Medical Device Companies Potentially Violate the False Claims Act by Selling Knowingly Defective Equipment

A medical device manufacturer pushes its sales force to peddle a device that it knows to be defective. Unfortunately, this particular device is a diagnostic device commonly used by physicians and hospitals across the country for the benefit of Medicare, Medicaid and other Government Healthcare Program beneficiaries. The results generated are widely inaccurate and oftentimes lead to unnecessary medical treatment, thus needlessly jeopardizing patient safety and draining health care dollars.

Such medical device fraud allegations recently surfaced in a California federal district court, where three former Masimo sales representatives filed a qui tam action against their former employer. See United States ex rel. Ruhe v. Masimo Corp., No. 2:10-CV-8169 (C.D. Cal. July 9, 2012). According to the relators, Masimo flooded the market with wholly defective noninvasive hemoglobin measurement devices known as Radical-7, Pronto, and Pronto-7. Allegedly, Masimo systemically and repeatedly made fraudulent statements that its hemoglobin measurement devices accurately measured hemoglobin, when, in fact, the devices were “widely inaccurate.” In turn, these false statement caused providers to use these devices on government health care beneficiaries, causing the federal government to pay out “substantial sums of money it would not have[,] had it known the hemoglobin measurement devices were dangerously defective.”

Rejecting Masimo’s motion to dismiss, the court ruled that the relators made allegations that “fit within the language and purpose of the [FCA].” Relators alleged that Masimo made false statements that its devices were effective and accurate. According to the court, “Such representations were material to the use of the defective devices by physicians, and the submission of claims for payment to government health care programs for a medical procedure that the physicians believed was reasonable and necessary.” The court further stressed, “The use of a ‘dangerously inaccurate’ test would not be a reasonable and necessary procedure, and Masimo’s misrepresentations caused physicians to submit false claims for payment to government.”

The District Court judge was spot on: Knowingly manufacturing and/or marketing defective medical devices is a violation of the False Claims Act. Exposure of their existence by courageous whistleblowers not only will return monies to the public fisc, but their courage could save lives.

More information for whistleblowers is located at the Nolan & Auerbach, P.A. website.