those are the only uses that have been determined to be safe and effective through the PMA process.
b. Whether in Addition to NCD 150.2, NCD 280.1 Must Be Consulted in Determining Coverage for Defendantsâ Stimulators and Whether It Bars Reimbursement for Cervical Use
Relatorsâ alternate argument is that NCD 150.2 must be read in conjunction with NCD 280.1 and that, so read, the NCDs proscribe coverage for off-label use of defendantsâ stimulators because one of the relevant considerations under NCD 280.1 is whether the FDA has approved marketing of the device for that particular use. Defendants contend that
Again, the court agrees with defendants. As relators note, NCDs identify items or services for which Medicare coverage will be provided on a national basis. They outline the conditions under which a device or service will be covered (or not covered) and are binding on all contractors.
NCD 280.1 does not add additional, mandatory requirements to the coverage provided by NCD 150.2. Rather, it is a non-comprehensive, summary resource designed to assist contractors in determining whether a specific DME is covered. By its own terms, NCD 280.1 serves merely âas a quick reference toolâ to âfacilitate the contractorâs processing of DME claims.â
The list of covered devices in NCD 280.1 directs the contractor to the specific NCD governing coverage for that device. The contractor must then determine coverage by applying the provisions of that NCD. NCD 280.1 does not instruct the contractor also to apply the coverage criteria set forth therein. See Cashflow Solutions, 2012 WL 4470589 at *3 (âNCD 280.1 is a DME reference list and, as relevant here, it includes âLymphedema Pumpsâ among its list of items. NCD 280.1 provides that lymphedema pumps are âcovered,â and refers specifically to NCD 280.6. NCD 280.1 does not otherwise contain any language specific to the coverage of (or non-coverage of) pneumatic compression devices or lymphedema pumps. The appellant would have the Council ignore specific instructions within NCD 280.1 to refer to .NCD 280.6, which addresses, more specifically, the coverage parameters for pneumatic compression devices. NCD 280.6 is binding legal authority and it must be applied to decide the coverage question hereinâ). Indeed, such a requirement would be redundant, as HHS already considered those criteria in deciding that the device should be covered and issuing a specific NCD.
The NCD covering a device is binding on the contractor even if it is not listed in NCD 280.1âs non-exhaustive list of covered devices. A contractor deciding coverage for a device that NCD 280.1 states is covered does not apply the coverage criteria set forth in that NCD in addition to the criteria contained in the deviceâs NCD. So too, a contractor deciding coverage for a device that is the subject of an NCD but is not listed as covered in NCD 280.1 does not apply the coverage criteria set forth in the latter. Because NCD 280.1 is intended merely as a reference point and not a mandatory supplement to other NCDs, re-latorsâ contention that it applies and precludes coverage for cervical use of defendantsâ stimulators is unavailing. Instead, whether defendantsâ stimulators are covered is fully answered by NCD 150.2, which does not limit coverage only to on-label use.
Relators also argued â most clearly at the hearing and in their supplemental brief â that defendants have an affirmative obligation to apply for a PMA supplement because they knowingly derive substantial profit from the distribution of stimulators for cervical use and because their representatives tell patients how to modify the stimulators for cervical use. As noted, this forms the basis for relatorsâ contention that defendants made impliedly false certifications to Medicare when they allegedly submitted requests for reimbursement of stimulators distributed for off-label use, certifying that they were in compliance with all applicable regulations.
Relators argue that the FDAâs PMA approval of defendantsâ stimulators required them to comply with 21 C.F.R. § 814.39.
âAfter FDAâs approval of a PMA, an applicant shall submit a PMA supplement for review and approval by FDA before making a change affecting the safety or effectiveness of the device for which the applicant has an approved - PMA[.] ... [Cjhanges for which an applicant shall submit a PMA supplement include, but are not limited to, the following types of changes if they affect the safety and effectiveness of the device: (1) New indications for use of the device.â 21 C.F.R. § 814.39.
The FDA has stated that it interprets the phrase ânew indication for use of the deviceâ to mean âa change to the intended patient population, disease state, or to other clinical aspects of the device use, such as duration of use, anatomical site, or surgical procedure.â
â[The] FDA approved a PMA for a prosthetic heart valve for use in the aortic position. The PMA applicant modified the indication to include the mitral position. No changes were made to the device itself. In the mitral position, the valve is subjected to different physiological conditions, such as valve closing pressures and flow rates, from the aortic position. These conditions can affect the performance of the valve by affecting the hemodynamics[.] The physiological and potential performance differences between the t\yo positions may significantly impact clinical*1400 outcome. Therefore, new clinical data were needed to ensure that the heart valve remained safe and effective when implanted in the new location. Additional preclinical testing was not needed because the test data provided in the original PMA to support the valve for use in the aohtic position were sufficient to support the valve for use in the mi-tral position. Therefore, FDA determined that the submission of a [type of PMA] supplement was appropriate for this change.â170
Relators argue that defendantsâ stimu-lators and the Orthofix stimulators employ different technologies.
Defendants do not disagree that the of their stimulators on the cervical spine constitutes a new indication for use of the devices.
In support of their argument that defendants have an affirmative duty to file a PMA supplement, relators cite 21 C.F.R. § 801.4.
âThe words intended uses or words of similar import in §§ 801.5, 801.119, and 801.122 refer to the objective intent of the persons legally responsible for the labeling of devices. The intent is determined by such personsâ expressions or may be shown by the circumstances surrounding the distribution of the article. This objective intent may, for example, be shown by labeling claims, advertising matter, or oral or written statements by*1401 such persons or their representatives. It may be shown by the circumstances that the article is, with the knowledge of such persons or their representatives, offered and used for a purpose for which it is neither labeled nor advertised. The intended uses of an article may change after it has been introduced into interstate commerce by its manufacturer. If, for example, a packer, distributor, or seller intends an article for different uses than those intended by the person from whom he received the devices, such packer, distributor, or seller is required to supply adequate labeling in accordance with the new intended uses. But if a manufacturer knows, or has knowledge of facts that would give him notice that a device introduced into interstate commerce by him is to be used for conditions, purposes, or uses other than the ones for which he offers it, he is required to provide adequate labeling for such a device which accords with such other uses to which the article is to be put.â 21 C.F.R. § 801.4.
The last sentence of § 801.4 appears to place an affirmative duty on a manufacturer that knows a device will be used for an off-label purpose to label the device accordingly. A manufacturer, however, cannot label a device for an off-label purpose without first obtaining a PMA supplement. Thus, the terms of § 801.4 would appear to indicate that defendants have an affirmative duty to file a PMA supplement if they intend to distribute their devices knowing that a physician has prescribed them for an off-label use. See Ramirez v. Medtronic, Inc., 961 F.Supp.2d 977, 991 n. 9 (D.Ariz.2013) (âAccording to th[is] regulation, [], mere awareness of off-label use can potentially result in the creation of a new intended useâ).
