Acclarent to Pay $18 Million to Settle False Claims Case

Johnson & Johnson subsidiary Acclarent Inc., a California-based medical device manufacturer, agreed to pay $18 million to resolve allegations that it directed healthcare providers to submit false claims to Medicare and other federal healthcare programs, the U.S. Justice Department said.
 
The case involved allegations Acclarent marketed its sinus spacer product for use as a drug delivery device without U.S. Food and Drug Administration (FDA) approval for that purpose, prosecutors said in a statement. 
 
“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.”     
 
Acclarent sold a variety of medical devices used in sinus surgeries, including a product known as the Relieva Stratus MicroFlow Spacer (Stratus). In 2006, Acclarent received FDA clearance to market the Stratus as a spacer to be used only with saline to maintain sinus openings following surgery.  The government claimed Acclarent intended for the Stratus to be used instead as a drug-delivery device for prescription corticosteroids, including Kenalog-40, and that the device was specifically designed and engineered for this use.    
 
The government further accused Acclarent of marketing the Stratus as a drug delivery device even after the FDA rejected the company’s 2007 request to expand the approved uses for the product.  For example, Acclarent employees trained physicians using a video that demonstrated the Stratus being used with prescription corticosteroid Kenalog-40 and also used a white, milky substance resembling Kenalog-40 when demonstrating the Stratus.   

“The FDA plays a fundamental role in ensuring the safety and efficacy of medical devices and drugs in this country,” said U.S. Attorney Carmen M. Ortiz.  “Every time that patients receive a medical device or fill a prescription they should be able to take for granted that the FDA’s requirements have been met. We will vigorously pursue those who ignore or seek to circumvent these important patient protections.”
 
In 2010, Acclarent added a warning to its label regarding use of active drug substances in the Stratus; however, the government alleged that Acclarent nonetheless continued to market the Stratus for drug delivery. By May 2013, Acclarent discontinued all sales of the Stratus and the company agreed to withdraw all FDA marketing clearances for the device, which is no longer commercially available in the United States.

A spokeswoman for J&J told The Wall Street Journal that the company has since put in place tighter compliance controls. She noted the agreement, which didn’t include an admission of liability or wrongdoing, resolves alleged conduct that took place almost entirely before J&J acquired Acclarent. 
 
On July 20, Acclarent’s former CEO William Facteau, 47, of Atherton, Calif., and former Vice President of Sales Patrick Fabian, 49, of Lake Elmo, Minn., were convicted following a six-week jury trial of 10 misdemeanor counts of introducing adulterated and misbranded medical devices into interstate commerce. 
 
The civil settlement with Acclarent resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The civil lawsuit was filed in the District of Massachusetts and is captioned United States ex rel. Melayna Lokosky v. Acclarent Inc. As part of today’s resolution, Lokosky will receive approximately $3.5 million from the settlement.

“It is imperative that medical device companies adhere to FDA approval requirements so that patients are not subject to questionable medical treatments at taxpayer expense,” said Special Agent in Charge Phillip M. Coyne of the Department of Health and Human Services Office of Inspector General. “Our investigators, working closely with our law enforcement partners, will continue to pursue allegations of such misconduct to hold fraudsters accountable and deter those tempted to launch such illegal scams.”
 
This settlement illustrates the government’s emphasis on combating healthcare fraud. Since January 2009, the Justice Department has recovered a total of more than $30 billion through False Claims Act cases, with more than $18.3 billion of that amount recovered in cases involving fraud against federal health care programs.
 
The settlement with Acclarent was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Massachusetts and the Civil Division’s Commercial Litigation Branch, with assistance from the FDA’s Office of Chief Counsel and U.S. Health and Human Services’ Office of Counsel to the Inspector General. The investigation was conducted by the FBI’s Boston Field Office, HHS-OIG, the Defense Health Agency, FDA’s Office of Criminal Investigations, the Department of Veterans Affairs Office of Inspector General and the U.S. Department of Defense, Office of Inspector General, Defense Criminal Investigative Service.