Smith & Nephew escapes False Claims suit alleging gov’t hospital overcharging

A federal judge today dismissed a whistleblower case against Smith & Nephew (NYSE:SNN) claiming the company overcharged government-run hospitals for expedited delivery of medical products despite receiving significant discounts from shipping companies UPS and FedEx.

Judge Indira Talwani for the US District Court of Massachusetts said last week that the plaintiff in the case, Cavallino Consulting, failed to produce concrete evidence of the overcharging.

“Although the complaint alleges that the fraudulent conduct has occurred ‘from at least 2008 to the present,’ […] the complaint does not identify any specific orders that a government hospital placed with defendant for equipment or supplies, a single government hospital to which any equipment or supplies were shipped, or any specific claims submitted to the government hospitals for payment under any contract,” Judge Talwani wrote, according to court documents.

The plaintiff claimed that the First Circuit court “allows some flexibility in construing the fraud allegations of FCA complaints,” but Judge Talwani said that all the cases which the plaintiff referenced “affirm that the fraud itself must be pled with particularity.”

“While [the plaintiff] is correct that each of these cases discuss ‘some flexibility in construing the fraud allegations of FCA complaints,’ all three cases ultimately found the respective complaint insufficient,” Judge Talwani wrote.

Judge Talwani allowed Smith & Nephew’s motion to dismiss, and denied the plaintiff’s request for leave to amend as the request “included no details as to what facts would be included if leave were granted.”

Late last month, shares in Smith & Nephew rose after the medical device company reported second-quarter numbers that beat expectations.

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