Advanced Bionics Pays More Than $12M to Settle Fraud Case

Valencia, Calif.-based Advanced Bionics LLC is paying more than $12 million to resolve charges that it misled federal healthcare programs about the radio frequency (RF) emissions generated by some of its cochlear implant processors.  
 
“The United States expects device manufacturers to provide accurate information when they claim that their devices meet certain tests or standards,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the U.S. Justice Department’s Civil Division. “The integrity of our healthcare system depends on the government being able to rely on the information provided by manufacturers when they apply for permission to market their devices.”

The settlement resolves allegations that Advanced Bionics, in submitting pre-market approval applications to the U.S. Food and Drug Administration (FDA) for its Neptune and Naida cochlear implant processors, made false claims about the results of its RF emissions tests. The tests measured the extent to which cochlear implant systems generate RF emissions that could potentially interfere with other devices using the RF spectrum like telephones, alarm and security systems, televisions, and radios.

Advanced Bionics claimed that its processors satisfied an internationally recognized emissions standard when, in fact, the company did not comply with the standard. More specifically, Advanced Bionics failed to honor the standard’s requirements to test processors using “worst-case” configurations, and improperly shielded certain emissions-generating system components during emissions testing, according to the Justice Department’s complaint. The company allegedly sought reimbursement from Medicare, Medicaid, and other federally funded healthcare programs for these devices.

“The FDA’s approval process requires companies to demonstrate the efficacy of their products,” said U.S Attorney Jacqueline C. Romero for the Eastern District of Pennsylvania. “The settlement in this case demonstrates our commitment to hold responsible any medical device manufacturer that skirts these rules and seeks FDA approval of a device it knows is not as effective as represented. The consumers who use these devices, and the federal programs that pay for many of them, deserve better.”

Advanced Bionics, however, denies the government’s allegations and contends that its older Neptune and Naida processors (which it no longer sells) were never unsafe or ineffective for patients.

“Advanced Bionics places the highest priority on the safety and efficacy of our devices, and we take compliance with all laws and regulations governing our industry very seriously,” the company noted in a formal statement. “It is important to emphasize that this settlement agreement with the government does not allege that the devices at issue—older versions of our Neptune and Naida processors that we no longer market—were unsafe or ineffective for our patients. The settlement relates exclusively to the adequacy of our disclosures to the FDA about our procedures for radio frequency emissions testing for these legacy devices. The RF testing at issue does not analyze the efficacy of AB’s sound processors in performing their FDA-approved use of enabling hearing. While we deny the government’s allegations, we believe it is in the best interests of our company to resolve this matter so it will not distract from our focus on developing technology and devices that help restore hearing for so many people.”    
 
In addition to the civil settlement, Advanced Bionics entered into a five-year Corporate Integrity Agreement (CIA) with HHS-OIG. The CIA requires an independent review of activities and processes relating to the preparation or submission of Premarket Approval Applications (PMAs) to the FDA and performance standards relevant to those PMAs. Advanced Bionics must also implement a robust compliance program that includes, among other things, a risk assessment program and compliance certifications from key managers and from the Board of Directors.  
 
“Patients deserve to receive medical devices which are in compliance with all federal standards,” said Special Agent in Charge Maureen R. Dixon of the Department of Health and Human Services (HHS-OIG) Office of the Inspector General. “Manufacturers are required to be truthful in submitting claims for payment to the Medicare and Medicaid Programs. HHS-OIG will continue to work with the Department of Justice and our law enforcement partners to protect the integrity of the Medicare Trust Fund.” 

The settlement provides that Advanced Bionics will pay roughly $11.36 million to the United States, and in addition, will pay approximately $1.24 million to the participating Medicaid States, pursuant to the terms of separate settlement agreements that Advanced Bionics has, or will enter into, with those states.
 
“The Department of Defense Office of Inspector General’s Defense Criminal Investigative Service (DCIS) is committed to working with its law enforcement partners, including the Department of Justice, to combat health care fraud,” said Special Agent in Charge Patrick J. Hegarty of the DCIS Northeast Field Office. “TRICARE, the health care program for active-duty military personnel, retirees, and dependents, relies on medical providers to furnish complete and truthful information about the efficacy of their products and services. Today’s settlement demonstrates DCIS’s tireless commitment to investigating the submission of false claims and statements to TRICARE.”

The settlement resolves a lawsuit originally brought by David Nyberg, a former Advanced Bionics engineer, under the qui tam or whistleblower provisions of the False Claims Act. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. As part of this resolution, Nyberg will receive approximately $1.87 million of the federal settlement amount.
 
“We expect that medical products offered to federal employees and their families meet the standards promised by the manufacturer,” said Special Agent in Charge Amy K. Parker of the Office of Personnel Management, Office of Inspector General (OPM-OIG). “We applaud our law enforcement partners and colleagues at the Department of Justice for their hard work resulting in today’s settlement.”
 
“The Department of Veterans Affairs Office of Inspector General (VA-OIG) is dedicated to ensuring veterans receive the quality healthcare products they are promised,” said Special Agent in Charge Christopher Algieri of the VA-OIG Northeast Field Office. “In reaching today’s settlement, we thank the Department of Justice, and our law enforcement partners in exposing misleading practices that affect medical devices meant for veterans and the proper use of VA dollars for their benefit.”
 
This settlement was the result of a coordinated effort by the Justice Department’s Civil Division’s Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Eastern District of Pennsylvania, with assistance from the Department of Health and Human Services, Office of Counsel to the Inspector General and Office of Investigations; the Defense Criminal Investigative Service; the Defense Health Agency Office of General Counsel; the Office of Personnel Management, Office of Inspector General; the Department of Veterans Affairs, Office of Inspector General; and the National Association of Medicaid Fraud Control Units.  
 
Senior Trial Counsel Daniel Spiro of the Civil Division’s Commercial Litigation Branch, Fraud Section, and Assistant U.S. Attorney Lauren DeBruicker for the Eastern District of Pennsylvania prosecuted the case.
 
The lawsuit resolved by this settlement is captioned United States, et al., ex rel. Nyberg v. Advanced Bionics Corp. The claims resolved by the settlement are allegations only, and there has been no determination of liability.