Dive Brief:

• A whistleblower lawsuit accusing Medtronic of fraudulently obtaining FDA clearance for several spinal fusion devices can proceed, the U.S. 9th Circuit Court of Appeals has ruled. The plaintiffs — Dan Abrams Co., the U.S. and 28 states — appealed a California district court's 2019 dismissal of the False Claims Act lawsuit.
• The appeals court, however, affirmed the lower court's decision to dismiss additional allegations that Medtronic unlawfully marketed the spine devices for an off-label use. 
• The appeals court also dismissed accusations that Medtronic illegally compensated hospitals and physicians for use of the devices in violation of the Anti-Kickback Statute.  

Dive Insight:

The spinal fusion devices at the center of the lawsuit were cleared through the 510(k) process for vertebral body replacement use. The lawsuit claims Medtronic defrauded the FDA into granting Class II clearance to the devices by failing to disclose that the products were intended for use in the cervical spine.

A Medtronic spokesperson said in an emailed statement the company is pleased the 9th Circuit Court of Appeals affirmed the lower court's dismal of certain claims.

"With regard to the remaining claims remanded back to the lower court, we are confident in the merits of our case and intend to defend ourselves vigorously against these baseless allegations," the spokesperson said in the statement.

The plaintiffs, which include a former sales representative, accuse Medtronic of knowing that cervical use posed different safety questions than those raised in previous device approvals. If Medtronic had disclosed that the devices were intended for use in the cervical spine, FDA may have required that they undergo the more stringent Class III approval process, the lawsuit contends.

"These considerations -- intended use, similarity to a predicate device, and different questions about safety -- are precisely those that the FDA considers in granting Class II certification," the appellate court stated in its memorandum.

The court rejected Medtronic's argument that the False Claims Act was not the proper vehicle for bringing a claim of fraud against the FDA.

On the plaintiffs' allegation that Medtronic marketed the devices without FDA clearance for use in the cervical spine, constituting an off-label and contraindicated use, the appeals court sided with the district court in rejecting the claim. The federal government has recognized that doctors may use devices for off-label purposes as long as they are medically necessary and reasonable, the court said.

The plaintiffs also alleged that Medtronic violated the Anti-Kickback Statute by providing rebates to hospitals to buy the devices and paying physicians for costs related to business development events for the devices. The appeals court agreed with the district court's dismissal of the anti-kickback claims, stating that properly disclosed discounts offered to providers are exempt from the statute.

Medtronic's cranial and spinal technologies business in February posted a 3.2% decline in third-quarter revenue, to $1.08 billion, hurt by the resurgence of COVID-19 that depressed procedure volumes over the winter, company executives said on the earnings call