FCA Liability Awaits Medical Device Companies That Submit False 510(k) Notices to Avoid Class III Premarket Approval Process

Increasingly, the United State Department of Justice is cracking down on medical device makers who fraudulently obtain FDA clearance for their products. DOJ is particularly interested in companies who mischaracterize their medical devices as Class II devices, solely for purpose of obtaining FDA approval through the lenient 510(k) clearance process. By fraudulently inducing the FDA to clear their products, the manufacturers are liable under the federal False Claims Act.

Class III devices are subject to a premarket approval process, which is the most stringent level of device regulation imposed by the FDA, usually requiring the manufacturer to conduct costly clinical studies to demonstrate the safety and effectiveness of the device. Class II devices, on the other hand, are subject to a less arduous process, commonly known as Section 510(k) certification.

The lowered approval hurdles for Class II devices provide an easy end-around for dishonest medical device companies. For example, companies may make false statements and omit material information regarding their devices’ classification, type, predicate devices, substantial equivalence, intended use, appropriate labels, and risk to patients, any or all of which may allow avoiding the premarket approval process for Class III devices. Thus, the companies obtain market clearance of their devices through fraud, violating the federal False Claims Act’s “false statements” liability provision, § 3729(a)(1)(B), under a so-called “fraudulent inducement” theory of liability.

Applying this well-established theory of liability to fraudulent 510(k) submissions, the device makers’ false statements to the FDA would be material to false or fraudulent claims because those statements induced the federal government to clear the devices for introduction into interstate commerce, which is a prerequisite for reimbursement by government health care programs, such as Medicare. Importantly, the underlying principle of the fraudulent inducement theory is that the initial FDA fraud taints all future claims presented, whether or not they are literally false or fraudulent.