On December 8, 2014, the Department of Justice (DOJ) announced that OtisMed Corporation (OtisMed) and its former CEO, Charlie Chi, agreed to pay $80 million to the U.S. Government to resolve allegations that it violated the Food, Drug, and Cosmetic Act (FDCA) by marketing and distributing knee devices that were not approved by the Food and Drug Administration (FDA). OtisMed and Mr. Chi also plead guilty in Newark federal court to distributing adulterated medical devices with the intent to defraud and mislead. The settlement and guilty plea both flow from a lawsuit that was originally filed under the qui tam whistleblowers provision of the False Claims Act (FCA).
In 2008, Charlie Chi, founder and then CEO of OtisMed — manufacturers of orthopedics, joint replacement, and medical devices — sought approval from the FDA to market and distribute its newly designed knee replacement surgery cutting guide, the OtisKnee. However, the device was rejected by the FDA because OtisMed was not able to demonstrate to the FDA that OtisKnee was safe and effective. Despite the FDA’s disapproval, Mr. Chi and OtisMed decided to move forward with marketing and distributing the device anyway, and between May 2006 and September 2009, OtisMed sold 18,000 OtisKnee devices which grossed approximately $27.1 million in revenue. According to the government’s allegations, this act of apparently ignoring the decision of the FDA both violated the FDCA and potentially compromised the health, safety, and well-being of patients whose doctors used the device to preform knee surgery on their patients.
In addition, according to the qui tam lawsuit filed by Richard Adrian, former employee of OtisMed and the whistleblower in the case, OtisMed allegedly began manufacturing and distributing the OtisKnee device long before seeking approval from FDA. The lawsuit also alleged that OtisKnee was marketed and sold to physicians who were informed that the devices were exempt from pre-market requirements, and therefore did not need to be approved by the FDA. To make matters worse, after being denied by the FDA, OtisMed allegedly encouraged their employees to ship the devices on-hand and proposed several ways in which their employees could hide the shipment from FDA regulators. It is further alleged that because OtisMed needed data for the creation of OtisKnee, it directed health care providers to submit claims to Medicare, TRICARE, Federal Employees Health Benefits, and Medicaid programs, for MRIs that were not reimbursable because they were not performed for diagnostic use.
Submitting false claims to government health care programs is a violation of the FCA. If you have information concerning a potential case involving Medicare, Medicaid or TRICARE billing fraud, or distribution of products not approved by the FDA, you can help your fellow taxpayers, and protect patients, by bringing that information to the attention of the government. It is possible that you might be able to bring your own qui tam lawsuit under the False Claims Act, acting as a whistleblower on behalf of the U.S. government. Before filing your lawsuit, be sure to consult with an attorney familiar with the intricacies of the False Claims Act and qui tam lawsuits, as these attorneys are best equipped to help protect your rights and help you gain your share of any monetary reward from a potential settlement.
If you would like to consult with one of our False Claims Act attorneys, please fill out our Confidential Case Evaluation form, or call (202) 973-0900 to speak with a lawyer at the law office of Tycko & Zavareei LLP.