NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
THE DAN ABRAMS COMPANY LLC, Relator, Plaintiff

- Appellant, and UNITED STATES OF AMERICA, ex rel.; STATE OF ARKANSAS; STATE OF CALIFORNIA; STATE OF COLORADO; STATE OF CONNECTICUT; STATE OF DELAWARE; DISTRICT OF COLUMBIA; STATE OF FLORIDA; STATE OF GEORGIA; STATE OF HAWAII; STATE OF ILLINOIS; STATE OF INDIANA; STATE OF IOWA; STATE OF LOUISIANA; STATE OF MASSACHUSETTS; STATE OF MICHIGAN; STATE OF MINNESOTA; STATE OF MISSOURI; STATE OF MONTANA; STATE OF NEVADA; STATE OF NEW HAMPSHIRE; STATE OF NEW JERSEY; STATE OF NEW MEXICO; STATE OF NEW YORK; STATE OF NORTH CAROLINA; STA TE OF OKLAHOMA; STATE OF RHODE ISLAND; STATE OF TENNESSEE; STATE OF TEXAS; STATE OF VIRGINIA; No. 19

- 56377
D.C. No. 2:15

- cv - 01212

- JAK

- AS

MEMORANDUM *

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36

- 3. 

# FILED

APR 2 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS2

STATE OF WASHINGTON; STATE OF WISCONSIN, Plaintiffs,

v. MEDTRONIC INC.; MEDTRONIC PLC; MEDTRONIC SOFAMOR DANEK USA, INC.; WARSAW ORTHOPEDIC, INC .; MEDTRONIC SOFAMOR DANEK DEGGENDORF GMBH; MEDTRONIC PUERTO RICO OPERATIONS CO.; HUMACAO, Defendants

- Appellees.

Appeal from the United States District Court for the Central District of California John A. Kronstadt, District Judge, Presiding Argued and Submitted February 10, 2021

Pasadena, California Before: TALLMAN, CALLAHAN, and LEE, Circuit Judges. The Dan Abrams Company LLC (Relator) appeals the dism issal of i ts False Claims Act (FCA) lawsuit. 31 U.S.C. §§ 3729

- 3733. Relator alleges that Medtronic Inc. and various related entities fraud ulently obtained F ood and Drug Administration

c learance for several devices used in spinal fusion surgeries (Subject Devices ), unlawfully marketed them for an off

- label and contraindicated use, and illegally compensated physicians to use th em
. According to Relator, these fraudulent and unlawful practices caused physicians to submit false claims to Medicare. We affirm3

in part and reverse in part. The False Claims Act makes liable anyone who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,” or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or f

raudulent claim.” 31 U.S.C. § 3729(a)(1)(A), (B). The essential elements of an FCA claim are “ (1) a false statement or fraudulent course of conduct, (2) made with the [ requisite ] scienter, (3) that was material, causing (4) the government to pay out money or forfeit moneys due.” United States ex rel. Campie v. Gilead Sciences, Inc. , 862 F.3d 890, 899 (9th Cir. 2017) ( quoting United States ex rel. Hendo w v. Univ. of Phoenix , 461 F .3d 1166, 1174 (9th Cir. 2006))

. 1. O ff

- label/contraindicated

- use theory : Relator alleges that Medtronic marketed the Subject Devices without FDA approval or clearance for use in the cervical spine

— an “off

- label” and indeed contraindicated use. Relato r thus alleges that Medtronic engaged in misbranding, mislabeling, and adulterating in violation of the Food, Drug, and Cosmetics Act (FDCA)

. The fundamental problem with this theory is that Relator incorrectly assumes that the federal government will no t reimburse for an off

- label use of a medical device. To the contrary, the federal governmen t has recognized that doctors may use medical devices for off

- label purposes as long as it is medically necessary and reasonable. See, e.g ., Buckman Co. v. Plaint iffs’ Legal Comm ., 531 U.S. 341, 35 04

(2001) (“ ‘ [O]ff label ’ usage of medical devices . . . is an accepted and necessary corollary of the FDA ’ s mission to regulate in this area without directly interfering with the practice of medicine.”); U.S. Dep ’ t of Health & Hum

. Serv

. (HHS) , Medicare Benefit Policy Manual , ch. 14 § 10 , available at https://www.cms.gov/Regulations

- and

Guidance/Guidance/Manua ls/Downloads/bp102c14.pdf (noting that Medicare reimburses for “ [ d ] evices cleared by the FDA through the 510(k) process”

