United States v. Siemens Med. Sols. U.S.

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UNITED STATES OF AMERICA, ALASKA, CALIFORNIA, COLORADO, CONNECTICUT, DELAWAR, FLORIDA, GEORGIA, HAWAII, ILLINOIS, INDIANA, IOWA, LOUISIANA, MARYLAND, MASSACHUSETTS, MICHIGAN, MINNESOTA, MONTANA, NEVADA, NEW HAMPSHIRE, NEW JERSEY, NEW MEXICO, NEW YORK, NORTH CAROLINA, OKLAHOMA, RHODE ISLAND, TENNESSEE, TEXAS, VERMONT, VIRGINIA, WASHINGTON, AND THE DISTRICT OF VOLUMBIA, ex rel. MARY BIXLER WOOD, Plaintiffs, v. SIEMENS MEDICAL SOLUTIONS USA, INC., SIEMENS HEALTHCARE DIAGNOSTICS, INC., AND SIEMENS HEALTHCARE DIAGNOSTICS PRODUCTS GMBH, Defendants.

No. 21-CV-1947 (MKB)

United States District Court, E.D. New York

September 14, 2023

MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge

Plaintiff-Relator Mary Bixler Wood (“Relator”), acting on behalf of the United States of America, thirty states, and the District of Columbia, commenced the above-captioned action against Defendants Siemens Medical Solutions USA, Inc., Siemens Healthcare Diagnostics, Inc., and Siemens Healthcare Diagnostics Products GmbH (collectively “Siemens” or “Defendants”) on April 12, 2021.^[1] (Compl., Docket Entry No. 1.) On March 29 2022, Relator filed an Amended Complaint alleging that Defendants violated provisions of the False Claims Act, 31 U.S.C. § 3729 et seq. (“FCA”) barring the presentation of false claims, the use of false statements, and conspiracies to violate the FCA as well as various state law FCA analogs.^[2] (Am. Compl., Docket Entry No. 8.)

Defendants move to dismiss the Amended Complaint pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, and Relator opposes the motion.^[3] For the reasons set forth below, the Court grants Defendants' motion and dismisses the Amended Complaint. The Court grants Relator leave to file a second amended complaint within thirty days of this Memorandum and Order.

I. Background

The Court assumes the truth of the factual allegations in the Amended Complaint for the purposes of this Memorandum and Order.

a. The parties

From May of 2014 to December of 2015, Relator served as “Director of Compliance for a Siemens contractor that performed special projects for Siemens, including a project designed to qualify the shipping containers used by Siemens to maintain the temperature requirements during transport of the medical devices.” (Am. Compl. ¶ 10.) Between February 17, 2016 and April 29, 2016, “Relator served as a contract employee directly for Siemens as a Project Manager for implementation and management of cold chain transportation processes.” (Id.)

Siemens Medical Solutions USA, Inc., which is the parent company of Siemens Healthcare Diagnostics, Inc., is a Delaware corporation conducting business in Malvern, Pennsylvania and operating a distribution center in Plainfield, Indiana “where all domestic Siemens IVD shipments originate.” (Id. ¶ 11.) Siemens Healthcare Diagnostics, Inc., a wholly-owned subsidiary of Siemens Medical Solutions USA, Inc., is a California corporation conducting business in Tarrytown, New York which “is responsible for maintaining premarket approvals and 510(k) clearances for . . . medical devices . . . as well as for maintaining compliance with applicable regulatory controls, such as FDA's Quality System Regulations, relating to those devices.” (Id. ¶ 12.) Siemens Healthcare Diagnostics Products GmbH, a corporate affiliate of Siemens Healthcare Diagnostics, Inc., is a German corporation principally operating in Marburg, Germany which “has oversight of quality issues at other corporate affiliates, including quality issues relating to the shipping and storage of devices from the ADC in Plainfield, Indiana.” (Id. ¶ 13.)

b. In vitro diagnostic medical devices

In vitro diagnostic (“IVD”) medical devices “are tests (frequently referred to as assays) which are performed on blood, saliva or tissue samples that can be used to monitor a person's overall health to help cure, treat or prevent disease as well as to identify patients who are likely to benefit from specific treatments or therapies.” (Id. ¶ 2 (citations omitted).) “An IVD that cannot be relied upon to provide an accurate measurement pertaining to the very medical issue for which the test has been designed is, by definition, a materially defective product for which neither payment nor reimbursement may be required under law or contract.” (Id. ¶ 3.) “Many . . . IVD medical devices are temperature-sensitive and, in many cases, must be maintained in a refrigerated or frozen condition until they are used.” (Id. ¶ 4.) “An IVD's value in accurately measuring and detecting analytes or markers in the human body . . . cannot be maintained if the temperature conditions necessary to meet the IVD's design and performance specifications do not exist.” (Id. ¶ 7.) The failure of IVDs “presents a serious public health risk” because “[f]aulty diagnostic tests could result in false-positives or false-negatives, thus causing misdiagnosis” which could “lead to deferred treatments, unnecessary treatments, death, and serious injuries, among other negative consequences.” (Id. ¶ 101.)