It does not appear, however, that courts in the Ninth Circuit and elsewhere construe § 801.4 â whose purpose is to define the terms used in §§ 801.5 and 801.119 â âą as imposing an affirmative duty on manufacturers to file a PMA supplement under § 814.39 any time they know or should know that a patient intends to use, or that a physician has prescribed or will prescribe, a device for off-label purpose. In Carson, as noted, the Ninth Circuit unequivocally concluded that âa manufacturer is not liable [for distributing a mis-branded product] merely because it sells a device with knowledge that the prescribing doctor intends an off-label use.â 365 Fed. Appx. at 815. Moreover, in Ramirez, the court noted that the Ninth Circuitâs discussion in a case regarding preemption under the FDCA' â Perez v. Nidek Co., Ltd., 711 F.3d 1109 (9th Cir.2013) â appeared to âforeclose efforts to claim that merely alleging knowledge of off-label use in the absence of off-label promotion by the manufacturer can establish a new, unregulated intended use by the manufacturer.â 961 F.Supp.2d at 992 n. 9. In Perez, the Ninth Circuit concluded that a plaintiffs state law claims alleging that a defendant misled patients by failing to disclose that a laser was not approved by the FDA for certain types of surgeries was not preempted by the FDCA because to hold otherwise would impose a âdisclosure requirement ... âdifferent from, or in addition toâ the requirements applicable to the Laser under the [FDCA].â 711 F,3d at 1118.
A Minnesota district court directly addressed the question in Riley v. Cordis Corp., 625 F.Supp.2d 769 (D.Minn.2009), and concluded that § 801.4 did not impose an affirmative duty on a manufacturer to file a PMA supplement when it knew its product was being used for off-label purposes. First, it held, imposing such a duty would be inconsistent with the fact that the FDA allows manufacturers to provide health care providers with academic journals and certain other types of studies
The court believes it is bound by the explicit holding in Carson that a manufacturer cannot be held liable merely because it knows its device is being prescribed for an off-label purpose. Even if it were not bound by Carson, the court finds the reasoning of the Riley court persuasive. Something more than the mere knowledge that a device is being prescribed for off-label use is required before a manufacturer is obligated to file a PMA supplement. To hold otherwise would create an affirmative duty on the part of a manufacturer to apply for a PMA supplement every time it learned that a device was being prescribed or used for an off-label purpose; this would be impracticable. Moreover, the court agrees with Riley and with defendants that the fact that the FDA continues to state that manufacturers may provide health care providers with academic journals and other types of material discussing the benefits of using a device for off-label purposes without running afoul of the FDCAâs ban on promotion
As to whether the fact that defendantsâ employees demonstrate for patients how to use the stimulators for off-label purposes constitutes a form of promotion that imposes an affirmative obligation on defendants to file a PMA supplement, the court finds it inappropriate to consider the question in deciding this motion. Relators did not clearly plead such a theory in their second amended complaint, and none of their briefs other than the supplemental brief addressed it. Defendants, who filed their supplemental brief simultaneously, have not had an opportunity to respond to the point. See El Pollo Loco, Inc. v. Hashim, 316 F.3d 1032, 1040-41 (9th Cir. 2003) (indicating that the court may consider new issues raised in reply if it gives the opposition an opportunity to respond); Provenz v. Miller, 102 F.3d 1478,1483 (9th Cir.1996) (â[Wjhere new evidence is pre
Even had relators adequately alleged this theory of implied false certification based on the fact that defendantsâ employees have demonstrated off-label uses for patients, and even had the court found such a theory valid, the court would nonetheless dis'miss the claim. This is because relators have failed to plead facts satisfying Ebeid. To plead an implied false certification claim adequately under Ebeid, relators must allege that â(1) the defendant explicitly undertook to comply with a law, rule or regulation that is implicated in submitting a claim for payment and that (2) claims were submitted (3) even though the defendant was not in compliance with that law, rule or regulation.â Ebeid, 616 F.3d at 998. While the court finds infra that relators have adequately alleged defendants submitted claims to Medicare, they have not sufficiently alleged the first of the elements set forth in Ebeid: relators plead that every three years defendants signed a Medicare Enrollment Application, pursuant to 42 C.F.R. § 424.57, which certified compliance with all applicable rules and regulations, and stated that defendants âun-derst[oo]d that payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations, and program instructions.â
d. Conclusion Regarding Relatorsâ Ability to State a False Claim Act Claim Based on Defendantsâ Submission of Claims to Medicare
Because relators incorrectly assert that Medicare covers defendantsâ stimulators only when prescribed for on-label use, their argument that defendantsâ failure affirmatively to disclose the fact that their stimulators were prescribed for off-label use makes their claims factually false and that they have provided a false certification that their devices were being prescribed for on-label use fails.
3. Whether Relators Have Adequately Alleged Submission of False Claims to Medicaid and other Federal Reimbursement Programs
The federal government reimburses a portion of the cost of DME under the Medicaid program, Federal Employees Health Benefit Program, Federal Workerâs Compensation Programs, CHAMPVA, and Tricare. Relators contend that defendants submitted false claims to these programs as well.
As noted,â relatorsâ FCA claim must satisfy the heightened pleading requirements of Rule 9(b). Relators must therefore âset forth what is false or misleading about a statement and why it is false.â Ebeid, 616 F.3d at 998. Relatorsâ complaint alleges only that state Medicaid requires that a device be medically necessary in order to obtain reimbursement, and that â[s]everal state Medicaid programs expressly exclude payment for DME that has not received PMA [approval] from the FDA for its intended use.â
With respect to the other federal programs to which defendants purportedly
4. Whether Relators Have Adequately Alleged Scienter
The deficiencies the court has noted in relatorsâ pleading of falsity also render inadequate their allegations of scienter. Although, as noted, scienter may be alleged generally in an FCA case, none of the facts relators plead support their conelusory allegation that defendants knowingly submitted false claims. Indeed, as the court has noted, none of the statutes, regulations, NCDs, LCDs, or claim forms indicate that defendants were required to disclose the fact that they were seeking reimbursement for devices prescribed for off-label use. Thus, none put defendants on notice that they needed to do so.
Relators, moreover, allege no other facts that could support an inference of such an awareness on defendantsâ part. While re-lators do plead facts supporting an inference that defendants knew they were supplying stimulators to patients for off-label use, none of their allegations supports an inference that they knew they could not lawfully seek reimbursement for the stim-ulators from Medicare or the other federal programs identified in the complaint. Indeed, the only allegation that is even relevant in assessing whether relators have adequately pled facts supporting an inference that defendants knew they were submitting false claims is their assertion that on May 20, 2013, Milko asked a former Biomet distributor how Biomet got Medicare to reimburse Biomet for its lumbar-only device when it was prescribed for cervical use. Relators allege that the former Biomet representative said that neither CMS 847 nor HCPCS code E0748 discloses the level of the spine to which the device was to be applied.
Relators argue that the 1997 warning letter from the FDA to Orthofix put defendants on notice that any cervical use of their stimulators required a PMA supplement.
