United States ex rel. Modglin v. DJO Global Inc.
United States ex rel. Modglin v. DJO Global Inc.
Opinion of the Court
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS THE CORRECTED THIRD AMENDED COM- ■ PLAINT ■ '
Qui tam relators Doris Modglin and Russ Milko filed this action against defendants bjO Global Inc. (“DJO Global”), DJO, LLC (“DJO”), DJO Finance LLC (“DJO Finance”), Orthofix, Inc. (“Ortho-fix”), Biomet, Inc. (“Biomet”), and EBI, LP (“EBI”) under seal and in camera on August'20, 2012. Relators invoked the court’s federal question jurisdiction under 28 U.S.C. § 1331, and alleged a single claim for violation of the False Claims Act (“FCA”), 31 U.S.C. § 3729(a)(1)(A), (B).
On October 3, 2013, pursuant to a request by relators; the court dismissed Or-thofix.
On September 22, 2014, relators filed a third amended complaint; subsequently, on September 29, 2014, they filed a corrected third amended complaint.
I. FACTUAL BACKGROUND
Relators assert that defendants — manufacturers and distributors of durable medical equipment (“DME”) — fraudulently caused the government to disburse money by filing claims with Medicare and other federal healthcare plans
A. Background Regarding FDA Approval of Medical Devices
One of the “core objectives” of the Food, Drug, and Cosmetic Act (“the FDCA”), 21 U.S.C. § 301 et seq., is to ensure that “there is reasonable assurance of the safety and effectiveness of devices intended for human use.” Food and Drug Administration v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133-34, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000) (citing 21 U.S.C. § 393(b)(2)). To that end, the FDCA classifies medical devices in three categories: Classes I, II, and III. 21 U.S.C. § 360c(a). Class III devices include those that present a potentially unreasonable risk of illness or injury. Id., § 360c(a)(1)(C). Because of the risk associated with such devices, the FDA has determined that the manufacturers of such devices must submit premarket approval (“PMA”) applications to the FDA-and obtain premarket clearance before offering the devices for sale.
The FDA gives a device PMA approval if it determines that the PMA application contains sufficient valid scientific evidence to assure that the device is safe and effective for its intended use. 21 C.F.R. § 814.2(a). It is “a ‘rigorous’ process in which the manufacturer submits extensive study reports, design specifications and descriptions, samples of the device, and proposed labeling to the FDA, and the FDA conducts a comprehensive review and evaluation of all the submitted documents and materials[.]” Kashani-Matts v. Medtronic, Inc., No. SACV 13-01161-CJC (RNBx), 2013 WL 6147032, *1 (C.D.Cal. Nov. 22, 2013).
The FDCA does, however, expressly prohibit Class III device manufacturers from marketing a PMA-approved device for an off-label use. 21' U.S.C. § 331 (proscribing, inter alia, “[t]he introduction ... into interstate commerce of any ... device ... that is adulterated or misbranded”); 21 C.F.R. § '814.80 (stating that once the-FDA has approved a PMA application, the manufacturer of the approved device may not manufacture, package, store, label, distribute, or advertise the device in a manner that is inconsistent with any conditions of approval specified in the PMA approval order for the device). Because off-label usage of medical devices “is an accepted and necessary corollary of the FDA’s mission to regulate in th[e] [medical field] without directly interfering with the practice of medicine,” however, Buckman Co., 531 U.S. at 349-50, 121 S.Ct. 1012, “a manufacturer is not liable [for having violated the FDCA] merely because it sells a device with knowledge that the prescribing doctor intends an off-label use,” Carson, 365 Fed-Appx. at 815. The manufacturer can only be liable for violating the FDCA if it markets or promotes the device for that purpose. If a device manufacturer wishes to market a device for an off-label purpose, it must submit a PMA supplement for review and approval by the FDA. 21 C.F.R. § 814.39.
B. Facts Alleged in the Corrected Third Amended Complaint Regarding FDA Approval of Defendants’ Stimulators
Relators allege that DJO, Biomet, and EBI — a wholly owned subsidiary of Biom-et — manufacture and market DME, including stimulators, throughout the United
C. Background Regarding Medicare Coverage of Medical Devices
1. Coverage Determinations by Medicare
The Medicare program is a federally funded health insurance program for the aged and disabled created by the Social Security Act (“the Medicare Act”), 42 U.S.C. § 1395 et seq. See International Rehabilitative Sciences Inc. v. Sebelius, 688 F.3d 994, 997 (9th Cir. 2012) (“Medicare is the federal health insurance program for the elderly and disabled”). Part B of the Medicare Act provides medical insurance for medical and other health services needed by individual plan participants; this includes stimulators and other DME provided to Medicare patients by a DME provider. Id. (citing 42 U.S.C. §§ 1395j, 1395k(a)(2), 1395m). Under Part B, “Medicare beneficiaries receive medical treatment and the providers submit claims for government reimbursement.” Id. (citing § 1395n). Under the Medicare Act, only devices that are “reasonable and necessary for the diagnosis or treatment of illness’ or injury or to improve the functioning of a malformed body member” can be reimbursed. 42 - U.S.C. § 1395y(a)(1)(A). This limitation on coverage is intended to; control Medicare costs. International Rehabilitative Sciences, 688 F.3d at 997. The Act states that
“[a] device is not ‘reasonable and necessary5 — and thus is not eligible for Medicare coverage — if it is: [ (1) ] Not ‘safe5 and ‘effective5 — that is, if the device has not ‘been proven safe and effective based on authoritative evidence5 or is not ‘generally accepted in the medical community as safe and effective for the condition for which it is used5; [ (2) ] ‘[Experimental5 — that is, ‘investigational’; [ (3) ] Not ‘[appropriate5 for the individual beneficiary’s needs; or [ (4) ]'‘[Substantially more costly than a medically appropriate and realistically feasible alternative pattern of care.5 55 Id. (citing § 1395y(a)(1)(A) and 54 Fed.Reg. 4302, 4303-04 (Jan. 30, 1989); 60 Fed.Reg. 48417, 48418 (Sept. 19, 1995)).
Of. Medicare Program Integrity Manual § 13.7.T. (stating that “[i]n order of preference, [local coverage determinations] should be based on: [1] Published authoritative evidence derived from definitive randomized clinical trials or other definitive studies, and [2] General acceptance by the medical community (standard of practice), as supported by sound medical evidence”).
In its Medicare Benefit Policy Manual (“the Medicare Manual”), the Department of Health and Human Services (“HHS”) considered the FDA categorization of devices and determined generally that “[devices that may be covered under Medicare include the following categories: [1] Devices appróved by the FDA through the Pre-Market Approval (PMA) process; [2] Devices cleared by the FDA through the 510(k) process; [3] FDA-approved IDE Category B devices; and [4] Hospital Institutional Review Board (IRB) approved IDE devices.”
Within these general categories of devices eligible for coverage, HHS “may make [Medicare] coverage determinations [for certain types of devices] via up-front rules.” The agency, however, has “discretion ... whether to make [broad] determinations [as to whether a particular device is reimbursable] ... or [whether to have Medicare contractors make that decision based on a] case-by-case adjudication.” Id. at 1001. When HHS engages in rule-making regarding the scope of coverage for certain devices, it issues National Coverage Decisions (“NCDs”). “An NCD is a determination-... of whether a particular item or service is covered nationally under Medicare.” 42 C.F.R. § 405.1060(a)(1). NCDs are compiled in the Medicare Manual. “Once published .,an NCD is binding on all Medicare carriers.”
(The reimbursement of stimulators is covered by. NCD 150.2.
NCD 280.1, the “Durable Medical Equipment Reference List” is a “quick reference tool” that applies “(where appropriate) to all DME national coverage determinations (NCDs).”
