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What Should You Expect with Enforcement of the False Claims Act?

Medtech companies could see continued scrutiny of customer relationships as well as of their dealings with FDA, an expert tells MD+DI.

Image source Zolnierek/Shutterstock

Gibson Dunn’s 2018 Mid-Year False Claims Act Update includes several notable developments of interest to medical device manufacturers. In addition to covering recent enforcement activity, the update explains this year’s memorandum from then-Associate Attorney General Rachel Brand (known as the “Brand Memo”) that "prohibits DOJ attorneys from bringing civil enforcement actions based on alleged noncompliance with informal agency guidance," explains Jonathan Phillips, a partner in the office of Gibson, Dunn & Crutcher.

To dig deeper into this issue and other activities involving the False Claims Act (FCA), MD+DI asked Phillips a few medtech-focused questions. Phillips focuses on FDA and healthcare compliance, enforcement, and litigation, among other matters.


Can you explain how the authority of the DOJ and FDA intersect when it comes to the False Claims Act (FCA)? Are there any new developments?

Phillips: DOJ has exclusive enforcement authority over False Claims Act matters; FDA does not (and cannot) pursue these matters itself. However, FDA personnel, including in the Office of Chief Counsel, may have an advisory role in False Claims Act matters that are predicated on allegations of off-label promotion or other conduct that implicates or overlaps with the Federal Food Drug & Cosmetic Act. Some notable FCA litigation in recent years has focused on the extent to which alleged misrepresentations or other problematic interactions with FDA can be the basis for False Claims Act liability.

Would the Brand Memo of January 2018 or the Sessions Memo of November 2017 have any impact?

Phillips: The Brand Memo has the potential to impact DOJ’s evaluation of whether to get involved in FCA cases in which the theories of liability are based upon agency guidance. For example, an FCA relator may allege a violation based on an alleged improper use of a device or a use that is arguably not reimbursable by government health programs. The Brand memo indicates that DOJ leadership may be more receptive to arguments from device companies that those theories should not be grounded in agency guidance and other documents that have not gone through notice-and-comment rulemaking and do not have the force of law. But the Brand memo also makes clear that DOJ may still use that sort of evidence as proof of the company’s knowledge of what is or is not allowed.

How has enforcement activity of medical device companies under the False Claims Act unfolded and evolved under the current presidential administration? How has this been different from past administrations?

Phillips: While the Brand Memo provides some indication that DOJ is willing to take a less aggressive view of the grounds for FCA enforcement, the number of newly opened FCA cases remain at historical record highs, in large part because so much of the enforcement activity originates with private whistleblowers. The number and amount of FCA resolutions specifically involving device companies in 2017 and the first half of 2018 is also consistent with the resolutions involving device companies reached under the previous administration.

Are there any trends in the cases that reveal larger industry trends? Are there any lessons for the industry frm any recent or notable cases?

Phillips: We continue to see a lot of government investigative and enforcement activity in FCA matters predicated in alleged violations of the Anti-Kickback Statute, through which the government and FCA relators have been scrutinizing financial arrangements of all kinds between device companies and healthcare providers using or recommending their products. Recent FCA claims challenging such arrangements have gone beyond well-identified areas like gifts and speakers program and have looked at more complex arrangements in which the alleged quid pro quo may not be evident. Device companies should remain thoughtful and vigilant about any arrangements or relationships they establish with third parties in a position to recommend or use their products.

Would any emerging product categories face unique challenges, such as nonopioid pain management technologies, digital health technologies, or artificial intelligence? Or would there be any others?

Phillips: Emerging product categories may bring unique issues particularly to the extent they are subject to unique reimbursement schemes, since FCA liability is ultimately tied to government health program reimbursement. FCA case law continues to evolve on the question of what kinds of representations and interactions with FDA during the product approval or clearance process can provide a basis for False Claims Act liability down the line. As emerging product categories are involved in those kinds of interactions, the FCA is yet another challenge these companies need to think about as they navigate the gauntlet of regulatory regimes.

What can medical device companies expect moving forward?

Phillips: Although there is some indication that DOJ may evaluate potential FCA actions less aggressively in certain circumstances, device companies should expect continued robust enforcement activity under the False Claims Act. In particular, they should expect to see continued scrutiny of their arrangements with health care providers and other customers, and of their dealings with the FDA.

Gibson Dunn will be hosting a webcast on August 22 entitled: The False Claims Act: 2018 Mid-Year Update for Drug and Device Industry. Click here to register.

Daphne Allen

Daphne Allen is editor-in-chief of MD+DI. She previously served as executive editor of Pharmaceutical & Medical Packaging News, which serves as the pharmaceutical and medical device channel of Packaging Digest. Daphne has covered medical device manufacturing, packaging, labeling, and regulatory issues as well as pharmaceutical packaging and labeling for more than 20 years. She is also a member of the Institute of Packaging Professionals's Medical Device Packaging Technical Committee. Follow her on Twitter at @daphneallen.


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