In the absence of any factual allegations supporting relatorsâ argument that defendants acted with the requisite scienter, the lone allegation in the complaint that defendants âknew that they were falsely and/or fraudulently claiming reimbursementâ is too conclusory to plead a plausible claim for relief under Rule 8(a), Iqbal, and Twombly.
5. Whether the Second Amended Complaint Has Adequately Alleged That Defendants Submitted Claims to the Government
As noted, claims âbrought under the FCA must fulfill the requirements of Rule 9(b).â Lee, 245 F.3d at 1051; see also Cafasso, 637 F.3d at 1054 (âThe heightened pleading standard of Rule 9(b) governs FCA claimsâ). Even if relators could allege that a claim to Medicare or another federal program for reimbursement of lumbar-approved stimulators prescribed for cervical use was false absent disclosure of the off-label use, and even if they had adequately alleged that defendants had the requisite scienter, the court would nonetheless dismiss their FCA claim as to some of the federal programs. This is because relators have not alleged with particularity that defendants ever submitted false claims for reimbursement under these programs to the government.
a. Whether Relators Have Alleged Representative Examples of False Claims Submitted by Defendants
â[U]se of representative examples is [ ] one means of meeting the pleading obligationâ a relator must satisfy in order adequately to allege defendants submitted false claims under Rule 9(b). Ebeid, 616 F.3d at 998. Relators have not sufficiently alleged any representative instances in which defendants submitted false claims to federal programs, however. Relators allege that on February 2, 2012, DJO submitted a claim to the Minnesota Health Care Programs for a stimulator prescribed for off-label use, and that Biomet and EBI submitted claims for stimulators prescribed for off-label use to that program on February 16, 2010, March 10, 2010, and March 18, 2011.
Relators have not otherwise alleged any facts concerning representative claims submitted by Biomet and EBI that were false. While they do allege more facts concerning DJO, those facts also fail adequately to allege representative examples of false claims. The second amended complaint identifies three physician orders DJO received in 2011 for which it purportedly submitted claims to Medicare for reimbursement.
The allegation that claims were submitted to Medicare, moreover, is made on information and belief. âAllegations of fraud based on information and belief do not satisfy FRCP 9(b) requirements .... unless accompanied by a statement of the specific facts on which the belief is founded.â County of Santa Clara v. Astra U.S., Inc., 428 F.Supp.2d 1029, 1036-37 (N.D.Cal.2006) (citing Moore, 885 F.2d at 540); see also Shroyer v. New Cingular Wireless Services, Inc., 622 F.3d 1035, 1042 (9th Cir.2010) (âClaims made on information and belief are not usually sufficiently particular, unless they accompany a statement of facts on which the belief is foundedâ). Relatorsâ allegation on information and belief that DJO submitted claims to Medicare based on these physician orders is not supported by the pleading of specific facts'on which realtorsâ belief is founded. It is therefore inadequate to support their claim of fraud.
Even if relatorsâ allegation that DJO submitted claims to Medicare based on these physician orders were adequate to support their fraud claim, moreover, it is too conclusory to satisfy Rule 9(b). It does not state who at DJO submitted the claims, when they did so, where the claims were sent, or provide any details concerning the claims or what made them false. For all of these reasons, relators have not adequately alleged any representative examples of either defendantâs submission of false claims to Medicare or other federal programs.
b. Whether Relators Have Adequately Alleged Particular Details of a Scheme to Submit False Claims Coupled with Reliable Indicia that Lead to a Strong Inference Claims were Actually Submitted
Relators can also meet their pleading burden by alleging âparticular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.â Ebeid, 616 F.3d at 999-1000 (citing United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009)). Assuming, without deciding, that relators have adequately alleged a scheme to submit false claims, they have not adequately pled reliable indicia leading to a strong inference that defendants actually submitted false claims to each of the federal programs. More specifically, they have adequately alleged reliable indicia that DJO submitted claims to Medicare and Medicaid, and that Biomet and EBI submitted claims to Medicare, but have not adequately alleged reliable indicia that DJO, Biomet, or EBI submitted claims to the remaining federal programs.
i. DJO
As respects DJO, relators have alleged many facts giving rise to a strong infer
Relators have also pled facts indicating that DJO submitted claims for off-label use of its stimulator to Medicare and Medicaid. In April 2011, an Orthofix sales associate purportedly went to work for DJO; concurrently, Orthofix lost some of its physician referral sources, including doctors who regularly referred Medicare patients for cervical stimulators. In August 2012, the DJO Regional Sales Director and a DJO sales representative allegedly told Modglin that DJO routinely billed federally-sponsored health care programs like Medicare and Medicaid for off-label distribution of SpinaLogic. Finally, DJO submitted a claim for a stimulator prescribed for use on the cervical spine to a Minnesota insurance reimbursement plan. These facts â most specifically, the fact that the DJO Regional Sales Director told Modglin DJO routinely billed Medicare and Medicaid for stimulators prescribed for off-label use â strongly support the Inference that DJO submitted claims for such use to Medicare and Medicaid.
The only allegation supporting an inference that DJO submitted similar claims to any other federal program, however, is the directorâs purported statement that DJO routinely billed federally-sponsored health care programs for stimulators prescribed for off-label use. This single statement is not sufficient to support a strong inference that DJO submitted a claim or claims for off-label use of a stimulator to the Federal Employees Health Benefit Program, Federal Workerâs Compensation Programs, CHAMPVA, or Tricare. It is far too general, and could just as easily be a reference to submission of claims to Medicare and Medicaid. Because relators do not adequately allege the actual submission of claims to these other federal programs, their FCA claim against DJO concerning those programs must be dismissed,
ii. Biomet and EBI
As respects Biomet and EBI, relators also plead facts tending to show that these companies distributed their stimulator, SpinalPak, for cervical use. They plead, for example, that on September 5, 2012, a
Relators also plead facts tending to show that Biomet and EBI submitted claims to Medicare. They allege, for example, that Medicare patients told Milko they had used the SpinalPak on their cervical spine. They also allege that on February 16 and March 10, 2010, and on March 18, 2011, Biomet and EBI submitted claims to the Minnesota Health Care Programs for a stimulator prescribed for off-label use, which were reimbursed. Re-lators plead that on May 20, 2013, a former Biomet distributor told Milko that Biomet had received Medicare payment for off-label use of its stimulator because CMS 847 does not require disclosure of the level of the spine to which the device will be applied, and because the relevant HCPCS billing code covers both lumbar and cervical use. On May 29, 2013, a former Biom-et sales representative allegedly told Modglin that she had sold Biometâs device to Medicare patients for off-label use, and on May 31, 2013, a former Biomet sales representative told Modglin he had sold the SpinalPak to Medicare and Medicaid patients in Texas between 2009 and 2011 for cervical use. These facts â most specifically, admissions by Biomet and EBI employees that they sold stimulators for off-label use to Medicare and Medicaid patients and that Medicare reimbursed the company for stimulators prescribed for off-label use because Medicare claim forms did not require that that fact be disclosed â support an inference that Biomet and EBI submitted claims to Medicare.