“generic categories of equipment on which NCDs have been made by ... CMS— In the case of-equipment categories that have been determined by CMS. to be covered under the DME benefit, the list outlines the conditions of coverage that must be met if payment is to be allowed for the rental or purchase of the DME by a particular patient, or cross-refers to another section of the manual where the applicable coverage criteria are described in more detail. With respect to equipment categories that cannot be covered as.DME, the list includes a brief explanation of why the equipment is not covered____When the contractor receives a claim for an.item of equipment which does not appear to fall logically into any of the generic categories listed, the contractor has the authority and responsibility for deciding whether those items are covered under the DME benefit. These decisions must*1003 be made by each contractor based on the advice of its. medical consultants, taking into account: [1] The Medicare Claims Processing Manual, Chapter 20, T>urable Medical .Equipment, Prosthet-ics and Orthotics, and Supplies (DME-POS)- [;]' [2] Whether the item has been approved for marketing by the Food and Drug Administration (FDA) and is otherwise generally considered to be safe and effective for the purpose intended; and [3] Whether the item is reasonable and necessary for the individual patient.”39 . .
NCD 280.1 thus serves as a first point of reference for contractors attempting to determine whether a certain device or a certain use of a device is covered. Specifically, it provides an index of some of the national coverage determinations Medicare has made. It-lists some devices that are covered and refers the reader to the NCD controlling that device. It also lists some devices that are not covered and articulates why HHS has determined that that device cannot be covered. For devices that HHS has not explicitly declared covered or uncovered, NCD 280.1 sets forth the factors a contractor must consider in making a case-by-case coverage determination. NCD 280.1 is not comprehensive, however. Certain devices that are covered by a particular NCD are not referenced in NCD 280.1. This is because NCD 280.1 was meant only to-aid in determining coverage for “certain pieces of DME and especially for those items commonly referred to by both brand and generic names.”
2. The Reimbursement Process
To submit a claim for reimbursement, DME providers fill out and submit to Medicare CMS Form 15Q0.
Together with CMS Form 1500, the provider must .submit- a Certificate of Medical Necessity.
The DME provider must also include a Healthcare Common Procedure Coding System (“HCPCS”) number for the device for which it is requesting reimbursement on both CMS Form 1500 and CMS 847.
By regulation, DME providers seeking reimbursement must furnish sufficient information to Medicare’s claim processing contractors that they can determine whether payment is due. 42 C.F.R. § 424.5(a)(6) (“As a basis for Medicare payment, the following conditions must be met: ... The provider, supplier, or beneficiary, as appropriate, must furnish to the intermediary or carrier sufficient information to determine whether payment is due and the amount of payment”).
D. Facts Alleged in the Second Amended Complaint Regarding Defendants’ Submission of Claims to the Medicare Program
Relators allege that defendants are approved Medicare DME providers.
As proof that defendants have submitted such claims for reimbursement, rela-tors plead facts concerning their interactions with defendants over the years. They allege that in 1997, relator Milko was hired as a direct sales representative-for Orthofix to promote and sell stimulators.
Relators allege that on July 1, 2005, Milko became an Orthofix distributor and that he has continued in that capacity since, marketing and selling the Cervical-Stim and Orthofix’s other, non-cervical stimulators.
■ In April 2011, a sales associate working for Milko left his employ and went to work for DJO; the associate sold the SpinaLogie in the same geographic area in which Mil-ko sold Orthofix products. Milko allegedly lost “some of his best physician referral sources, including physicians who regularly referred Medicare patients for cervical bone growth stimulators, even though [as noted,] Orthofix sold the only approved cervical device.”
Relators assert that Milko sued Ms former associate for violating a non-competition agreement.
Relators allege that on June 21, August 30, and September 1, 2011, the Spine and Brain Institute m Las Vegas, Nevada, faxed prescriptions on behalf of Dr. John Anson, the ordering' physician, to the local DJO sales representative for SpinaLogie; the institute indicated that the patients were Medicare beneficiaries and were diabetic.
In August 2012, DJO’s Regional Sales Director and a DJO sales representative told relator Modglin, a private investigator licensed by the state, of California, that DJO routinely billed federally sponsored health care programs like Medicare and Medicaid for off-label distribution of Spina-Logic for use on the cervical spine.
In May 2013,. an Orthofix sales representative in Temecula, California, switched companies and began to sell the SpinaLogic. After two weeks, the representative returned to Orthofix. Relators contend that while working for DJO, DJO upper management told the sales representative that 40% of the company’s SpinaLogie business involved off-label, cervical spine applications.
As respects the SpinalPak manufactured by Biomet and EBI, relators allege that Milko has provided replacement Cervical-Stims to Medicare patients who complained that their use of the SpinalPak on the cervical spine caused skin irritation on their necks.
On February 16 and March 10, 2010, and again on March 18, 2011, Biomet and EBI submitted claims to the Minnesota Health Care Programs for off-label stimu-lators under Code E0748, for use following cervical spinal fusion surgery. They were paid $817.05, $3,901.41, and $3,897.50 on the claims, respectively.
Relators allege that on September 5, 2012, Dr. David Ketroser, a neurologist, contacted the office of a neurosurgeon in Minnesota. An employee confirmed that the office routinely prescribed the Spinal-Pak for cervical and lumbar fusions, for both Medicare and non-Medicare patients,- and that it had done so for a particular patient Ketroser had referred.
On May 20, 20Í3, Milko asked a former Biomet distributor who now sells Orthofix devices how Biomet succeeded in securing Medicare payment for a lumbar-only device when the physician’s order indicated cervical application. The individual purportedly told him that neither the CMS, 847 Form nor the.E0748 billing code reveal the level of the spine for which the device was ordered.
E. Defendants’ Request for Judicial Notice.
Defendants request that the court take judicial notice of certain documents‘they contend are relevant to this motion.
Defendants ask the court to take judicial notice of three exhibits. The first contains excerpts of the October 1, .2011 Michigan Medicaid Provider Manual. The second contains excerpts of the October 1, 2005 Michigan Medicaid Provider Manual, while the third contains excerpts _ of . the Nevada Medicaid Services Manual.
IL DISCUSSION
A. Legal Standard Governing Motions to Dismiss
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. A Rule 12(b)(6) dismissal is proper only where there is either a “lack of a cognizable legal theory,” .or “the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). The court must accept all factual' allegations pleaded in the complaint a:s true, and- construe them and 'draw all rea-’ sonable inferences from them in favor -of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996); Mier v. Owens, 57 F.3d 747, 750 (9th Cir. 1995).
The court need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations.
B. Relators’ Federal FCA Claim
Because relators’ FCA claim provides the only basis for subject matter jurisdiction, the court addresses it first.
1. Legal Standard Governing Federal FCA Claims
The FCA, 31 U.S.C. §§ 3729 et seq., provides for “the recovery of civil penalties from those who' knowingly present a false or fraudulent claim to the federal government for payment, or knowingly use a false record to avoid or decrease an obligation to pay the federal government.” Hagood v. Sonoma County Water Agency, 81 F.3d 1465, 1467 n. 1 (9th Cir.), cert. denied, 519 U.S. 865, 117 S.Ct. 175, 136 L.Ed.2d 116 (1996). Originally enacted to punish and prevent massive frauds perpetrated by large contractors during the Civil War, the FCA’s chief goal was to provide for restitution to the government of money taken from'it by fraud. See United States v. Bomstein, 423 U.S. 303, 309, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976). The Supreme Court has refused to 'adopt a restrictive reading of the statute, however, holding that the FCA is a “remedial statute [that] reaches beyond ‘claims’ which might be legally enforcéd, to all fraudulent attempts to cause the Government to pay out sums of money.” United States v. Neifert-White Co., 390 U.S. 228, 233, 88 S.Ct. 959, 19 L.Ed.2d 1061 (1968); United States v. McLeod, 721 F.2d 282, 284-85 (9th Cir. 1983).
