United States ex rel. Vitale v. Mimedx Grp., Inc.

381 F. Supp. 3d 647
CourtDistrict Court, D. South Carolina
DecidedMay 15, 2019
DocketCivil Action No.: 3:17-cv-00166-RBH
StatusPublished
Cited by7 cases

This text of 381 F. Supp. 3d 647 (United States ex rel. Vitale v. Mimedx Grp., Inc.) is published on Counsel Stack Legal Research, covering District Court, D. South Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. Vitale v. Mimedx Grp., Inc., 381 F. Supp. 3d 647 (D.S.C. 2019).

Opinion

R. Bryan Harwell, Chief United States District Judge

This matter is before the Court on Defendant MiMedx Group, Inc.'s motion to *651dismiss under Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure. ECF No. 65 ("Mot. To Dismiss"). For the reasons set forth below, the Court grants in part and denies in part Defendant's motion to dismiss. Defendant's motion is granted as to Relator Jon Vitale's ("Relator") claims regarding the Federal Health Employees Health Benefits Program (FEHBP), and denied as to the remainder of Relator's complaint.1

Factual Allegations and Procedural Background

From January, 2014 to December, 2017, Relator worked as a South Carolina sales representative for Defendant. ECF No. 1 ("Compl.") ¶ 58. Defendant is a pharmaceutical manufacturer that develops and distributes patented biomaterials created from human amniotic tissues and used in wound, surgical, sports medicine, ophthalmic, and dental healthcare. Compl. ¶¶ 6, 48. At issue in this case are two of Defendant's product lines: EpiFix and EpiFix Micronized. Id. ¶¶ 51-53. Intended to heal wounds, EpiFix is an amniotic membrane while EpiFix Micronized is an amniotic powder useable in intradermal injections. Id. at ¶¶ 52-53. Both products are regulated by the United States Food and Drug Administration and satisfy the definition of a "drug" under the Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq. , and a "biologic product" under the Public Health Service Act, 42 U.S.C. §§ 201 et seq . Compl. at ¶¶ 16-24.

On January 19, 2017, Relator filed this qui tam action against Defendant under seal in federal court pursuant to the procedures of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et seq . Compl. Relator alleges that since at least February, 2014, Defendant secures reimbursement of its products by disguising illegal payments as charitable contributions to the Patient Access Network Foundation ("PAN")-a copay and coinsurance assistance foundation-while manipulating the submission of patient assistance applications to ensure its contributions fund only patients seeking Defendant's products. Id. at 1, ¶¶ 5, 42-43; ECF No. 66 ("Relator's Mem in Opp'n") at 2-3 (citing Compl. ¶¶ 115-159). Relator seeks to recover monies Defendant allegedly obtained illegally from federal health insurance programs through the sale of regenerative biomaterials, in violation of the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a-7b, and thus in violation of § 3729(a)(1)(A) and (B) of FCA. Compl. at 1, ¶¶ 167-178.

On August 10, 2018, after the United States declined to intervene in the case, ECF No. 40, the Court unsealed the complaint for service on Defendant, ECF No. 43. On October 1, 2018, Defendant filed the pending motion to dismiss for failure to plead FCA violations with particularity under Fed. R. Civ. P. 9(b) and failure to state a claim upon which relief may be granted under Rule 12(b)(6). Mot. to Dismiss at 1. Additionally, Defendant contends dismissal is warranted because Relator's claims are foreclosed by FCA's public disclosure bar, 31 U.S.C. § 3730(e)(4). Id. On October 15, 2018, Relator filed a response in opposition to dismissal, ECF No. 66, and on October 22, 2018, Defendant filed a reply thereto, ECF No. 67. On November 6, 2018, the United States, which is the real party in interest, filed a statement of interest,2 *652ECF No. 68, to which Defendant responded on November 13, 2018, ECF No. 69. On January 2, 2019, Relator filed a supplemental response in opposition to dismissal with additional authority, ECF No. 73, to which Defendant replied on February 22, 2019, ECF No. 74. The matter is now ripe for the Court's consideration.

Legal Standards

I. AKS and FCA

AKS makes it a violation, inter alia , to "knowingly and willfully offer[ ] or pay[ ] any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind" to induce the referral of business reimbursable under a federal health care program. 42 U.S.C. § 1320a-7b(b)(2). A person can violate AKS without knowing of AKS, or having the specific intent to violate the section. Id. § 1320a-7b(h). An AKS violation resulting in a federal health care payment automatically constitutes a false claim under FCA. United States ex rel. Lutz v. United States , 853 F.3d 131, 135 (4th Cir. 2017) (citing 42 U.S.C. § 1320a-7b(g) ).

FCA provides civil liability against a person who, inter alia , "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" ("false claims provision") or "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim" ("false statements provision"). 31 U.S.C. §§ 3729(a)(1)(A)-(B). "Knowingly" means having "actual knowledge," or acting "in deliberate ignorance of the truth or falsity of the information" or "in reckless disregard of the truth or falsity of the information."

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381 F. Supp. 3d 647, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-vitale-v-mimedx-grp-inc-scd-2019.