On September 3, 2014, U.K.-based medical device maker Smith & Nephew (the ‘‘Company’’) agreed to pay $8.3 million (plus an additional $3 million in attorney’s fees) to resolve a lawsuit filed under the federal civil False Claims Act (the ‘‘FCA’’) due to alleged misrepresentations by the Company regarding the origin of certain products it sold to the U.S. Departments of Defense (‘‘DoD’’) and Veterans Affairs (the ‘‘VA’’)(8 MELR 612, 9/17/14). The relator in the case was Samuel Cox, an information technology executive for the Company who was terminated shortly filed his suit under the FCA. Smith & Nephew joins a lengthening list of companies targeted under the FCA for issues related to non-compliance with the federal Trade Agreements Act (the ‘‘TAA’’). Relators and their lawyers have continued to drive TAA enforcement actions since the early part of the decade, bringing FCA cases against a widening variety of companies, including businesses in the industrial supply, furniture, hardware, and home improvement industries. Based on the Smith & Nephew settlement, we expect that medical device and other health care supply companies may be next.
The TAA generally requires companies that sell products to government agencies to certify that all ‘‘products’’ sold are made (i) in the United States or a designated country or (ii) ‘‘substantially transformed’’ in the United States or a designated country prior to purchase. Major non-designated countries include China, India, Malaysia, Thailand and others. Many companies that sell products to the United States government may have supply relationships with nondesignated countries.
Originally published in Bloomberg BNA's Medical Devices Law & Industry Report, 8 MELR 730, 10/29/2014..
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