The FCA authorizes individuals, known as “relators,” to file civil suits, known as “qui tam actions,” against persons who present false claims to the government.
“A civil action for False Claims Act liability requires four essential elements: ‘(1) a false statement or fraudulent course of conduct, (2) made with, scienter, (3) that was material, causing (4) the government, to pay out money or forfeit moneys due.’ ” United States ex rel. Ruhe v. Masimo Corp., 977 F.Supp.2d 981, 991 (C.D.Cal. 2013) (citing United States ex rel. Hendow v. University of Phoenix, 461 F.3d 1166, 1174 (9th Cir. 2006)); see also Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 997 (9th Cir. 2010) (same). A plaintiff “must show an actual false claim for payment being made to the Government”; “[e]vidence of an actual false claim is the sine qua non of a False Claims Act violation.” United States ex rel. Aflatooni v. Kitsap Physicians Serv., 314 F.3d 995, 1002 (9th Cir. 2002); see also Cafasso, United States ex rel. v. General Dynamics C4 Systems, Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (“ ‘It seems to be a fairly obvious notion that False Claims Act suit ought to require a false claim.’ ‘[T]he [FCA] attaches liability, not to' the underlying fraudulent activity or to the government’s wrongful payment, but to the “claim for payment,” ’ ” citing Aflatooni, 314 F.3d at 997, and United States v. Rivera, 55 F.3d 703, 709 (1st Cir. 1995) (internal alterations original)); United Stales ex rel. Hopper v. Anton, 91 F.3d 1261, 1266-67 (9th Cir. 1996) (“Violations of laws, rules, or regulations alone do not create a cause of action under the FCA. It is the false certification of compliance which creates liability when certification is a prerequisite to obtaining a government benefit.... [Thus there is no FCA liability] where regulatory compliance was not a sine qua non of receipt of state funding”).
Relators who assert that a defendant has made a false claim can allege that defendant, has submitted a factually false claim, or that defendant has given- a false certification. The prototypical false claims action alleges a factually false claim, i.e., an explicit lie in a claim for payment, such as an overstatement of the amount due. See Maa v. Ostroff, No. 12-cv-00200-JCS, 2013 WL 1703377, *15 n. 3 (N.D.Cal. Apr. 19, 2013) (“The ‘factually false’ theory refers to the ‘archetypal qui tarn False Claims Action’ in which ‘a private company overcharges under a government contract, [and] the claim for payment itself is literally false or fraudulent,’” citing Hendow, 461 F.3d at 1170 (alteration original)). Re-lators relying on a false certification theory allege that defendant’s claim is false because defendant certified to a government agency that it had complied with laws, rules, or regulations governing the reimbursement of claims or other provision of benefits when it had not. See Hopper, 91 F.3d at 1266 (“Violations of laws, rules, or regulations alone do not
“Express certification simply means that the entity seeking payment certifies compliance with a law, rule or regulation as part of the process through which the claim for payment is submitted. Implied false certification occurs when an ' entity has previously- undertaken to expressly comply with a law,- rule, or regulation, and that obligation is implicated by submitting a claim for payment even though a certification of compliance is not required in the process of submitting the claim.” Ebeid, 616 F.3d at 998.
To show that claims were false un-dena false certification theory, a complaint “must plead with particularity allegations that provide a reasonable basis to infer that (1) the defendant explicitly undertook to comply with a law, rule-or regulations that is implicated in submitting a claim for payment and that (2) claims were submitted (3) even though the defendant was not in compliance with that law, rule or regulation.” Id. '
Like other allegations of fraud in federal court, claims “brought under the FCA must fulfill the requirements of Rule 9(b)” of the Federal Rules of Civil Procedure. United States ex rel. Lee v. Smith-Kline Beecham, Inc., 245 F.3d 1048, 1051 (9th Cir. 2001); see also Cafasso, 637 F.3d at 1054 (“The heightened pleading standard of Rule 9(b) governs FCA claims”). Under Rule 9(b),' “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Fed.R.Civ.Proc. 9(b). Conclusory allegations are insufficient, and the facts constituting the fraud must be alleged with specificity. Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989). “A pleading is sufficient under Rule 9(b) if it-identifies the circumstances constituting fr'aud so that a defendant can prepare an adequate answer to the allegations. While statements of the time, place and nature of the alleged fraudulent activities are-sufficient, mere -conclusory allegations of fraud are insufficient.” Id. at 540 (citation omitted). See also Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997) (to satisfy Rule 9(b), “the complaint [must] identify] the circumstances of the alleged fraud so that defendants can prepare an adequate answer” (internal quotations omitted)); DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990) (“Although states of mind may be pleaded generally, the ‘circumstances’ must be pleaded in detail. This- means the who, what, when, where,.and how”);- Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973) (concluding that allegations stating the time, place, and nature of allegedly fraudulent activities met Rule 9(b)’s particularity requirement).
Thus, to satisfy Rule 9(b), a plaintiff must specify the content of the fraudulent representation, the person who made it, when and where the representation was made, and the manner in which it was untrue and misleading, or the circumstances indicating that it was false. See In re GlenFed Securities Litigation, 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc). See also Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1107 (9th Cir. 2003) (plaintiff “alleges that the APA misrepresented its connection -to Novartis, but*, he does not identify any specific' misrepresentations or specify when and where they occurred. These allegations are not particular enough to satisfy Rule 9(b)”).
“The knowledge or scienter element of a fraud claim need not be pleaded
2, FCA Liability Premised on Implied False Certifications
The second amended complaint alleged that Medicare covers defendants’ stimu-lators only when prescribed for. on-label use, and that defendants’ failure affirmatively to disclose the fact that the stimu-lators had been prescribed for off-label use constituted the submission of a false claim. Relators also alleged that defendants made an implied false certification because they had an affirmative obligation — under 21 C.F.R. §§ 801.4 and § 814.39 — to seek a PMA supplement given knowledge that the devices were prescribed from time to time for off-label -uses. The court disagreed that these allegations were sufficient to plead the submission of a false claim or making of a false certification.
With regard to relators’ argument that failure to disclose that the stimulators had been prescribed for off-label use, the court explained that because “the Medicare regulations- and the Medicare Manual do not bar reimbursement of devices supplied for off-label use, the fact that defendants have allegedly not filed a PMA supplement or obtained PMA approval for cervical use of their stimulators does not bar them from obtaining reimbursement for the devices if HHS has otherwise determined that they are ‘reasonable and necessary.’”
The court also found defendants’ false certification argument unavailing. It noted that although § 801.4 appears; at first blush, to-.support relators’ theory, courts in the Ninth Circuit and elsewhere have not construed § 801.4 as imposing an affirmative duty on manufacturers to file a PMA supplement under § 814.39 whenever time they know or should know that a patient intends to use, or that a physician has prescribed or will prescribe, a device for off-label use.
The court nonetheless conchided that re-lators might be able to allege an FCA claim under an implied' false certification theory based on off-label promotion of the stimulators by defendants. Stated differently, the court noted it was possible that relators could allege that defendants engaged in off-label promotion of the type that would trigger a duty to file PMA supplement, and' hence permit them to plead submission of false claims based on an implied false certification theory.
a. Whether the Corrected Third Amended Complaint Sufficiently Alleges that Defendants Engaged in Off-Label Promotion
Defendants contend that as alleged in the corrected third amended complaint, re-lators’ assertion that they were required to file a PMA supplement is flawed for two reasons. First, defendants maintain that to the extent relators rely on the false claim and false certification theories they pled in the second amended complaint— allegations the court dismissed with prejudice — the claim once again fails.
