Boston Scientific can’t slip neurostim False Claims suit

A federal judge in New Jersey last week shot down a bid by Boston Scientific (NYSE:BSX) to dismiss a False Claims Act lawsuit brought over its Precision Plus neurostimulation device.

The lawsuit, filed in March 2011 and unsealed in August 2012, alleges that Boston Scientific ran a scheme to defraud Medicare and promote off-label use of its Precision Plus spinal cord stimulation system. The suit accuses Marlborough,  Mass.-based Boston Scientific of selling consumables for the spinal cord stimulation devices without certificates of medical necessity and of faking diagnostic codes. It also claims that the company falsely certified its truthfulness and compliance on claim forms. The company allegedly shipped the device before receiving orders from physicians, faking records to alter the shipping date, according to the suit.

Last week Judge John Vazquez ruled on a trio of motions from both the plaintiffs, Wendy Bahnsen and Carolina Fuentes, and the company. Boston sought summary judgment for dismissal, arguing that it was not required to obtain a physician’s order before submitting claims and that the allegedly fabricated diagnosis codes didn’t violate the False Claims Act. The company also argued that it informed the Medicare administrator about its billing practices and that Bahnsen and Fuentes improperly inflated claim lines to increase their damages. Boston Scientific also argued that the penalty claims were unconstitutionally excessive and that the plaintiffs can’t identify the which claims are allegedly false.

Vazquez disagreed, ruling that the Medicare rules are ambiguous enough to create genuine issues of material facts regarding the necessity of obtaining a doctors’ orders and whether the allegedly false codes violated the FCA. The judge also found that a fair reading of the facts could lead to a reasonable conclusion that Boston failed to fully disclose its billing practices to the government.

Regarding the aargument that the plaintiffs inflated their claim lines, Vazquez found it  “inappropriate to address these arguments here at the summary judgment stage. Both arguments present issues better addressed through motions in limine concerning the evidence that plaintiffs will be able to present and how the jury will be instructed.”

As for the argument that the penalties sought are unconstitutional, “the court finds defendant’s argument premature. At this stage, it is not clear yet what, if any, liability defendant will have. Therefore, the court will nile on this argument at the appropriate juncture if necessary.

“The FCA has been in existence since the Civil War, and no court (much less the United States Supreme Court) has found its penalty provisions to be facially unconstitutional,” Vazquez wrote.

The judge also allowed two of four expert witnesses for Boston Scientific to testify, provided they do not attempt to provide a legal opinion, but deemed the other witnesses’ testimony inadmissible. Vazquez also allowed testimony from a pair of plaintiff witnesses, also excluding any legal opinions from them.

Finally, Vazquez granted the plaintiff’s motion to dismiss several counterclaims for breach of contract, but allowed one count against Fuentes to stand.

In June 2013 another Garden State judge denied Boston’s motion to dismiss the lawsuit, to disqualify attorneys working for the plaintiffs and to strike certain confidential information.

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