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Medical Device Maker Agrees to Pay $36 Million to Resolve Criminal Liability and False Claims Act Allegations

The government’s crackdown on fraud often affects companies whose alleged criminal and civil violations impact patient safety. This was demonstrated earlier this month when the Justice Department announced that medical device manufacturer Biocompatibles, Inc., had agreed to plead guilty to mishandling its embolic device LC Bead and had also pay more than $36 million to resolve criminal and civil liability arising out of its illegal conduct. LC Bead is used in the treatment of liver cancer. Under the terms of the plea agreement, Biocompatibles pleaded guilty to a misdemeanor charge in connection with the misbranding of its LC Bead device. This misbranding is in violation of the Food, Drug and Cosmetic Act. LC Bead was cleared by the U.S. Food and Drug Administration (FDA) as an embolization device that can be used to treat certain types of tumors and arteriovenous malformations. LC Bead has never been cleared or approved by the FDA as a drug-device combination product or as a drug-delivery device.

As a part of the criminal resolution, Biocompatibles agreed to pay an $8.75 million fine for misbranding LCB and a criminal forfeiture of $2.25 million. The FDA sought assurances from Biocompatibles in 2004 that it would not market LC Bead as a drug delivery device. Nevertheless, two years later Biocompatibles began marking the device as such through the company it hired to carry out its sales and distribution in the United States. According to the statement of offense, that company said that LC Bead was “a drug-delivery device” and that its sales representatives were trained to market it “aggressively” to the chemoembolization market. Sales representatives told health care providers that the device increased the level of chemotherapy delivered to the liver tumor and that this resulted in “better tumor response rates.” The FDA did not clear the product for this purpose nor did any scientific evidence support this claim.

“The FDA approval process serves an important role in ensuring that federal health care participants receive devices that are safe, effective and medically appropriate,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “We will not permit companies to circumvent that process and put profits over patient safety.” Additionally, Biocompatibles agreed to pay $25 million to resolve False Claims Act violations for submitting false claims to the government healthcare programs for procedures in which LC Bead was loaded with chemotherapy drugs and used as a drug-delivery device. Doing this created a new combination device that was not approved or cleared by the FDA and also not covered by Medicare or other federal health care programs. The federal share of the civil settlement is approximately $23.6 million and the state Medicare share is approximately $1.4 million.

Biocompatibles had filed an application with the FDA for the approval of LC Bead as a drug-eluting bead combination but it was rejected since the company could not provide clinical studies proving that the device provided a genuine therapeutic benefit. Nevertheless, Biocompatibles marketed the product as having such benefits. “The FDA plays a fundamental role in ensuring the safety and efficacy of medical devices and drugs in this country,” said U.S. Attorney Richard L. Durbin Jr. of the Western District of Texas. “The FDA approval process and clinical studies serve to ensure that patients receive devices that meet those standards. We will vigorously pursue those who ignore or seek to circumvent these important patient protections.”

The settlement with Biocompatibles resolved a lawsuit filed under the whistleblower provision of the False Claims Act, with allows private individuals to file suit on behalf of the United States and to share in any recovery. The civil lawsuit was filed by Ryan Bliss who will receive approximately $5.1 million as his part the settlement. If you have knowledge of fraud that has been committed against the government or one of its agencies you are encouraged to report it and to contact a whistleblower law firm. An attorney there can advise you of your rights and determine the strength of your case.