As respects the only portion of the federal Medicare FCA claim in the corrected third amended complaint that relators were granted leave to plead — i.e., an implied false certification claim premised on off-label promotion and failure to submit a PMA supplement — defendants contend that relators have failed to allege with-the requisite specificity under Rule 9(b) that defendants in fact marketed their devices for off-label use.
Given the theory, on which a claim of implied false certification due to off-label promotion and failure to submit a PMA supplement is. based, pleading specific facts concerning any off-label promotion by defendants is necessary to provide the “particular details of [the] scheme to submit false claims.” Ebeid, 616 F.3d at 998-99; see United States ex rel. Bennett v. Medtronic, Inc., 747 F.Supp.2d 745, 779 (S.D.Tex. 2010) (“In addition, the relators have failed to plead with sufficient particularity the alleged false claims. The rela-tors have not identified any Medtronic employees who engaged in off-label promotion nor specific physicians or hospitals who received the promotions. They have not alleged the ‘who’ or ‘where’ of the alleged fraud”); cf. Hawkins v. Medtronic, Inc., No. CV 13-00499 AWI SK, 2014 WL 346622, *13 (E.D.Cal. Jan. 30, 2014) (“Plaintiff fails to allege not only the content of the off-label promotion directed at his spine surgeon and on which the surgeon relied, but he also fails to allege who made those representations to his surgeon and when the representations were made. Rule 9(b) requires more than the generalized allegations made here.”).
In their, opposition, relators argued that the corrected third amended complaint satisfied Rule 9(b). At the hearing, however, they ■ disclaimed any intention of pleading an implied false certification claim based on off-label promotion. The court nonetheless addresses the off-label promotion arguments made in their opposition, as this is the only theory on which the court granted leave to amend upon dismissal of thé second amended complaint. In their opposition, relators contend they adequately alleged that it was defendants’ corporate-wide policy and practice to train their representatives to tell physicians, that all stimulators are the same and therefore that their lumbar devices could be safely used on the cervical spine,
Although both paragraphs sufficiently allege the “content” of the purported promotional statements, neither identifies who made the statements. Where fraud has allegedly been perpetrated by a- corporation, a plaintiff must allege the names of the employees or agents who purportedly made the statements or omissions that give rise to the claim, or at a mininium identify them by title and/or job responsibility. See, e.g., United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1051 (9th Cir. 2001) (holding that Rule 9(b) was not satisfied, inter alia, because plaintiff did not “identify the [defendant’s] employees who performed the tests, or provide any dates, times, or places the tests were conducted”); Arch Ins. Co. v. Allegiant Prof'l Bus. Servs., Inc., No. CV 11-1675 CAS (PJWx), 2012 WL 1400302, *3 (C.D.Cal. Apr. 23, 2012) (“The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent fepre-sentations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written”); Dooms v. Fed. Home Loan Mortgage Corp., No. CV F 11-0352 LJO DLB, 2011 WL 1232989, *14 (E.D.Cal. Mar. 31, 2011) (“In a fraud action against a corporation, a plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written’ ”); Flowers v. Wells Fargo Bank, N.A., No. C 11-1315 PJH, 2011 WL 2748650, *6 (N.D.Cal. July 13, 2011) (same). The corrected third amended complaint does not do this. It simply states that unidentified “DJO personnel” and “EBI personnel” informed Milko of defendants’ purported policy and practice.
The allegations also fail ’to state’ with particularity when and/or where the alleged statements were made. Although relators allege that Milko attended the national convention of the American Academy of Orthopedic Surgeons in Chicago in March 2013, and spoke with DJO representatives there, they do not allege that Milko learned about alleged off-label promotion at the convention. All that is alleged in paragraph 131 is that Milko “has also learned from DJO personnel that sales representatives are instructed to tell physicians that [it is] permissible to use their lumbar devices on the cervical spine,” i.e., that it is permissible to use its devices off-label.
Relators also allege that Milko “became aware over time that DJO and Biomet were distributing their spinal, lumbar only, non-invasive bone growth stimulators off-label for cervical use.”
Finally, paragraph 32 of the corrected third amended complaint also fails under Rule 9(b)., It contains no particularized, allegation?; in?tead, it states generally that “Defendants’ agents and employees ... are not licensed physicians, but- [ ] nevertheless advised patients on dosage ... and provided ad hoc instructions on how to modify the use of the device in order to use it in this unapproved anatomical location.”
Relators assert that defendants place the pleading bar too high; they contend that defendants’ motion to dismiss is premised on the absence of “exemplar details relating to claims from each government program.”
b. Whether the Corrected Third Amended Complaint Sufficiently Alleges that Medicare Conditioned Payment on Compliance with the FDA’s PMA Supplement Regulation
To allege an FCA implied false certification claim adequately, relators must plead that the claimant failed to comply with a law, rule, or regulation upon which payment of the claim was conditioned. Ebeid, 616 F.3d at 998 (“a complaint alleging implied false certification must plead with particularity allegations that provide a reasonable basis to infer[, inter alia,] that the defendant explicitly undertook to comply with a law,.rule or regulation that is implicated in submitting a claim for payment” (emphasis added)). Defendants contend that even had relators adequately pled that they engaged in off-label marketing of their stimulators, they do .not — and cannot — plausibly allege that Medicare conditions payment for medical devices on the device manufacturer’s compliance with the FDA’s PMA supplement regulation.
Nowhere in the complaint do relators cite any Medicare statute, regulation, or program requirement that states Medicare conditions payment for medical device
- Relators appear to. contend that 42 C.F.R. § 424.57 is a regulation that requires manufacturers to comply with the FDA’s PMA supplement rules.
“The defendants are correct, irrespective of whether they in fact violated the regulations.'' The [FCA] is not a vehicle to police technicál compliance with complex federal regulations —' The regulations set forth in[§ 424.57(c) ] are condfi tions of participation, the violation of which do not lead to [FCÁ] liability. Consequently, the district court erred in granting summary judgment in favor of the United States on this claim, and the defendants’ motion for summary judgment as to Count Two' is granted.” Id.
See also Gross, 415 F.3d at 604 (“An FCA claim premised upon an alleged false certification of compliance '... also requires that the certification of compliance be a condition of or, prerequisite to government payment”); United States v. Chubb Inst., No. CIVA 06 3562, 2010 WL 1076228, *5 (D.N.J. Mar. 22, 2010) (“Consequently, the overwhelming majority of courts have extended False Claims Act liability to a party’s knowingly false certification of compliance-with applicable regulations when such regulations are a condition of payment”); Hansen v. Freedom Mobility, Inc., No. 5:08-CV-131, 2009 WL 3784958, *2
Williams and the other authority cited is persuasive. Section 424.57 does not concern reimbursement, and contains its own internal sanction — i.e., loss of billing privileges. See 42 C.F.R. § 424.57(e) (“CMS will revoke a supplier’s billing privileges if it is found not to meet the [applicable standards]”); see also Williams, 696 F.3d at 531-32 (noting same). Accordingly, to the extent premised on the notion that § 424.57(c) requires that manufacturers promoting stimulators for off-label use comply with the PMA supplement process in order accurately certify compliance with Medicare, realtors’ FCA Medicare claim must be dismissed.
