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False Claims Act Settlements For Medical Device Fraud

January 11, 2023

The Department of Justice recently announced two settlements of cases alleging medical device fraud. One case involved a Massachusetts manufacturer (Zyno Medical) that distributed defective intravenous (IV) administration kits. The other involved a Pennsylvania company (Jet Medical) that distributed migraine treatment devices that were not FDA-approved.

Zyno Medical

Two whistleblowers sued Zyno Medical, LLC (Zyno) for knowingly distributing defective IV kits. Providers used these kits to deliver chemotherapy and other medications to Medicare patients. The defect caused leaks during the infusion of these medications. Zyno admitted knowing of the defect as early as November 2015. However, it did not issue a recall for the kits until late July 2016. Instead, it continued to sell them.

Under the settlement, Zyno agreed to pay $493,140, and the government awarded the whistleblowers 20% of that amount. In announcing the settlement, DOJ emphasized that “Medicare patients who need chemotherapy or other medication administered intravenously should not have to worry about whether the devices used for their treatment will deliver the intended dosage.” Further, Principal Deputy Assistant Attorney General Brian M. Boynton, who heads DOJ’s Civil Division, warned medical device manufacturers:

We will pursue appropriate relief when health care providers, including medical device manufacturers, knowingly put the safety and welfare of federal healthcare program beneficiaries at risk.

Jet Medical

The settlement involving Jet Medical (Jet) included both criminal and civil penalties. Jet distributed a device called the Allevio SPG Nerve Block Catheter (Allevio). Jet claimed that Allevio was effective in treating migraines by administering nerve blocks into the skull. However, it never sought approval from the FDA for this use. In addition, Jet never properly studied whether Allevio was safe and effective for treating migraines.

Whistleblowers alleged that Jet and two related companies caused false claims by persuading providers to submit claims for Allevio. They contended that, because the FDA had not approved or authorized Allevio for treating headaches, the nerve-blocking device was not covered by Medicare. DOJ settled their civil False Claims Act case for $545,000. In addition, Jet agreed to a deferred prosecution and criminal penalties of $200,000. As part of the settlements, Jet admitted to distributing “misbranded” (not FDA-approved) devices.

In connection with this settlement announcement, Principal Deputy Assistant Attorney General Boynton emphasized:

The FDA approval and clearance process serves an important role in ensuring that devices used to treat patients are safe, effective, and medically appropriate. We will not permit companies to circumvent that process and put profits over patient safety.

Medical Device Fraud Continues to be an Enforcement Priority for DOJ

These settlements demonstrate the continuing commitment by DOJ, the FDA, and other federal agencies to use the False Claims Act to combat device manufacturers and distributors who put patients at risk and cost taxpayers money. We’ve previously written about many of the ways in which device manufacturers can violate the False Claims Act. About a year ago, one of our whistleblower cases involving medical devices settled for $16 million. That case alleged that Arthex, the device manufacturer, paid kickbacks to orthopedists to get them to order or recommend its surgical products. Other successes include a case against heart monitoring companies that overbilled for remote cardiac monitoring, which settled for $13.4 million.

If you have evidence of fraud involving medical devices, we encourage you to contact us.