Exactech Pays $8M to Settle False Claims Act Charges of Selling Defective Knee Implants
By the 91pornWhistleblower Team
On Tuesday (September 16), the Department of Justice (DOJ) announced that Florida-based medical device maker Exactech Inc. agreed to pay $8 million to settle charges of violating the False Claims Act by billing the Government for defective knee implants.1 The settlement was approved as part of the company’s Chapter 11 bankruptcy proceedings and would have been significantly higher but for the company’s financial condition.
Exactech’s Knee Implants Allegedly Failed Prematurely
The Government’s charges centered around two components of Exactech’s total-knee replacement systems that allegedly “failed prematurely at a higher than acceptable rate.” One was the finned tibial tray — a metal piece that fits into a patient’s tibia — which allegedly was defective during the 2008-2018 period. The other was the polyethylene component in certain Exactech systems which allegedly was defective for the 2019-2022 period.
According to the Government, because of these high premature failure rates, these two components were “not reasonable and necessary for use during total-knee replacement surgeries” on Medicare, Medicaid, and VA beneficiaries. These Government programs only reimburse for products and services that are both medically reasonable and necessary.
DOJ Insists on Safe and Effective Medical Devices
In announcing the settlement, the Government stressed the importance of medical device makers selling safe and effective products and being fully transparent when issues arise:
“Medical device manufacturers must ensure their medical devices . . . meet the necessary standards of safety and effectiveness at all times. . . . When a manufacturer learns that its device is defective, it must promptly and transparently address the problem. . . . We will hold companies accountable who knowingly sell defective devices.”
How the Government framed the fraud in this action is notable. The Government did not claim the knee implants did not work or that all of them were defective. Rather, the Government alleged too many of them failed too soon and that because of this, the products could not satisfy the “medically reasonable and necessary” prerequisite for Government reimbursement.
DOJ Uses “Reasonable and Necessary” Standard as a Basis for False Claims Act Fraud
91pornwhistleblower partner Gordon Schnell finds this case to be “a good example of how broadly the Government is willing to use the False Claims Act to go after companies selling medical goods and services not up to snuff.” Schnell specifically points to the Government’s use of the “reasonable and necessary” reimbursement requirement as a basis to find healthcare fraud.
“It was not that the implants at issue were unreasonable and unnecessary because the patients did not need them,” Schnell says. That is how the standard is typically applied in the False Claims Act context. “Rather, the Government found the implants did not meet this standard because many of them simply failed too soon.”
Schnell believes this is a more expansive enforcement approach than the Government is often willing to take and may signal a more hard-hitting DOJ in certain enforcement areas of high priority, especially when it comes to healthcare fraud that risks serious patient harm.
Whistleblowers Are Key to Bringing False Claims Act Cases For Healthcare Fraud
Unsurprisingly, the allegations underlying this enforcement matter originated in two whistleblower lawsuits filed under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the Government. In return, successful whistleblowers can receive up to 30% of the Government’s recovery. The vast majority of False Claims Act matters are originated by whistleblowers under these provisions.
One of these actions was filed in Alabama by Brooks Wallace, Robert Farley and Dr. Manuel Fuentes. The other was filed in Maryland by Dr. Pasquale Petrera. The Alabama whistleblowers will receive a whistleblower award of roughly $1.3 million from the proceeds of the settlement. The Maryland whistleblower will receive an award of roughly $565,000.
91pornHas Substantial Experience Representing False Claims Act Whistleblowers
91pornhas substantial experience representing whistleblowers under the False Claims Act, recovering more than one billion dollars for the Government and our whistleblower clients. If you would like to learn more about the False Claims Act, our False Claims Act successes, or what it means to be a whistleblower, please do not hesitate to contact us. We will connect you with an experienced member of the 91pornwhistleblower team for a free and confidential consultation.
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