“The FDA [ ] considers the use of [elec-trostimulation] devices for thé treatment (healing) of,wounds to be significantly different than the use of these' devices for the indications currently covered under a 510(k) clearance. When used to treat wounds, these devices are considered by the FDA to be Class III devices, which requires the manufacturer to go through the Premarket Approval (PMA) process. Therefore, manufacturers would have to submit valid scientific evidence to show that their products provide reasonable assurance of safety and effectiveness for the treatment of wounds before the FDA would approve*1022 a PMA application. As of this time, the law prohibits manufacturers from marketing the use of electromagnetic devices. for .wound healing. Lack of approval for, this particular indication, however, does not preclude physicians and other healfh care .providers, from providing this therapy for an unapproved use. In addition, lack of FDA approval or clearance for a specific non-labeled indication, when there are other labeled indications, is not an automatic disqualification for Medicare coverage. In addition, CMS assesses relevant health outcomes, above and beyond the safety and effectiveness regulatory mandate of the FDA. Although a device must receive FDA approval or clearance for at least one indication to be eligible for Medicare coverage ..., FDA approval/clearance alone does not entitle that device to coverage.... CMS has the authority to conduct a separate assessment of a device’s appropriateness for Medicare coverage, including whether it is reasonable and necessary specifically for its intended use for Medicare beneficiaries”120
This passage makes it clear that if the FDA has approved a device for at least one purpose, an off-labél use can be reimbursed by Medicare. Cf. Medicare Benefit Policy Manual, § 50.4.2 (“An unlabeled use of a drug is a use that is not included as an indication on the drug’s label as approved by the FDA. FDA approved drugs used for indications other than what is indicated on the official label may be covered under Medicare if the carrier determines the use to be medically accepted, taking into con-' sideration the major drug compendia, authoritative medical literature and/or accepted standards of medical practice. In the case of drugs used in an anti-cancer chemotherapeutic regimen, unlabeled uses are covered for a medically accepted indication as defined in § 50.5”). It therefore supports- the court’s conclusion that CMS’ use of the phrase “device approved by the FDA” in the Medicare Benefit Policy Manual does not mean “a use of a device that has been approved by the FDA,” and that there is no categorical ban on the coverage of devices for off-label uses.
The- ■ explicit. terms of certain of the NCDs and LCDs' also support the court’s conclusion that the Medicare Manual’s use of the term devices approved by the FDA does not mean' the particular use of a device approved by the FDA. Some NCDs and LCDs, for example, specifically limit the reimburseable use of particular devices to those for which they have been approved by the FDA See NCD 20.9, § B.lB.3 (stating that ventricular assist devices (“VADs”) “used for support of blood circulation post-cardiotomy are covered only if they have received approval from the [FDA] for that purpose, and are used according to the FDA-approved labeling instructions— VADs used for bridge-to-transplant are. covered .only if they have received approval from the FDA for that purpose, and the VADs are used according to the FDA-approved labeling instructions _VADs used for destination therapy aré covered only if they have received approval from the FDA for that purpose”);
Some LCDs specify that both on-label use and off-label use of devices is covered when supported by peer-reviewed literature. See, e.g., LCD L35084 (covering non-coronary vascular stents “only- when an FDA-approved stent * is” either (1) “[u]sed for the FDA-ápproved indications” or (2) for certain other enumerated indications “supported by the peer medical literature”);
As the court previously concluded, .none of these distinctions would be required if coverage for off-label use of devices were categorically prohibited.
In sum, relators have failed to identify any Medicare statute, regulation, or program requirement that conditions payment for medical device claims on the manufacturer’s compliance with PMA supplement requirements. They therefore fail plausibly to allege that Medicare conditions payment for medical devices on the device manufacturer’s compliance with the FDA’s PMA supplement regulation. Thus, even had they adequately alleged that defendants engage in off-label promotion of their stimulators, the court would dismiss the Medicare FCA claim for this reason.
The deficiencies the court has noted in relators’ pleading of falsity also render inadequate their allegations of scienter. The court previously found that relators failed to allege scienter sufficiently because none -of the statutes, regulations,-NCDs, LCDs, or claim forms referenced in the second amended complaint or discovered independently by the court indicated that defendants were required to disclose the fact that they sought reimbursement for devices prescribed for off-label use. Consequently, nope put defendants.on notice that they needed to do so.
Relators’ only argument is that intent and knowledge can.be alleged generally in an FCA case.
As in the second amended, complaint, relators do not cite any Medicare statute, regulation, NCD, LCD, or claim form that indicates manufacturers like defendants must disclose the fact that they seek reimbursement for devices prescribed for off-label use, or that they must file a PMA supplement before seeking reimbursement. No facts alleged by relators give rise-to a reasonable'inference that defendants were on notice they were filing false claims. In the absence of any factual allegations-supporting relators’ assertion that defendants acted with the requisite scienter, their allegations that defendants “knew that they were falsely and/or fraudulently claiming reimbursement” and “knew [them devices] were being unlawfully sold for unapproved off-label cervical use” are too conclusory to plead a plausible claim for relief, even under the relaxed standard of Rule 8(a).' Accordingly, the court again concludes that relators have failed adequately to allege scienter, and dismisses their Medicare FCA claim on this basis as well.
d. Whether the. Corrected Third Amended Complaint Adequately Alleges that Defendants Made False Certifications
. In addition to the basis for dismissal already ■ discussed, the court also concludes that relators have failed to plead with particularity when any of defendants’ purported certifications of compliance occurred.
e. Conclusion Regarding Relators’ Ability to State a FCA Claim Based on Defendants’ Submission of Claims. to Medicare
Because relators have failed (i). to plead with particularity facts showing that defendants engaged in off-label promotion of their stimulators; (ii) to allege facts demonstrating that, defendants were required to file a FDA PMA- supplement as a prerequisite to obtaining reimbursement for off-label use of their stimulators;
a. Whether the Corrected Third Amended Complaint Adequately Alleges that Defendants Submitted False Claims for Medicaid Reimbursement
The federal government reimburses a portion of the cost of DME under the Medicaid program, Federal Employees Health Benefit Program, Federal Worker’s Compensation Programs, CHAMPVA, and Tricare. Relators contend that defendants submitted false claims to these programs as well.
As noted, relators’ FCA claim must satisfy the heightened pleading requirements of Rule 9(b). Relators must therefore “set forth what is false or misleading about [the] statement and why it is false.” Ebeid, 616 F.3d at 998. Relators’ complaint contains a cursory review of the Medicaid laws of forty-four states and the District of Columbia. Defendants contend these allegations are insufficient, because they (i) contain no reference medical devices or state that medical devices are covered only when prescribed for FDA-approved uses; and (ii) do not indicate that any state considered defendants’ devices experimental or investigational.
Relators allege that Florida limits Medicaid coverage to medically necessary DME, which is defined as “not experimental or investigational.” “Experimental or investigational” in turn is defined as “used for a purpose that is not approved by the FDA.”
Relators contend' that Minnesota’s Medicaid Manual dated April 8, 2014 states that bone growth stimulators “should only be used in a way that is consistent with the FDA approved package insert,” and that the device must be “requested for an FDA approved indication.”
In sum, the court concludes that relators have failed to allege with particularity that defendants submitted any claim that was inconsistent with any state’s Medicaid program requirements. The court therefore dismisses the state Medicaid aspects of the FCA claim.
b. Whether the Corrected Third Amended Complaint Adequately Alleges Submission of False Claims tp Other Government Agencies
‘ Defendants argue' that the court dismissed relators’ FCA claim in the second amended complaint to the extent based on the submission of claims to other federal government programs for at least four reasons: (i) relators did not allege the reimbursement rules for these programs, and thus failed to plead with particularity that they did not cover off-label uses of the stimulators;
c. Scienter
Even had relators adequately alleged defendants’ submission of, false claims or certifications to these programs, they have not cured the deficiencies the court earlier found in their allegations of scienter. As discussed' in some detail in addressing re-lators’ Medicare allegations, they do not plead facts that support their conclusory assertion that defendants acted with scien-ter. The allegations' are thus insufficient under Rule 8(a). Consequently, relators’ FCA claim premised on submission of false claims to federal programs other than Medicare must be dismissed.
