St. Jude Medical Inc. (“St. Jude”), which was acquired by Abbott Laboratories in 2017, entered into a settlement last week with the United States Department of Justice (“DOJ”) for $27 million to resolve allegations it had violated the False Claims Act (“FCA”). The case was initially filed in 2016 by whistleblower Debbie Burke under the FCA’s qui tam provisions. These provisions allow a private individual who is aware of fraud resulting in financial loss to the government to file a lawsuit on behalf of the United States in federal court. The majority of FCA cases, including this one, revolve around the submission of fraudulent claims for reimbursement under government healthcare programs such as Medicare, Medicaid, and TRICARE. FCA whistleblowers, such as Ms. Burke, are entitled to receive between 15-30% of any recovery obtained by the United States as the result of a qui tam FCA action.
The allegations brought by Ms. Burke and the DOJ center around St. Jude’s sale of heart devices to medical facilities between 2014 and 2016. Prior to these sales, St. Jude knew that these devices were defective. The defective devices were then implanted into patients, including patients on Medicare and TRICARE, thereby causing the federal government to reimburse the costs. The devices at issue were several models of implantable defibrillators commonly used in patients with irregular heartbeats.
These devices serve to prevent cardiac arrest by deploying an electrical shock when the device detects the occurrence of an irregular heartbeat. In 2013, before the sales of these devices began in 2014, St. Jude allegedly knew that the batteries powering the devices lost their power charge prematurely. By 2014, St. Jude sought approval from the Food and Drug Administration (“FDA”) to make changes in the device to cure the defect. In seeking approval St. Jude allegedly lied to the FDA by claiming the known defect had not actually caused serious harm. However, St. Jude knew at the time that at least two serious injuries and one death had already occurred.
Even after fraudulently gaining FDA approval and making the necessary changes, St. Jude continued to sell its stock of defective devices until 2016. In August 2016, St. Jude finally came clean to the FDA, admitting that the defect had occurred 729 times and had resulted in two deaths and 29 other negative events. Then finally, after it already knowingly sold thousands of the defective devices, St. Jude issued a recall on October 10, 2016. It noted the recall was issued because there existed a “reasonable probability” that the devices “will cause serious adverse health consequences, including death.” The settlement resolves all allegations of FCA violation for the thousands of defective devices reimbursed by federal funds before the recall date.
Ms. Burke, who initially made the government aware of these alleged actions by St. Jude through the filing of her qui tam FCA complaint, was actually a patient who had been implanted with one of the defective St. Jude devices in 2016, after St. Jude was already manufacturing updated, non-defective versions of the devices. The share of the proceeds that Ms. Burke will receive as a result of this settlement has yet to be determined. Additionally, a portion of the settlement proceeds will serve as restitution to those patients affected by St. Jude’s defective devices.