Because relators do not allege that either of the Biomet employees who stated they sold stimulators for off-label use to Medicare patients also said that Biomet billed Medicaid for the devices, and also do not allege that Biomet obtained reimbursement for such use from Medicaid, relators have not adequately alleged reliable indicia that support a strong inference claims were actually submitted to Medicaid. Additionally, there are no factual allegations that could support a strong inference that Biomet and EBI ever submitted claims to any of the other federal programs identified in the complaint. Consequently, rela-torsâ FCA claim must be dismissed to the extent based on an allegation that Biomet and EBI submitted claims to Medicaid, the Federal Employees Health Benefit Program, Federal Workerâs Compensation Programs, CHAMPVA, and Tricare.
6. Whether the Court Will Grant Leave to Amend
Defendants ask that the court dismiss relatorsâ claim with prejudice.
Because it appears possible relators could allege that defendants submitted false claims to Medicaid, the Federal Employees Health Benefit Program, the Federal Workerâs Compensation Programs, CHAMPVA, and/or Tricare, the court grants relators leave to amend their federal FCA claim to the extent based on the submission of claims to these programs if they can cure the deficiencies noted in this order.
C. Whether the Court Should Exercise Supplemental Jurisdiction Over Relatorsâ State Law Claims
Relatorsâ federal FCA claim provides the sole basis for federal subject matter jurisdiction in this case. Because it is presently unclear whether relators can state a viable federal claim, the court declines to exercise jurisdiction over relatorsâ state law claims at this time. See Wade v. Regional Credit Association, 87 F.3d 1098, 1101 (9th Cir.1996) (âWhere a district court dismisses a federal claim, leaving only state claims for resolution, it should decline jurisdiction over the state claims and dismiss them without prejudiceâ); Harrell v. 20th Century Insurance Co., 934 F.2d 203, 205 (9th Cir.1991) (â[I]t is generally preferable for a district court to remand remaining pendent claims to state courtâ); Anderson v. Countrywide Financial, No. 2:08-ev-01220-GEB-GGH, 2009 WL 3368444, *6 (E.D.Cal. Oct. 16, 2009) (âSince state courts have the primary responsibility to develop and apply state law, and the Gibbs values do not favor continued exercise of supplemental jurisdiction over Plaintiffs state claims, Plaintiffs state claims are dismissed under 28 U.S.C. § 1367(c)(3)â); 28 U.S.C. § 1367(c)(3) (âThe district courts may decline to exercise supplemental jurisdiction over a [state-law] claim [if] ... the district court has dismissed all claims over which it has original jurisdictionâ). See also United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966) (âNeedless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable lawâ).
III. CONCLUSION
For the reasons 'stated, the court grants defendantsâ motion to dismiss the second amended complaint. Relatorsâ federal FCA claim is dismissed with prejudice to the extent it is based on defendantsâ submission of claims to Medicare; the only exception is a claim alleging that defendants made impliedly false certifications to Medicare that they were in compliance with all applicable regulations when they had an affirmative duty to file a PMA supplement because their employees were promoting use of the stimulators for the cervical spine. This aspect of the claim is dismissed with leave to amend. Relatorsâ federal FCA claim is dismissed without
. Complaint, Docket No. 1 (Aug. 20, 2012).
. First Amended Complaint, Docket No. 8 (Dec. 26, 2012).
. The United States' Election to Decline Intervention, Docket No. 9 (May 17, 2012).
. Statesâ Election to Decline Intervention, Docket No. 13 (July 19, 2013).
. Docket (July 19, 2013).
. Request to Dismiss Defendant Orthofix, Inc., Docket No. 18 (Oct. 2, 2013); Order Dismissing Action Against Defendant Orthofix Without Prejudice, Docket No. 19 (Oct. 3, 2013).
. Second Amended Complaint, Docket No. 43 (Nov. 8, 2013). Defendants assert, and rela-tors agree, that EBI LLC and EBI, L.P. are the same entity. (See Motion at 1 and Opposition at 9.) The court accordingly refers to both as EBI.
. Stipulation to Dismiss Defendants DJO Finance and DJO Global, Docket No. 49 (Jan. 22, 2014).
. Order Dismissing Defendants DJO Global and DJO Finance, Docket No. 50 (Jan. 28, 2014).
. Order Granting Defendantsâ Motion to Stay Discovery, Docket No. 57 (Feb. 20, 2014).
. Motion to Dismiss Second Amended Complaint ("Motionâ), Docket No. 46 (Jan. 20, 2014).
. Opposition to Joint Motion to Dismiss Second Amended Complaint, Docket No. 61 (Mar. 19, 2014); Notice of Errata re: Rela-torsâ Opposition to Defendantsâ Motion to Dismiss Second Amended Complaint ("Oppositionâ), Docket No. 62 (Mar. 22, 2014). Re-latorsâ opposition is 31 pages. Local Rule 11-6 states that "[n]o memorandum of points and authorities ... shall exceed 25 pages in length, excluding indices and exhibits, unless permitted by order of the judge.â Ca CD L.R. 11-6. The court did not authorize relators to exceed the page limit, and could strike the opposition for that reason. The court declines to do so in this instance. Relators are cautioned, however, that they must follow all local rules in the future. Should relators submit another memorandum of points and authorities that exceeds the page limits set by the local rules, the court will strike it.
. Order Directing Parties to File Supplemental Briefing, Docket No. 67 (June 20, 2014).
. Relators' Responses to the Questions Presented in the Courtâs June 20, 2014 Order ("Relatorsâ Supp. Briefâ), Docket No. 71 (July 7, 2014); Defendantsâ Joint Supplemental Brief in Support of Motion to Dismiss Second Amended Complaint ("Defendantsâ Supp. Briefâ), Docket No. 72 (July 7, 2014).
. These other plans are Medicaid, the Federal Employees Health Benefit Program, the Federal Worker's Compensation Programs, the Civilian Health and Medical Program of the Department of Veterans Affairs ("CHAMPVAâ), and Tricare.
. All manufacturers that wish to market Class III devices must obtain a PMA supplement prior to doing so unless the FDA clears a form 510(k) in which the manufacturer has successfully argued that the device should be reclassified as a Class I or II device âbecause it is substantially equivalent to an existing device so categorized.â United States v. Universal Management Services, Inc., 191 F.3d 750, 754 (6th Cir.1999). Manufacturers that wish to market Class I or II devices must also, except in rare circumstances, submit a form 510(k) to the FDA in order to be able lawfully to market the device. (Defendantsâ Request for Judicial Notice in Support of their Supplemental Brief (âDefendantsâ Supp. RJNâ), Docket No. 73 (July 7, 2014), Exh. 10 at 447 (Medical Devices: Premarket Notification (510k)).) The court takes judicial notice of this, and the other documents cited in this section infra.
