In United States ex rel. Fitzer v. Allergan, Inc., et al., 1:17-cv-00668-SAG (D. Md. Sept. 10, 2021), the court dismissed a declined False Claims Act (FCA) action, under 31 U.S.C. § 3729, et seq. The court dismissed the action without prejudice, based upon a holding that the allegations that defendants knew they were acting in violation of the Anti-Kickback Statute (AKS) were conclusory.
The defendants were two medical device companies who had owned the LAP-BAND brand. The defendants operated a website that provided a physician locator for bariatric surgeons who used LAP-BANDs. Relator alleged that the physician locator functioned as a kickback scheme “by providing surgeons with valuable free advertising … in order to induce surgeons to recommend Defendants’ . . . medical device….” The relator further alleged that physicians would only be listed on the website if they met a quota of surgeries. Notably, the relator was a surgeon on the website who was allegedly removed after he failed to meet the quota.
The FCA imposes liability on anyone who, in relevant part, “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval[,]” or anyone who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim[.]” 31 U.S.C. § 3729(a)(1)(A)-(B). To state a claim for FCA liability, the plaintiff must allege: “(1) the defendant made a false statement or engaged in a fraudulent course of conduct; (2) such statement or conduct was made or carried out with the requisite scienter; (3) the statement or conduct was material; and (4) the statement or conduct caused the government to pay out money or to forfeit money due.” (Citations omitted). Here, relator’s FCA claims were based on defendants’ alleged violation of the AKS. The AKS prohibits anyone from, in relevant part, “knowingly and willfully . . . offer[ing] or pay[ing] any remuneration (including any kickback, bribe, or rebate) . . . to induce” a referral or purchase reimbursable “under a Federal health care program[.]” 42 U.S.C. § 1320a-7b(b)(2) (emphasis added).
Here, the court rejected the arguments the allegations were sufficient to allege intent under the AKS. The court found the defendants awareness of the AKS and its requirements said nothing about whether they were acting with an unlawful intent while operating the LAP-BAND website. Similarly, neither the fact that relator told one defendant that he believed the physician locator violated the AKS, nor the fact that the defendant decided to speak with relator on the phone rather than in writing about that concern, indicated the defendant was acting with malintent. Finally, relator’s allegation that the other defendant’s intent could be inferred from its posting of disclosures on the website describing the criteria for inclusion on the physician locator was merely relator’s own conclusion, and not a factual basis to allege intent.
The court further found that the second amended complaint failed to allege facts to support relator’s conclusion that defendants acted with intent to induce referrals. The relator’s allegation that “at least one purpose of Defendant[s’] exclusive website marketing scheme was to increase the number of LAP-BAND procedures performed and therefore its own sales” was found to be a “legal conclusion unsupported by any factual allegations.” The court rejected relator’s view that defendants’ position that the quota was designed to match patients with surgeons who have experience implanting the LAP-BAND was “pretext” for a fraudulent scheme to sell more LAP-BANDs. While the court admitted that the relator could be right, relator alleged no specific facts to support his conclusory assertion that defendants enacted the quotas, even in part, to increase the number procedures performed. Thus, the court dismissed the second amended complaint without prejudice.