False 510(k) Notices to Avoid Class III Premarket Approval Process

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Increasingly, the United State Department of Justice is cracking down on medical device makers who fraudulently obtain FDA approval for their products. DOJ is particularly interested in those companies who mis-characterize their medical devices as Class II devices, solely for purpose of obtaining FDA approval through the lenient 510(k) approval process. By fraudulently inducing the FDA to approve their products, the manufacturers are potentially liable under the federal False Claims Act. (In addition, the companies may be subjected to additional False Claims Act liability when they then promote their Class II-approved devices for unapproved Class III uses.)

Fraudulent 510(k) submissions are incentivized, in part, by the different FDA approval paths for medical devices. Indeed, the differences in the level of regulatory review required for Class II and Class III medical devices are quite substantial. Class III devices are subject to a pre-market 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 § 510(k) certification.

The lowered approval hurdles for Class II devices provide an easy end-around for dishonest medical device companies, who misrepresent in their 510(k) notices that their devices were intended for Class II uses when in fact they were intended for Class III uses. 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. Importantly, if the device makers were truthful about their devices’ intended use, they would be required to complete the pre-market approval process for Class III devices. Thus, the companies obtain market clearance of their devices through fraud.

Such deceit potentially violates Medicare Fraud statutes, and 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 fraud taints all future claims presented, whether or not they are literally false or fraudulent.

Thus, for example, in the classic example of a government contractor who procures a government contract by fraud, the fact that the contract itself was procured by fraud creates FCA liability for every claim for payment made under the contract, even if all of the claims the contractor makes are otherwise free of falsity or fraud. The same application of the False Claims Act can be utilized by whistleblower lawyers to reach those device-makers who abuse the 510(k) approval process to sidestep pre-market approval for Class III devices.

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