C. Whether the Court Should Exercise Supplemental . Jurisdiction over Relators’ State Law Claims
Relators’ federal FCA claim provides the sole basis for federal subject matter jurisdiction in this case. Because relators have not stated a viable, federal claim, the court declines to exercise jurisdiction over their state law claims at this time. See Wade v. Regional Credit Association, 87 F.3d 1098, 1101 (9th Cir. 1996) (“Where a district court dismisses a federal claim, leaving only state claims for resolution, it should decline jurisdiction over the state claims and dismiss them without prejudice”); Harrell v. 20th Century Insurance Co., 934 F.2d 203, 205 (9th Cir. 1991) (“[I]t is generally preferable for a district court to remand remaining pendent claims to state court”); Anderson v. Countrywide Financial, No. 2:08-cv-01220-GEB-GGH, 2009 WL 3368444, *6 (E.D.Cal. Oct. 16, 2009) (“Since state courts have the primary responsibility to develop and apply state law, and the [United Mine Workers v.] Gibbs values do not favor continued exercise of supplemental jurisdiction over Plaintiffs state claims, Plaintiffs state claims are dismissed under 28 U.S.C. § 1367(c)(3)”); 28 U.S.C. § 1367(c)(3) (“The district courts may decline to exercise supplemental jurisdiction over a [state-law] claim [if] ... the district court has dismissed all claims over which it has original jurisdiction”). See also United Mine Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966) (“Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law”).
D. Whether the Court Should Grant Relators Leave to Amend
Defendants previously asked that the court dismiss relators’ federal claim with prejudice, and reiterate that request in their motion.
Relators have now had four opportunities to plead a viable FCA claim against defendants; although the court has reviewed the allegations only twice, it concludes, based on the allegations in the corrected third amended complaint, the arguments asserted in their opposition, and the fact that they disclaim any reliance on defendants’ off-label promotion of the devices, that relators will not be able to amend to state a viable federal FCA claim based on the submission of claims to Medicare. Compare Orion Tire Corp. v. Goodyear Tire & Rubber Co., 268 F.3d 1133, 1137 (9th Cir. 2001) (“Where counsel is able to posit possible amendments that would be consistent with the operative complaint and could also possibly state a claim for relief, the complaint should not be dismissed on its face with prejudice”). Specifically, relators do not state that they can add additional particularized allegations concerning defendants’ alleged off-label promotion, despite having been advised that particularity was required for its implied false certification claim,
Defendants’ FCA claim based on submissions to state Medicaid pleads no particularized allegations that defendants ever submitted any false claims. Relators’ response to defendants’ argument in this regard is that it rests on a semantic quibble that most state Medicaid provisions lack the term “device.”
For these reasons, the court dismisses all aspects of relators’ federal FCA claim with prejudice. See Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1051 (9th Cir. 2008) (“Dismissal without leave to amend is proper if it is clear' that the complaint could not be saved by amendment”); California ex rel. California Department of Toxic Substances Control v. Neville Chem
III. CONCLUSION
For the reasons stated, the court grants defendants’ motion to dismiss the corrected third amended complaint. Relators’ federal FCA claim is dismissed in its entirety with prejudice. The court declines to exercise supplemental jurisdiction over relators’ state law claims, and dismisses them without prejudice to refiling in state court.
. First Amended Complaint, Docket No. 8 (Dec. 26, 2012).
. The United States’ Election to Decline Inter- ' vention, Docket No. 9 (May 17, 2012).
. United States’ Election to ;Decline Intervention, Docket No. 13 (July 19, 2013).
. Docket (July 19, 2013).
.Request to Dismiss Defendant Orthofix, Inc., Docket No. 18 (Oct. 2, 2013); Order Dismissing Action Against Defendant Orthofix Without Prejudice, Docket No. 19 (Oct. 3, 2013).
. Second Amended Complaint ("SAC”), Docket No. 43 (Nov. 8, 2013).
.' Stipulation to Dismiss Defendants DJO Finance and DJO Global, Docket No. 49 (Jan. 22, 2014).
. Order Dismissing Defendants DJO Global and DJO Finance, Docket No. 50 (Jan. 28, 2014).
. Order Granting Defendants’ Motion to Stay Discovery, Docket No. 57 (Feb. 20, 2014).
. Motion to Dismiss Second Amended Complaint, Docket No. 46 (Jan. 20, 2014).
. Order Directing Parties to File Supplemental Briefing, Docket No. 67 (June 20, 2014).
. Relators’ Responses' to the Questions Pre- . sented in the Court’s June 20, 2014 Order, Docket No. 71 (July 7, 2014); Defendants’ Joint Supplemental Brief in Support of Motion to Dismiss Second Amended Complaint, Docket No. 72 (July 7, 2014).
. Order Granting Defendants’ Motion to Dismiss the Second Amended Complaint ("Order”), Docket No. 74 (Sept. 2, 2014).
. Id. at 66-67.
. Id. at 67.
. id. at 68.
. Third Amended Complaint, Docket No. 75 (Sept. 22, 2014); Corrected Third Amended Complaint ("TAC”), Docket No. 78 (.Sept. 29, 2014). All citations or references to the third amended complaint refer to the corrected third amended complaint.
. Order Setting Briefing Schedule, Docket No. 80 (Oct. 7, 2014).
. Joint Motion to Dismiss Corrected Third Amended Complaint (“Motion”), Docket No. 81 (Oct. 22, 2014).
. Opposition to Joint Motion to Dismiss Corrected Third Amended Complaint ("Opposition”), Docket No. 86 (Nov. 24, 2014).
.' These other plans are Medicaid, the Federal Employees Health Benefit Program, the Federal Worker’s Compensation Programs, CHAMPVA, and Tricare.
. All manufacturers that wish to market Class III devices must submit a PMA supplement prior to marketing unless the FDA clears a Form 510(k) in which the manufacturer successfully argues that the device should be reclassified as a Class I or II device “because it is substantially equivalent to an existing device so categorized." United States v. Universal Management Services, Inc., 191 F.3d 750, 754 (6th Cir. 1999). Manufacturers that wish to market Class I or II devices must also, except in rare circumstances, submit a Form 5l0(k) to the FDA in order lawfully to market the device. (Defendants’ Request for Judicial Notice in Support of Supplemental Brief (“Defendants’ Prior Supp. RJN"), Docket No. 73 (July 7, 2014), Exh. 10 at 447 (Medical Devices: Premarket Notification (510k)).)
The court took judicial notice of various documents cited in this section in its prior order granting defendants’ motion to dismiss the second amended complaint. (Order at 20-29.) The court takes judicial notice of the same documents again to provide adequate background for understanding of the parties’ dispute. Citations are to the parties’ prior requests for judicial notice.
. TAC, ¶¶ 5-6.
. Id., ¶20.
. Id., ¶ 5.
. The "lumbar spine” refers to the vertebrae in an individual's lower back. (Merriam-Webster Dictionary, www.merriam-webster. com/dictionary/lumbar (accessed on Apr. 21, 2014) ("relating to .or lying near the lower back”).)
. TAC, ¶5.
. Id., ¶6.
. Id.
. The court takes judicial notice of the contents of the Medicare Program Integrity Man
.Relators’ Request for Judicial Notice in Support of Opposition to Defendants’ Motion to Dismiss Second Amended Complaint ("Re-lators’ Prior RJN”), Docket No. 61 (Mar. 19, 2014), Exh. J at 136-137 (Medicare Manual Chapter 14-Medical Devices).
