Financial Fraud: CAREFUSION CORPORATION Admits to Buying and Selling Unapproved Medical Devices
Manhattan U.S. Attorney Settles Civil Fraud Claims Against Medical Device Distributor For Selling Products Not Approved By The Fda
Distributor CareFusion Admits to Buying and Selling Unapproved Devices, Agrees to Pay $3.3 Million
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jeffrey E. Shuren, M.D., director of the Center for Devices and Radiological Health at the U.S. Food and Drug Administration (“FDA”), announced today that the U.S. has settled civil fraud claims under the False Claims Act against CAREFUSION CORPORATION (“CAREFUSION”), a medical device distributor based in San Diego, California, for buying and selling medical devices that were not approved or cleared by the FDA. These unapproved and uncleared devices were then used by medical providers in medical procedures, and the providers submitted claims for reimbursement to federal healthcare programs, such as Medicare and Medicaid, for those procedures. As part of the settlement, approved May 7, 2019, by U.S. District Judge Edgardo Ramos, CAREFUSION agreed to pay the Government $3.3 million and admitted to buying and selling medical devices that had not received the requisite approval or clearance from the FDA.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Medical devices that do not have the required FDA approval or clearance cannot be bought and sold for use on patients. When unapproved devices are used in medical procedures, it presents a public health and safety risk, and federal health insurance programs should not foot the bill. Medical device distributors must follow FDA rules and this Office will continue to hold them accountable when they don’t.”
Director Jeffrey E. Shuren, M.D. said: “Americans rely on FDA oversight to ensure that their medical devices are safe and effective. When companies sell devices without proper authorization, they may be putting patients’ health at risk. We will continue to investigate and bring to justice companies that attempt to subvert the regulatory functions of the FDA, which are intended to protect the public health. We commend the efforts of the Department of Justice for their vigorous pursuit of justice in this matter.”
Since 1976, many different kinds of medical devices must, depending on the degree of patient risk, be approved or cleared by the FDA before they can be marketed for use on patients. There is a grandfather exception for medical devices that were legally in commerce prior to 1976, which are known as “pre-amendment” devices. To qualify for pre-amendment status, the device’s owner (typically the manufacturer) must, among other things, have marketed the device prior to May 28, 1976.
In the settlement, CAREFUSION admitted to distributing medical devices for which the device manufacturer (the “Manufacturer”) had not obtained the required approvals or clearances from the FDA and for which the Manufacturer could not demonstrate that the pre-amendment exception applied. In particular, CAREFUSION admitted that:
From 2007 to 2014, the Manufacturer sold devices for which the Manufacturer (i) had not obtained approval or clearance from the FDA to market; (ii) was relying on the pre-amendment status exemption to market, but (iii) lacked the required evidence to demonstrate that the devices qualified for the pre-amendment status exemption.
During that period, CAREFUSION purchased devices from the Manufacturer that the Manufacturer wrongly claimed qualified for the pre-amendment status exception, and then sold those devices to hospitals and other health care providers.
Some of those devices were used in procedures for which providers submitted claims for reimbursement to federal health care programs.
While the Manufacturer provided CAREFUSION with the evidence on which it was relying to justify its claim that the devices qualified for the pre-amendment status exemption, that evidence was insufficient.
After the FDA issued a warning letter to the Manufacturer in 2014 and the Manufacturer issued recall notices for the devices at issue, CAREFUSION ceased selling and distributing the devices.
Of the $3.3 million that CAREFUSION agreed to pay under the settlement, $2,821,539.92 will go to the United States and $478,460.08 will go to states adversely affected by CAREFUSION’s conduct through separate settlements with those states.
In connection with this settlement, the United States joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act. The whistleblower suit remains under seal as the Government continues its investigation.
Mr. Berman thanked the FDA, the Department of Health and Human Services Office of Inspector General, and the Centers for Medicare and Medicaid Services for their invaluable assistance in this matter.
The case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorneys Sharanya Mohan and Mónica P. Folch are in charge of the case.