. Relators' Request for Judicial Notice in Support of Opposition to Defendants' Motion to Dismiss Second Amended Complaint ("Re-latorsâ RJNâ), Docket No. 61 (Mar. 19, 2014), Exh. E at 69-70 (FDA Good Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices ("Good Reprint Practiceâ) (stating that off-label uses of approved devices "may even constitute a medically recognize[d] standard of careâ)).
. Id. (stating that ââ[a] medical device that is promoted for a use that has not been approved or cleared by FDA is adulterated and misbranded").
. SAC, ¶¶ 5-6.
. Id., ¶ 11; Relatorsâ Request for Judicial Notice in Support of Relatorsâ Responses to Court's June 20, 2014 Order ("Relatorsâ Supp. RJN"), Docket No. 70 (July 6, 2014), Exh. A at 13 (FDA Guidance Document for Industry and CDRH Staff for the Preparation of Investigational Device Exemptions and Premarket Approval Applications for Bone Growth Stimulator Devices ("Guidance Document re: Premarket Approval for Stimu-latorsâ) ("Based upon the potential for serious risk associated with chronic exposure to electrical, electromagnetic, and ultrasound energies at the cellular and molecular levels, the [FDA] regards all bone growth stimulators as significant risk devicesâ)).
. SAC, ¶5.
. The "lumbar spineâ refers to the vertebrae in an individualâs lower back. (Merriam-Webster Dictionary, www.merriam-webster. com/dictionary/lumbar (accessed on Apr. 21, 2014) ("relating to or lying near the lower backâ).)
. Id., ¶ 5.
. Id., ¶ 6.
. Id.
. The court takes judicial notice of the contents of the Medicare Program Integrity Manual. See http://www.cms.gov/Regulations- and-Guidance/Guidance/Manuals/Downloads/ pim83cl3.pdf (accessed on July 30, 2014).
. Relatorsâ RJN, Exh. J at 136-137 (Medicare Manual Chapter 14 â Medical Devices). The court takes judicial notice of this document infra.
. Relatorsâ RJN, Exh. H at 94 (Medicare Program Integrity Manual, Chapter 13 â Local Coverage Determinations, § 13.1.1). The court takes judicial notice of this document infra.
. Defendantsâ Request for Judicial Notice in Support of Joint Motion to Dismiss Second Amended Complaint ("Defendants' RJNâ), Exh. 1 (National Coverage Determination for Osteogenic Stimulators (150.2) ("NCD 150.2â)). The court takes judicial notice of this document, infra. â >
. Id. at 7.
. Id., Exhs. 3 at 15 (Local Coverage Determination (LCD): Osteogenesis Stimulators (LCD LI 1501), covering Connecticut, D.C., Delaware, Massachusetts, Maryland, Maine, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont ("LCD LI 1501â) (âA spinal electrical osteo-genesis stimulator (E0748) is covered only if any of the following criteria are met ... Following spinal fusion surgeryâ)); Exh. 4 at 33 (Local Coverage Determination (LCD): Osteo-genesis Stimulators (LCD LI 1490), covering Alaska, American Samoa, Arizona, California, Guam, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Ofegon, South Dakota, Utah, Washington, Wyoming, Northern Mariana Islands (âLCD LI 1490â) (âA spinal electrical osteo-genesis stimulator (E0748) is covered only if any of the following criteria are met ... Following spinal fusion surgeryâ)); Exh. 5 at 52 (Local Coverage Determination (LCD): Osteo-genesis Stimulators (LCD L5012), covering Alabama, Arkansas, Colorado, Florida, Georgia, Louisiana, Mississippi, North Carolina, New Mexico, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, Virgin Islands, West Virginia ("LCD L5012â) (âA spinal electrical osteogenesis stimulator (E0748) is covered only if any of the following criteria are met ... Following spinal fusion surgeryâ)); Exh. 6 at 67 (Local Coverage Determination (LCD): Osteogenesis Stimulators (LCD L27026), covering Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio, and Wisconsin ("LCD L27026â) ("A spinal electrical osteogenesis stimulator (E0748) is covered only if any of the following criteria are met ... Following spinal fusion surgeryâ)). The court takes judicial notice of these documents infra.
.See Defendantsâ RJN, Exhs. 1 (NCD 150.2); 3 (LCD LI 1501), 4 (LCD LI 1490), 5 (LCD L5012), and 6 (LCD L27026). The "cervical spineâ refers to the vertebrae in an individualâs neck. (Merriam-Webster Dictionary, www.merriam-webster.com/dictionary/ cervical (accessed on Apr. 21, 2014) ("of or relating to the neckâ).)
. Relatorsâ RJN, Exh. F (Medicare Manual, Chapter. 1, Part 4, Coverage Determinations, § 280.1 â Durable Medical Equipment Reference List (âNCD 280.1â)). The court takes judicial notice of this document infra.
. Id.
. Id.
. Relators' RJN, Exh. R (Health Insurance Claims Form 1500 ("CMS Form 1500â)). The court takes judicial notice of this document infra.
. Id.
. CMS Manual System, Pub. 100-04 Medicare Claims Processing, Transmittal 236, at 3, http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/ R236CP.pdf (accessed on April 24, 2014) ("Modifier KF is a pricing modifier. The description for modifier KF is as follows: Item designated by FDA as class III deviceâ). The court takes judicial notice of this fact based on an official document available on the CMS website.
. Defendants' RJN, Exh. 2 at 11 (Certificate of Medical Necessity CMS-847-Osteogenesis Stimulators ("CMS 847â)). The court takes judicial notice of this document infra.
. Id.
. Id.
. Id.
. Id.
. Id.
. Relatorsâ RJN, Exh. R (CMS Form 1500); Defendantsâ RJN, Exh. 2 (CMS 847).
. Defendantsâ RJN, Exhs. 3 (LCD LI 1501), 4 (LCD LI 1490), 5 (LCD L5012), and 6 (LCD L27026).
. SAC, ¶¶ 5-6.
. Id.
. Id., ¶ 30.
. Id.
. Id.
. Id.
., Id., ¶ 29.
. Id., ¶ 28.
. Id., ¶35.
. Id., ¶¶ 13, 15.
. Id., V¶ 14, 16.
. Id., ¶¶ 13, 15.
. Defendants' RJN, Exh. 7 at 81 (July 3, 1997 Letter Warning Letter from the FDA to Orthofix); id., ¶ 15.
. Id., ¶36.
. Id.
. Id.
. Id., ¶ 37.
.Id.
. Id.
. Id., ¶ 38. Relators allege these physicians testified that they did not complete CMS 847 forms in connection with these orders. (Id.) They do not plead, however, that defendants forged the physicians' signatures on the form, that defendants wrongfully completed Section B, or that when a manufacturer completes the form instead of the physician, this alone means the manufacturer has made a false
. Id., ¶ 45.
. Id.
. Id., ¶3.
. Id., ¶39.
. Id., ¶ 40.
. Id., ¶ 44.
. Id., ¶ 47.
. Id.
. Id.
. Id., ¶ 48.