. . Id., Exh. H at 94 (Medicare Program Integrity Manual, Chapter 13 — Local Coverage Determinations^ 13.1:1). ■
. Defendants' Request for Judicial Notice in Support of Joint Motion to Dismiss Second Amended Complaint ("Defendants’ Prior RJN”), Exh. 1-(National Coverage Determination for Osteogenic Stimulators (150.2) ("NCD 150.2”)). The court takes judicial notice of this document, infra.
. Id. at 7.
. Id., Exhs. 3 at 15 (Local Coverage Determination (LCD): Osteogenesis ■ Stimulators (LCD L11501), covering Connecticut, D.C., Delaware, Massachusetts, Maryland, Maine, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont ("LCD L11501”) ("A spinal electrical osteo-genesis stimulator (E0748) is covered only if any of the following criteria are met ... Following spinal fusion surgery")); Exh. 4 at 33 (Local Coverage Determination (LCD): Osteo-genesis Stimulators (LCD LI 1490), covering Alaska, American Samoa, Arizona, California, Guam, Hawaii, Iowa, Idaho, Kansas, Missouri, Montana, North Dakota, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington,- Wyoming, Northern Mariana , Islands ("LCD LI 1490”) ("A spinal electrical osteo-genesis stimulator (E0748) is covered only if any of the following criteria are met ... Following spinal fusion surgery”)); Exh. 5 at 52 (Local Coverage Determination (LCD): Osteo-genesis Stimulators (LCD L5012), covering Alabama, Arkansas, Colorado, Florida, Georgia, Louisiana, Mississippi, North Carolina, New Mexico, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, Virgin Islands, West Virginia ("LCD L5012”) ("A spinal electrical osteogenesis stimulator (E0748) is covered only if any of the following criteria are met ... Following spinal fusion surgery”)); Exh.-6 at 67 (Local Coverage Determination (LCD): Osteogenesis Stimulators (LCD L27026), covering Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio, and Wisconsin ("LCD L27026”) ("A spinal electrical osteogenesis stimulator (E0748) is covered only if any of the following criteria are met ... Following spinal fusion surgery”)). The court takes judicial notice of these documents infra.
. See Defendants’ Prior RJN, Exhs, I (NCD 150,2); 3 (LCD LI 1501), 4 (LCD LI 1490), 5 . (LCD L5012), and 6 (LCD L27026). The ’.‘cervical spine” refers, to the vertebrae in an individual’s neck. (Merriam-Webster Dictionary, www.merriam-webster. com/dictionary/ cervical (accessed on Apr. 21, 2014) ("of or relating to the neck").)
. Relators' Prior RJN, Exh. F (Medicare Manual, Chapter 1, Part 4, Coverage Determinations, § 280.1 — Durable Medical Equipment Reference List ("NCD 280.1")).
. Id. ■
. Id.
. Relators’ Prior RJN, Exh. R (Health Insurance Claims Form 1500 ("CMS Form 1500”)). The court takes judicial notice of this document infra.
. Id.
. CMS Manual System, Pub. 100-04 Medicare Claims Processing, Transmittal 236, at 3, http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloadsA R236CP.pdf' (accessed on April-24,' 2014) ("Modifier KF is a pricing modifier. The description for modifier KF is as follows: Item designated by FDA as class III device”). The court takes judicial notice of this fact based on an official document available on the CMS website.
. Defendants’ Prior RJN, Exh. 2 at 11 (Certificate of Medical Necessity CMS-847-Osteo-.genesis Stimulators ("CMS 847”)).
. Id: '
. Id.
. Id.
. Id.
. Id.
. Relators' Prior RJN, Exh. R (CMS Form 1500); Defendants’ RJN, Exh. 2 (CMS 847).
. Defendants’ Prior RJN, Exhs. 3 (LCD LI 1501), 4 (LCD LI 1490), 5 (LCD L5012), and 6 (LCD L27026).
. TAC, ¶¶ 5-6.
. Id., ¶ 111.
. Id.
. Id.
. Id.
. Id., ¶ 115.
. id., ¶ 114.
. Id., ¶ 126.
. Id., ¶ 58.
. Id., ¶ 61.
. Id., ¶ 60.
. Id.
. Id., ¶ 126.
. Id., ¶ 127.
. Id.
. Id., ¶ 128.
. id.
. Id.
. Id., ¶ 129. Relators allege these physicians testified that they did not complete CMS 847 forms in connection with these orders. (Id.) They do not plead, however, that defendants forged the physicians’ signatures on the form, that defendants wrongfully completed Section B, or that when a manufacturer completes the form instead of the physician, this alone means the manufacturer has made a false claim to the government by submitting the form.
. . Id., ¶ 45.-
. Id.
. Id., ¶¶3, 135.
. Id., ¶ 130.
. Id., ¶133.
. Id., ¶ 130.
. Id., ¶141.
. Id.
. Id.
. Id., ¶146.
. Id., ¶ 144.
. Id., ¶ 142.
.' Id., ¶145.
. Id., ¶ 146.
. Defendants' Request for Judicial Notice ("RJN”), Docket No. 82 (Oct. 22, 2014),
. RJN, Exhs 1-3.
. For this reason, although the complaint contains many allegations concerning the applicable law, the court does not accept them as true.
. An FCA action can be commenced in one of two ways. The government can file a civil action against the alleged false claimant. '31 U.S.C. § 3730(a). Alternatively, a- private person, a relator, can commence a qui tarn civil action against the alleged false claimant "for the person and for the United States Government ... in the name of the Government.” 31 U.S.C. § 3730(b)(1). When a private person files a false claims action, the government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and material evidence and information supporting the complaint. 31 U.S.C. § 3730(b)(2). If the gov- . ernment declines to assume responsibility for the action, the relator has the right to conduct the action in the government’s name. 31 U.S.C. § 3730(b)(4)(B). If the government elects to prosecute the action, the relator will receive 15 to 25 percent of any recovery, depending on the extent to which he substantially contributes to prosecution of the action. 31 U.S.C. § 3730(d)(1). If the .government chooses not to intervene, the relator will receive 25 percent to 30 percent of any recovery. '31 U.S.C. § 3730(d)(2).
. Ordér at 45-46.'
. Id. at 54-55.
. Id. at 67.
. Id.
. Motion at 10.
. Opposition at 23.
. Order at 68 ("Relators’ federal FCA claim is dismissed with prejudice to the extent it is based on defendants’ submission of claims to Medicare; the only exception is a claim alleging that defendants made impliedly false certifications to Medicare that they were in compliance with all applicable regulations when they had an affirmative duty to file a PMA supplement because their employees were promoting use of the stimulators for the cervical spine.” (emphasis added)).
.Alternatively, the court could strike the allegations under Rule 12(f). See Fed.R.Civ.Proc. 12(f) (“The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act: (1) on its own; or (2) on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading”); Barker v. Avila, No. 2:09-cv-00001-GEB-JFM, 2010 WL 3171067, *1-2 (E.D.Cal. Aug. 11, 2010) (striking an amendment to a federal law claim where the court had granted leave to amend only state law claims); PB Farradyne, Inc. v. Peterson, No. CV 05-3447 SI, 2006 WL 2578273, *3 (N.D.Cal. Sept. 6, 2006) (striking allegations exceeding scope of .leave to amend).
. Id. at *11-14. -
. Id. at *12.
.In Ebeid, the Ninth Circuit rejected the relator's argument that "the traditional pleading standards for fraud under Rule 9(b) should be relaxed [in implied false certification cases] because the alleged fraud was of an extended duration and 'the billing information is solely in Lungwitz’s possession.’ ” Ebeid, 616 F.3d at 999. The court held that:
To be sure, Ebeid is not privy to the details of patient billing. As he points out, in the securities fraud context we have held that ‘Rule 9(b) may be relaxed to permit discovery in a limited class of corporate fraud cases where the evidence is within a defendant’s exclusive possession.’ We are not persuaded that this limited principle should be applied in this case. To jettison the particularity requirement simply because it would facilitate a claim by an outsider is hardly grounds for overriding the general rule, especially because the FCA is geared primarily to encourage insiders to disclose information necessary to prevent fraud on the government.”