— not cleared uses of a device) (emphasis added). Thus, the federal government does not distinguish between on

- label and off

label uses i n determining whether to pay for medical devices. Rather, to be reimbursable, a device must (1) have FDA approval/clearance, (2) be “reasonable and necessary,” Int ’ l Rehab. Sci. Inc. v. Sebelius , 688 F.3d 994, 997 , 1002 (9th Cir. 2012) , and (3) meet any other pertinent regulations , HHS, Medicare Benefit Policy Manual , ch. 14 § 10. Relator ’ s argument must thus be considered through the prism of these three requirements. First, t he FDA cleared the Subject Devices through the 510(k) process (though, as disc ussed later, Relator claims Medtronic defrauded FDA in the clearance process)

. Second, the Relator has not plausibly alleged that the Subject Devices are not “reasonable and necessary

. ” T his court has cited Centers for Medicare & Medicaid5

(CMS) guidance in explain ing that “a device is not ‘reasonable and necessary’

— and thus is not eligible for Medicare coverage

— if it is (a ) “not ‘safe’ and ‘effective,” ( b ) “experimental,” ( c ) “not appropriate for the individual beneficiary’s need s ,” or ( d ) “substantiall y more costly than a medically appropriate and realistically feasible alternative pattern of care.” Int’l Rehab. Sci., Inc

. , 688 F.3d at 997 (cleaned up). CMS guidance makes clear that safety and efficacy determinations are based on “authoritative eviden ce” or “general[] accept[ance] in the medical community. ” Id

. Relator makes no allegations about published studies demonstrating that cervical use of vertebral body replacement (VBR) is medically unsafe or ineffective. Nor does Relator allege that VBR us e in the cervical spine i s contrary to accepted standards of medical practice. Instead, Relator points to a few anecdotal examples of harm caused by the Subject Devices. The problem is t hat any surgery carries the potential risk of harm. Merely showing that harm can occur is insufficien t. Relator also argues that the Subject Device s were not reasonable and necessary because cheaper and equally effective option s existed. Yet, as the district c ourt correctly observed, Relator does not connect any “alleged false statements and the pricing criterion of Medicare coverage

. ” Relator argues that this is not a case of merely off

- label use, but contraindicated use of the Subject Devices. But neither t he federal government nor the judiciary appear s to carve out an exception for contraindicated use in discussing6

off

- label uses. Indeed, the FDCA specifically contemplates that devices may be cleared even if contraindicated uses are expected: if the FDA su spects that a potential Class II device may be used for contraindicated purposes, the FDA “may require a statement” on the product’s label disclosing that use. 21 U.S.C. §360c(i) (1) (E)(i). As long as a doctor finds an off

- label use to be medically reason able and necessary, then the off

- label use is permitted , even if the particular use is contraindicated on the label. Third , Relator points to no statute, regulation, or administrative manual that specifically states that a contraindicated use of a device i s categorically not reasonable and necessary. Relator cites this court’s Campie decision for the proposition that “misbranded and adulterated devices are not eligible for Medicare reimbursement.” But in Campie , one of the relator’s claims was that the drug was “misbranded” or “adulterated” because the drug company had substituted an unapproved ingredient for an approved ingredient. 862 F.3d at 902. In contrast here, Relator alleges that the Subject Devices we re misbranded because they were sold for a contraindicated
purpose. But the federal government acknowledges that doctors may use medical devices for off

- label and even contraindicated uses if they believe that such use is medically necessary and reasonabl e. So contraindicated use of the Subject Devices is not material to the government’s decision to pay.7

W e thus affirm the district court’s dismissal of Relator’s claim based on off

label/contraindicated labels.
2. F raud

- on - the

- FDA theory : Relator also al leges that Medtronic defrauded the FDA into granting the Subject Devices Class II c learance. According to this theory, since Medicare reimbursement requires FDA c learance, the Subject Devices would have been ineligible for reimbursement but for Medtronic’ s fraud. Relator appears to divide the Subject Devices into two distinct g roups. The first group of Subject Devices consists of those that allegedly cannot be used for their labeled intended use and can only be used for their contraindicated use in the cervical spine

. For these “Contraindicated

- only Devices , ” 1 Relator alleges that Medtronic falsely represented in its c learance application that the y were intended for use in the thoracolumbar spine (the part of the spine below the neck) when in fact the y could not be used there and could only be used in the cervical (neck