. Id., ¶ 49.
. Id., ¶ 48.
. Id., ¶ 50.
. Id., ¶ 51.
. Relators' RJN; Defendants' RJN; Rela-torsâ Supp. RJN; Defendants' Supp. RJN.
. Relatorsâ RJN, Exh. A (Comments by the BGS Reclassification Opposition Group in opposition to a petition for reclassification of bone-growth stimulators from Class III to Class II (âBGS Reclassification Opposition Group Commentsâ)).
. Id., Exh. D (FDA guidance on the PMA requirement).
. Id., Exh. B (FDA guidance on PMA Supplements and Amendments).
. Id., Exh. E (Good Reprint Practice).
. Id., Exh. K (Implementation of the FDA/ HCFA Interagency Agreement Regarding Reimbursement Categorization of Investigational Devices).
. Relatorsâ Supp. RJN, Exh. A (Guidance Document re: Premarket Approval for Stiml-uators).
. Relatorsâ Supp. RJN, Exh. B (FDA Modifications to Devices Subject to Premarket Approval (PMA) â the PMA Supplement Decision-Making Process (âWhen to File a PMA Supplementâ)).
. Relatorsâ Supp. RJN, Exh. C (FDA Docket for Petition: Non-invasive Bone Growth Stimulator be Reclassified from Class III to Class II in Accordance with Section 513(e) of the Food and Drug Cosmetic Act (FDCA), 21 C.F.R. § 860.123 and 21 C.F.R. § 860.130).
. Relators' Supp. RJN, Exh: D (FDA Decision Denying Petition: Orthopedic Devices: Reclassification of Non-invasive Bone Growth Stimulator).
. Relatorsâ Supp. RJN, Exh. F (PMA Supplements Filed by DJO Global).
. Relatorsâ Supp. RJN, Exh. G (FDA Approval Materials for SpinaLogic).
. Relators' Supp. RJN, Exh. I (PMA Supplements Filed by EBI/Biomet).
. Relators' Supp. RJN, Exh. J (FDA Approval Materials for SpinalPak).
. Relators' Supp. RJN, Exh. L (FDA Approval Materials for Cervical-Stim).
. Relatorsâ RJN, Exh. G (Medicare National Coverage Determinations Manual, Forward).
. Id., Exh. F (NCD 280.1).
. Id., Exh. H (Medicare Program Integrity Manual, Chapter 13 â Local Coverage Determinations).
. Id., Exh. J (Medicare Benefit Policy Manual, Chapter 14 â Medical Devices).
. Id., Exh. N (Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Quality Standards).
. Id., Exh. O (Medicare Enrollment Application- â -Durable Medical Equipment, Pros-thetics, Orthotics, and Supplies Suppliers).
. Id., Exh. R (CMS Form 1500).
. Id., Exh. S (Medi-Cal Provider Agreement).
. Id., Exh. L (Form 10-K for DJO Finance for the fiscal year ending December 31, 2013).
. Id., Exh. M (Form 10-K, LAB Acquisition for Biomet for the fiscal year ending May 31, 2013).
. Id., Exh. C (Complaint in United States ex rel. Allen v. Guidant LLC, et al.~).
. Id., Exh. P (Order in United States ex Rel. Bui v. Vascular Solutions, Inc.).
. Id., Exh. Q (Brief for the United States as Amicus Curiae in United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., et ah).
. Id., Exh. T (State of Texasâ Statement of Interest in United States, ex. rel. Bergman v. Abbott Laboratories).
. Id., Exh. I (Federal Employee Program Policy Statement, Lifewise Healthplan of Oregon Policy Statement, Premara Blue Cross Policy Statement).
. Relatorsâ Supp. RJN, Exh. E (CMF Spina-Logic).
. Relatorsâ Supp. RJN, Exh. H (SpinalPak Patient FAQ Brochure). 113 Relatorsâ Supp. RJN, Exh. K (Cervical-StimÂź).
. While taking judicial notice of documents on the SEC website is appropriate, the documents themselves are of limited relevance. As relators note, both SEC documents contain acknowledgments by defendants that they submit claims to Medicare, which of course relators must prove in order to prevail on their federal FCA claim. (See Opposition at 28.) As respects claims submitted to Medicare, relators have adequately pled that defendants submitted such claims and thus the documents add little to the pleading. Rela-tors must also plead and prove, however, that some of the claims were false. Defendantsâ acknowledgment that they submit claims to Medicare does not advance relators' argument that any of the claims submitted were false. Relators also cite acknowledgments in these documents that defendants' devices are subject to the FDCA and that defendants therefore must file PMA Supplements for any new use of an already-approved device prior to marketing or labeling it for such use. (Opposition at 22-23.) This acknowledgment does not advance relators' argument because, as the court determines infra, Medicare covered defendantsâ devices regardless of the use for which they were intended. Relators, moreover, have not argued that defendants unlawfully marketed or labeled their stimu-lators for an unapproved use. For these reasons, while the court judicially notices the defendants' 10-K forms, it finds them of limited relevance to its decision.
. Id. at 9.
. Relators' Supp. RTN at 7.
.See id.
. Id., Exh. 1 (NCD 150.2).
. Id., Exh. 2 (Form CMS 847).
. Id., Exh. 3 (LCD LI 1501).
. Id., Exh. 4 (LCD LI 1490).
. Id., Exh. 5 (LCD L5012).
. Id., Exh. 6 (LCD L27026).
. Id., Exh. 7 (July 3, 1997 FDA Warning Letter to Orthofix).
. See Defendantsâ Supp. RJN at 1-3.
. For this reason, although the complaint contains many allegations concerning the applicable law, the court does not accept them as true.
. An FCA action can be commenced in one of two ways. The government can file a civil action against the alleged false claimant. 31 U.S.C. § 3730(a). Alternatively, a private person, a relator, can commence a qui tam civil action against the alleged false claimant âfor the person and for the United States Government ... in the name of the Government.â 31 U.S.C. § 3730(b)(1). When a private person files a false claims action, the government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and material evidence and information supporting the complaint. 31 U.S.C. § 3730(b)(2). If the government declines to assume responsibility for the action, the relator has the right to conduct the action in the government's name. 31 U.S.C. § 3730(b)(4)(B). If the government elects to prosecute the action, the relator will receive 15 to 25 percent of any recovery, depending on the extent to which he substan
. Motion at 8.
. At the hearing, relators argued that if a device is being used for an off-label purpose,
Relators also argue that even if cervical use of defendantsâ devices is not experimental, it is excluded from coverage under 42 C.F.R. § 411.15(o). (Id. at 12-13.) Once again, the court cannot agree. Section 411.15(o) provides that only Category B, not Category A devices, are reimbursable and only if they have been furnished in accordance with FDA-approved protocol. (See 42 C.F.R. § 411.15(o) (âThe following services are excluded from coverage: ... Experimental or investigational devices, except for certain devices[] (1) Categorized by the FDA as a non-experimental/investigational (Category B) device ... and (2) Furnished in accordance with the FDA-approved protocols governing clinical trialsâ).) Relatorsâ reading of this section is erroneous because if ĂĄ device is not part of a clinical study, the section does not apply and has no effect on coverage.