. Opposition at 8.
. TAC, ¶ 131.
. Id. A 143.
. TAC, ¶¶ 131, 143.
. Id,, ¶ 131.
. .Id., ¶ 143.
. TAC, ¶ 127.
. Id.
. Relators appear to suggest that paragraphs 134-36, 138, 141-44, and 146 support their off-label promotion theory. The court disagrees. These paragraphs do not concern off-label promotion. Indeed, as defendants note, this is confirmed by the fact that these paragraphs appear almost verbatim in the second amended complaint, i.e., a complaint that relators asserted did not allege off-label promotion. (Order at 59 n. 186 ("As the court has noted multiple times, however, rela-tors explicitly state that they do not assert that defendants unlawfiitty marketed their de-■vices____Indeed, theré are no allegations of unlawful marketing in- the complaint.” (emphasis added)); Opposition to Motion to Dismiss Second Amended Complaint, Docket No. 60 (Mar. 19, 2014) at 26-27.)
. TAC, ¶ 32.
. Id.
. Opposition at 7.
. Motion at 14.
. Opposition at 39.
. TAC, ¶¶ 9-10.
.- See Opposition at 6 (citing TAC ¶¶ 96-110 •for proposition that defendants “undertook to comply with all applicable laws”). See also .TAC, ¶¶ 96-110 (referring to 42 C.F.R. § 424.57).
. At the hearing, relators argued that their implied false certification claim was based on defendants’ failure to comply with Medicare's overarching "reasonable and necessary” requirement. At the same time, they disclaimed any claim based on off-label promotion, twice arguing that this was .“not their theory.” Rather, relators assert that defendants' submission of claims for off-label use of their devices was unlawful because the devices are not medically accepted for such uses, i.e. reasonable and necessary. The court previously found this argument unavailing because it concluded that off-label use of defendants’ devices is not categorically prohibited. (See Order at 46-50.)
As the court explained in the order dismissing the second amended complaint, HHS "may make [Medicare] coverage determinations. [for certain types of devices] via up-front rules” and has "discretion [to decide] whether to make [broad] determinations [as to whether a particular device is reimbursable] ... or [whether to have Medicare contractors make that decision based on a] case-by-case adjudication.” International Rehabilitative Sciences, 688 F.3d at 1001. When HHS engages in rulemaking regarding the scope of coverage for certain devices, it issues NCDs, which are "a determination ... of whether a particular item or service is covered nationally under Medicare.” 42 C.F.R. § 405.1060(a)(1). NCDs outline the conditions under which a device or service will be covered (or not' covered), and are binding on all contractors. See 42 C.F.R. § 405.1060(a); Almy, 679 F.3d at 299; Erringer v. Thompson, 189 F.Supp.2d 984, 987 (D.Ariz. 2001) ("An NCD is binding on all carrier! ]s, fiscal intermediaries, and ALJs”); see also Fratellone v. Sebelius, No. 08 Civ. 3100(RMB) (RLE), 2009 WL 2971751, *5 (S.D.N.Y. Sept. 16, 2009) ("NCDs are binding on fiscal intermediaries, carriers, QICs, AUs, and the MAC”). They reflect CMS’s determination as to whether a particular device or service is reasonable and necessary; this includes a determination concerning the device’s or service's safety and efficacy.
In the prior order, the court noted that NCD 150.2 covers stimulators, and states that ”[t]he noninvasive stimulator device is covered only for the following indications: ... as an adjunct to spinal fusion surgery.” (Id. at 47.) The court observed that LCDs for stimu-lators provide identical coverage; it stated that nothing in NCD 150.2 or LCDs limits coverage for stimulators to those supplied for
Finally, even were there merit to relators’ argument, as discussed infra, their allegations of scienter fail in Tight of the existence of the NCDs and LCDs cited above. For all of these reasons, the court finds relators' reasonable and necessary argument is unpersuasive.
. Opposition at 38 (citing Medicare Benefit Policy Manual, Ch. 14, § 10).
. Reply at 8.
. Order at 40.
. Defendants’ Prior Supp. RJN, Exh. 2 at 358-359 (at 6-7) (emphasis added).
. Id., Exh. 1 at 39 (Medicare National Coverage Determinations Manual).
.Id. at 83.
. Id., Exh. 4 at 388 (LCD L30312).
. Id., Exh. 1 at 65 (Medicare National Coverage Determinations Manual).
. Id., Exh. 5 at 403 (LCD L32641).
. Id., Exh. 6 at 417 (LCD L33500).
. Id., Exh. 3 at 378 (LCD L32220).
. Id., Exh. 7 at 430 (LCD L32038).
.Order at 43.
. Order at 60-61.
. Opposition at 20.
. TAC, ¶ ISO
. Order at 57.
." TAC, ¶¶ 99-100.
. Id.
. SAC, ¶¶ 5-6.
. Order at 56.
. For the same reason, relators have failed to allege adequately that defendants’ failure to disclose that the stimulators were prescribed for off-label use was material. "To establish materiality ... the question is merely whether the false certification — or assertion, or statement — was relevant to the government's decision to confer a benefit.” Ebeid, 616 F.3d at 997 (citing Hendow, 461 F.3d at 1173). As the court previously noted, the fact that Medicare does not limit coverage of stimulators to on-label uses indicates the failure to disclose that a stimulator was going to be used for an off-label use was not material to the government's reimbursement decision. (Order at 58 n. 182.) This conclusion is reinforced by the fact that neither CMS Form 1500 nor CMS 847 includes a question regarding the use to which the stimulator will be put or the scope of FDA approval of the stimulator. See United States ex rel. Hess v. Sanofi-Synthelabo, Inc., No. 4;05CV570MLM, 2006 WL 1064127, *7 (E.D.Mo. Apr. 21, 2006) ("According to Plaintiff's Complaint, ¶ 13, although 'the Medicare claim form has a line for indicating the patient’s diagnosis,’ it 'does not require a doctor to indicate what stage cancer the patient has.' As such, the stage of a patient’s cancer is not material to a doctor’s seeking reimbursement for his or her prescribing Eloxatin for treatment of cancer. The stage of a patient’s cancer, therefore, was not material to [the government] in making a decision to reimburse doctors for their prescription of Eloxatin”).
. TAC, If 117.
. Motion at 18.
. Id.
. Id.
. TAC, ¶ 121.
. Id. at 19.
. The court notes that relators allege that the District of Columbia Medicaid program also prohibits "experimental procedures.” (Id.) Relators do not allege that "experimental procedures” are -linked to compliance with FDA rules, however. Even if they did, these allegations fail for the same reasons as the
. TAC, ¶ 121.
. Id.
.Id., ¶¶ 139, 146.
. See id. See also Order at 62.
. Order at 59.
. Id. at 60 n. 187.
. Id. at 60. Scienter is addressed separately in subsection (c) of the order,
. Id. at 62-66. .
.Motion at 23.
. Motion at 25.
. Order at 56 (noting that relators had not alleged it made certifications with the particularity demanded by Rule 9(b)).
. Opposition at 3 5.
. Id.
Reference
- Full Case Name
- UNITED STATES of America, ex rel. Doris MODGLIN and Russ Milko v. DJO GLOBAL INC., DJO LLC, DJO Finance LLC, Orthofix, Inc., Biomet, Inc. and EBI, LP
- Cited By
- 25 cases
- Status
- Published