- area) of the spine. The second group of Subject Devices

— “Extra

- use Devices” 2

— includes those that could be used for their stated intended use (i.e., use in the thoracolumbar spine) but which were contraindicated for use in the cervical spine. Relator alleges that

1 This label was not used by the parties but is included here for the sake of clarity.
2 Again, this is not a term that the parties use and is included here only for the sake of clarity.8

Medtronic secretly intended to sell these Extra

- use Devices for their contraindicated

use. T he district court dismissed Relator’s fraud

- on - the

- FDA theory for failure to state a claim, finding that its allegations were offered “solely as a predicate for the claim that the Subject Devices were intended for off

- label use.” The district court is correct that the materiality element cannot be met for the
Extra

- use Devices because the federal government allows reimbursement for off

label and even contraindicated uses. Put another way, Medtronic’s alleged omission about its intent to market the devices for a contraindicated use was immaterial to the FDA’s clearance for Extr a - use Devices.
But the Contraindicated

- only Devices present a different story. For those devices, Relator does not allege mere off

- label use. Rather, Relator alleges that the Contraindicated

- only Devices were not properly cleared for any use : they cannot be used for their labeled intended use (and are thus not substantially similar to the predicate device), and they can only be used for their contraindicated use
. Relator claims that Medtronic knew that cervical VBRs posed different questions of safety
t o its previously approved devices , and if Medtronic disclosed that the devices were intended for use in the cervical spine, then the FDA may have required Class III approval. These considerations

— intended use, similarity to a predicate device, and differe nt questions about safety

— are precisely those that the FDA considers in9

granting Class II certification. 21 U.S.C. § 360c(i)(1)(A). Put differently, Medtronic’s alleged fraud went “to the very essence of the bargain.” United Health Serv., Inc. v. United States ex rel. Escobar , 136 S. Ct. 1989, 2003 n.5 (2016) (cleaned up)

. Medtroni c argues that the F CA is not the proper vehicle to bring a fraud

- on the

- FDA claim. In Buckman , the Supreme Court held that the FDCA bars a private party from asserting state law claims that the device manufacturer defrauded the FDA during the 510(k)

- clearance process concerning a device’s intended use. 531 U.S. at 348. And the First Circuit has extended Buckman ’s holding to the FCA
context. U

nited S tates ex rel. D’Agostino v. ev3, Inc. , 845 F.3d 1, 7

- 9 (1st Cir. 20 1 6). Medtronic invites us to follow suit. But this court’s decision in Campie foreclos es that path. In Campie , we noted that other jurisdictions had “cautioned against allowing claims under the False Claims Act to wade into the FDA’s regulatory regime.” 862 F.3d. at 905 (citing, amongst others, D’Agostino , 845 F.3d at 9). Yet we nevertheless allowed the relator’s fraud

- on - the

- FDA theory to go forward. Id. at 905

- 06.
W e thus affirm the district court for claims based on t he Extra

- use Devices, but we reverse for claims based on Contraindicated

- only Devices.
3. Anti

- Kic kback Statute (AKS) : The AKS prohibits “knowingly and willfully offer[ing] or pay[ing] any remuneration . . . to any person to induce such10

person . . . to purchase . . . [any] item for which payment may be made in whole or in part under a Federal health c are program.” 42 U.S.C. § 1320a

- 7b(b)(2)(B). Relator first alleges that Medtronic entered into improper rebate agreements with hospitals to buy the Subject Devices. But the AKS exempts from its scope discounts offered to providers if properly disclosed to and reflected in charges to the federal program. 42 U.S.C. § 1320a

- 7b(b)(3)(A). Similarly, Medicaid allows rebate agreements so long as the state Medicaid programs are offered the same pricing. 42 U.S.C. § 1396r

- 8(a)(1). Relator does not explain how Medtronic’s rebate agreement violated the AKS. Therefore, in relation to the rebate agreements, Relator fails to state a claim. Relator next alleges that Medtronic remunerated physicians by paying the costs, including food, travel, and promotional expens es, in connection with certain business development events. But as the district court observed, these “general allegations do not identify any physicians, or categories of them, who actually received payment in connection with decisions

— in which they pa rticipated

— to purchase or use of any of the Subject Devices.” We thus affirm the district court’s dismissal of Relator’s AKS claim. AFFIRMED IN PART; REVERSED IN PART. Each party shall bear its
own costs.