. The FDA approves PMAs and PMA supplements. It clears devices that go through the 510(k) process.
. Relatorsâ Supp. Brief at 9.
.Opposition at 14, 17. In their supplemental brief, relators argue that "it is not, nor has it ever been, the position of the Relators that all âoff-label uses of drugs or medical devices are categorically excluded from Medicare coverage.â (Relatorsâ Supp. Brief at 1.) This statement conflicts with relatorsâ arguments in their opposition that "[a]bsent the [Required FDA [ajpproval, [cjervical [u]se of [defendants' [djevices [d]oes [n]ot [f]it [w]ith-in [a]ny [Reimbursable [cjategoiyâ (Opposition at 14), and that defendants' devices "when employed for [an] off-label use ... still could not be covered [by CMS] because they fail to meet the safety and effectiveness requirements protected 'through the Pre-Mar-ket Approval (PMA) process' â (Opposition at 17).
. If relators correctly interpret the Medical Manualâs restriction of coverage to PMA-approved devices as excluding coverage for off-label uses of defendants' stimulators, the NCDs would not apply to determine coverage and would be irrelevant.
. Opposition at 15-16.
. This conclusion, of course, depends on interpreting "device approved for marketing by the FDAâ in NCD 280.1 the way that relators suggest it should be interpreted as it appears in the Medicare Manual.
. Id. at 15, 21.
. See Opposition at 22 n. 21 (âFor an assertion to be 'false,' it need not be an affirmative misrepresentation; an omission of a material fact will suffice,â citing Shaw v. AAA Engineering & Drafting, Inc., 213 F.3d 519, 532 (10th Cir.2000)).
. Opposition at 25 (citing 42 C.F.R. § 424.57(b)(5) & (c)(24)). Under 42 C.F.R. § 424.57(c)(24), a DME supplier must "meet [DME] quality standards.â DME quality standards are set by HHS and include "pro-vidfing] only [DME] and other items that meet applicable [FDA] regulations and medical device effectiveness and safety standards.â (Relators' RJN, Exh. N at 195 (Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Quality Standards).) Under 42 C.F.R. § 424.57(b)(5), to be eligible for Medicare reimbursement, a DME supplier must âfurnish[] to [the contractor] all information or documentation required to process the claim.â
. Relators' RJN, Exh. J at 136 (Medicare Benefit Policy Manual, Chapter 14 â Medical Devices).
. Id.
. Reply at 5.
. Relators' Supp. Brief at 9-10.
. Defendants' Supp. RJN, Exh. 2 at 358-359 (at 6-7).
. Relators appeared to contend at the hearing, and argue in their supplemental brief, that because Class III devices pose the greatest risk to health, CMS treats them differently in determining Medicare coverage. (See Re-lators' Supp. Brief at 2 (arguing that because stimulators are Class III devices, "the FDA approval process provides the only realistic means of [ ] assuring] [the device is safe and effective]â).) The court cannot agree. Rela-tors have cited no statutory, regulatory, or administrative guidance that makes such a distinction. Whatever merit relatorsâ- contention has regarding the safety and effectiveness of defendantsâ devices when used for an off-label purpose, it goes either to relatorsâ implied false certification claim (i.e., that defendants were required to submit a PMA supplement and obtain PMA approval before distributing their stimulators for offjabel use, and falsely certified compliance with the FDA by failing to do so), discussed infra, or it is a policy argument that CMS should never cover off-label uses of Class III devices, including defendantsâ stimulators. To the extent re-lators advance a policy argument, it must be addressed to CMS; the court cannot impose such a condition on CMS.
. Defendants' Supp. RJN, Exh. 1 at 39 (Medicare National Coverage Determinations Manual ("Medicare Manualâ)).
. Id. at 83.
. Id., Exh. 4 at 388 (LCD L30312).
. Id., Exh. 1 at 65 (Medicare Manual).
. Id., Exh. 5 at 403 (LCD L32641).
. Id., Exh. 6 at 417 (LCD L33500).
. Id., Exh. 3 at 378 (LCD L32220).
. Id.., Exh. 7 at 430 (LCD L32038).
. Defendantsâ Supp. Brief at 5.
. Relators' Supp. Brief at 6.
. Opposition at 17.
. Id. at 6.
. Id. at 5-7.
. Relators' RJN, Exh. H (Medicare Program Integrity Manual).
. At the hearing and again in their supplemental brief, relators argued that NCD 150.2 does not address the safety and effectiveness of a device, but only discusses patient circumstances. (See Relatorsâ Supp. Brief at 2 ("NCD 150.2 does no more than describe the specific medical indications for which CMS considers these devices to be medically necessary, [and] does not speak to safety or effectiveness requirements at allââ).) At the hearing, relators argued that to determine the safety and effectiveness of the device, one has to turn to the FDA, which has authority to decide whether something is safe and effective. The court cannot agree. The FDA has authority to determine whether a device is sufficiently safe and effective to be marketed. CMS has authority to decide whether a device or a particular use of a device is sufficiently safe and effective to be considered reasonable and necessary and therefore reimbursable by Medicare. As the court has noted and as relators concede in their supplemental brief, in determining whether a device is sufficiently safe and effective to be considered reasonable and necessary, CMS considers, inter alia, whether it has been approved by the FDA. CMS, however, can consider other facts as well, such as whether the device has " 'been proven safe and effective based on authoritative evidenceâ or is [] 'generally accepted in the medical community as safe and effective for the condition for which it is used.â â International Rehabilitative Sciences, 688 F.3d at 997 (citing 42 U.S.C. § 1395y(a)(l)(A) and 54 Fedd. Reg. 4302, 4303-04 (Jan. 30, 1989); 60 Fed.Reg. 48417, 48418 (Sept. 19, 1995)). (See Relators' Supp. Brief at 1 (noting these methods of determining whether a device is safe and effective and acknowledging that the latter method is âcontemplated by the Medicare regulations where a drug or device has not been FDA-approved for the particular use in questionâ).) In their supplemental brief, relators assert that only NCD 280.1 and not NCD 150.2 considers the safety and effectiveness of defendantsâ stimulators. As noted, however, each NCD reflects CMSâ determination â on a nationwide basis â that a particular device or service or particular use of a device is sufficiently safe and effective to be considered reasonable and necessary, and therefore reimbursable. NCD 150.2 is CMSâ determination that stimulators that have been approved by the FDA are reimbursable when used "as an adjunct to spinal fusion surgery.â In making this coverage decision, CMS presumably took into account whether stimu-lators that have been approved by the FDA for at least one use are sufficiently safe and effective; it likely did so by concluding that they are generally accepted in the medical commu
. Defendantsâ RJN, Exh. 1 (NCD 150.2).
. See id.., Exh. 2 (Certificate of Medical Necessity Form 847).
. Defendantsâ Supp. Brief at 5.
. Relators argue that the court should not so conclude because CMS could not predetermine the safety and effectiveness of every undisclosed, off-label use of a device. (Rela-torsâ Supp. Brief at 9.) Whatever merit this argument has, the court again believes it is more properly addressed to CMS than to the court. If relators believe it unsafe to cover all uses of stimulators â both on- and off-labelâ they should urge CMS to modify NCD 150.2 to provide coverage only for on-label uses of stimulators. The court cannot interpret NCD 150.2 in a manner that is inconsistent with its plain language.
.Relators' RJN, Exh. F (NCD 280.1).
. For this reason, the court finds unpersuasive relatorsâ argument that the two NCDs must be construed together. (See Relators' Supp. Brief at 2-3.) Relatorsâ argument ignores the express language of NCD 280.1, which states that it serves merely as a reference tool for contractors. It also ignores NCD 280. lâs instruction that where an NCD covers a device, the contractor is to refer to that NCD rather than NCD 280.1 in determining coverage. Relatorsâ argument further ignores the HHS decisions the court cited above that specifically construe NCD 280.1 in this manner. Relators, moreover, provide no citation â not even to the terms of NCD 280.1 itself â that supports their argument that although coverage of defendantsâ stimulators on a nationwide basis is explicitly addressed in NCD 150.2, NCD 280.1 provides additional, mandatory limitations that a contractor must apply on a case-by-case basis to determine coverage.
. Relators argue that considering NCD 150.2 in isolation would lead to "absurd results.â (Opposition at 8 n. 4.) Doing so,cthey argue, would lead to the conclusion that "any device with 'opposing pads, wired to an external power supply,â capable of creating an electromagnetic field 'between the pads at the fracture site,â would fall within the definition of [covered] ... stimulatorfs], and would, therefore, be a reimbursable item, even if the device in question had been assembled using a gas grill igniter in the inventorâs garage.â (Id.) Relatorsâ argument lacks merit, however, because only stimulators that fall within one of the four eligible categories of medical devices under the Medicare Manual (including
. SAC, V 54; Relators' Supp. Brief at 15.
. Relators' Supp. Brief at 13 & n. 23. This allegation is not included in the complaint, although the court has taken judicial notice of the PMA approval orders for defendantsâ stimulators, which do require such compliance. (See Relatorsâ Supp. RJN, Exhs. G at 109 (FDA Approval Materials for SpinaLogic), J at 182 (FDA Approval Materials for Spinal-Pak).)
.Relatorsâ Supp. RJN, Exh. B at 43 (FDA Guidance for Industry and FDA Staff at 7-8 (emphasis added)).
. Id, at 46.
. Relators' Supp. Brief at 7. These allegations are not in the complaint. Nonetheless, the court considers them because it has taken judicial notice of the PMA approval materials for each of defendants' devices found on the FDA website.
. Id. at 7 n. 17; Relatorsâ Supp. RJN, Exhs. G at 115 (FDA Approval Materials for Spina-Logic), J at 186 (FDA Approval Materials for SpinalPak), and L at 224, 230, and 241 (FDA Approval Materials for Cervical-Stim).
. Relators' Supp. Brief at 7.
. Id.
. Indeed, as relators discuss, defendants previously argued in their opposition to the petition to reclassify stimulators that the FDA has ânoted that the different [stimulator] modalities and intended uses require[] tailored testing. Furthermore, [the] FDA has emphasized that seemingly minor alterations to [stimulator] devices' (e.g., to their waveforms or designs) may adversely impact their safety and effectiveness.â (See Opposition at 11 (citing Relators' RJN, Exh. A at 13 (BGS Reclassification Opposition Group Comments)).)
. Reply at 10-11; Defendants' Supp. Brief at 12-13.
. RelatorsâSupp. Brief at 15.
. Relatorsâ RJN, Exh. E at 71 (Good Reprint Practice (noting that providing health care providers with academic journals discussing the benefits of the use of a manufacturer's device for off-label purposes, so long as they are peer reviewed and not accompanied by a manufacturerâs comments, is not considered promotion)).
. The court expresses no opinion as to whether such a claim would be legally cognizable, and will await full briefing by the parties before doing so.
. SAC, ¶¶ 5-6; Relators' RJN, Exh. O at 206 (Medicare Enrollment Application).
. As the court has already found that Medicare covered defendantsâ stimulators for on- or off-label use, defendants' certification that they would provide Medicare with all information pertinent to a coverage determination was not false; this is because, given the breadth of Medicareâs coverage, defendants were not required to alert Medicare that their stimulators had been prescribed for off-label use.
.For the same reason, relators have also failed to allege adequately that defendants' failure to disclose that the stimulators were prescribed for off-label use was material. "To establish materiality ... the question is merely whether the false certification â or assertion, or statement â was relevant to the government's decision to confer a benefit.â Ebeid, 616 F.3d at 997 (citing Hendow, 461 F.3d at 1173). The fact that Medicare does not limit its coverage of stimulators to those that will be used for on-label purposes indicates that the failure to disclose whether a stimulator was to be used on- or off-label was not relevant to the governmentâs decision to reimburse defendants. This conclusion is reinforced by the fact that neither CMS Form
. Id., ¶ 33.
. Motion at 12 n. 8.
. SAC, ¶ 32.
.Relators also allege that under these programs; the federal government has âno obligation to pay a DME provider for a device marketed unlawfully.â (Id.) As the court has noted multiple times, however, relators explicitly state that they do not assert that defendants unlawfully marketed their devices. (Opposition at 26-27.) Indeed, there are no allegations of unlawful marketing in the complaint.
. Relators also fail to plead that defendants ever made certifications to these programs or what the content of such certifications was. As a result, to the extent their FCA claim concerning other federal programs is based on false certification, it fails for this reason as well.
. SAC, ¶ 48.
. Id., ¶ 13; Opposition at 14-15.
. Defendants' RJN, Exh. 7 (1997 Warning Letter from the FDA to Orthofix).
. Defendants appear to agree with this proposition. (Reply at 10 ("The letter might be relevant if Relators were arguing that Defendants had notice they could not advertise their devices as FDA approved for a use other than what they were actually FDA approved forâ).)
. Motion at 13 ("[The] FDA's warning that a company could not market a product whose approval specifically excluded vertebra use as being FDA-approved for spine fusions provide[d] no notice to Defendants that Medicare [would] not cover use of their spinal devices for spinal usesâ (emphasis added)).
. Id., ¶¶ 45, 50.
. SAC, ¶ 45.
. Relators also plead facts that do not support the inference they seek to have drawn. They allege, for example, that Milko deposed two physicians in another lawsuit, both of whom are Medicare providers and perform cervical and lumbar surgery. These physicians purportedly testified that they had ordered stimulators from DJO. This testimony does not support in any meaningful way an inference that the doctors ordered stimulators for cervical use from DJO, much less that DJO submitted reimbursement claims for the stimulators to Medicare.
. Motion at 2.