c. Defendants' IVD business

“Siemens is among the largest IVD manufacturers in the world,” and in 2015 “was the largest IVD manufacturer globally and the second leading IVD company, in terms of market share, in the United States.” (Id. ¶ 77.) “Siemens IVDs are reimbursed by Federal Health Care Programs.” (Id. ¶ 82.) “Siemens affirmatively contracts with a third party to provide government reimbursement information for its entire menu of IVDs through an online product called CodeMap.” (Id.) “IVDs . . . are reimbursed by Federal Health Care programs on the assumption that the IVDs are reliable, safe and effective for medically necessary diagnosis and treatment.” (Id. ¶ 84.) Siemens sells IVDs to the Department of Defense and the Department of Veteran Affairs. (Id. ¶ 85.) In addition, Siemens has had contracts for IVD products with the Department of Health and Human Services, the Department of the Air Force, the Federal Bureau of Prisons, and the Department of Navy. (Id. ¶ 88.) “Individual States also purchase Siemens IVDs for use by State laboratories and health systems.” (Id. ¶ 90.)

“Many Siemens IVDs . . . are highly temperature-sensitive devices that must be maintained in a refrigerated or frozen condition in order to ensure reliability, safety and efficacy in clinical use.” (Id. ¶ 96.) In internal memoranda, “Siemens has recognized that IVDs are sensitive to temperature changes and must [be] stored and shipped under specific controlled temperature conditions . . . to ensure product integrity is maintained throughout the distribution process.” (Id. ¶ 98 (internal quotation marks omitted).) Siemens conducts stress testing, exposing its devices to different temperatures “for particular defined intervals,” “[t]o assess whether its devices may be exposed, even briefly, to various temperature ranges.” (Id. ¶ 97.)

d. Allegations of misconduct

Relator contends that “[f]or many years, Siemens has knowingly shipped temperaturesensitive IVDs well outside their FDA-approved or -cleared temperature ranges.” (Id. ¶ 104.) Siemens IVDs, which are stored at and shipped from Plainfield, Indiana, (id. ¶ 108), “were cleared or approved by [the] FDA for specific temperature ranges,” (id. ¶ 109). “The labels on Siemens IVDs include temperature storage requirements and representations about shelf life” which “are based on purported testing conducted under the temperature conditions cleared or approved by the FDA.” (Id. ¶ 107.) “Upon information and belief, Siemens has not conducted stability testing to validate the accuracy of the information on its device labels.” (Id.) “Siemens knows that the expiration and shelf life information on its devices is inaccurate” and has conducted stability testing which “demonstrated that certain devices either fail or are not safe and effective within the shelf life stated on the device labels.” (Id.)

Siemens uses corrugated boxes lined with foam called “shippers” to ship IVDs. (Id. ¶ 111.) After orders are placed, Siemens IVDs are “placed in the shipper, labeled, packaged, and given to a carrier (such as FedEx, UPS, etc.) for distribution.” (Id. ¶ 110.) During the shipping process, IVDs “are not kept within temperature-controlled storage conditions” and “are removed from temperature-controlled storage conditions up to hours at a time in order to be packaged for shipment.” (Id.) Siemens is aware from its field tests that its “shipped IVD devices reach temperatures well outside their approved or cleared temperature ranges.” (Id. ¶ 113.) Between 2009 and 2015, companies hired by Siemens demonstrated that shippers used by Siemens “failed to maintain devices within required temperature ranges.” (Id. ¶ 114.) Tests conducted in 2009, 2010, 2012, and 2014 showed that shippers failed to maintain internal temperatures between two and eight degrees Celsius over a standard shipping time. (Id. ¶¶ 117-18.) “Siemens was aware since at least 2009 that the shippers used by the company to transport IVDs to customers resulted in exposure of IVDs to temperatures well outside of their FDA-approved frozen or refrigerated ranges, rendering the shipped devices both adulterated and misbranded, with no assurances or reliability, safety or efficacy.” (Id. ¶ 133.) “Siemens is fully cognizant of the safety risks that non-compliant temperature conditions create for its IVD products generally.” (Id. ¶ 147.)

Relator also contends that Siemens caused others to submit false claims, which “did not disclose . . . the compromised reliability, safety and efficacy of the IVDs resulting from Siemens' non-compliance with FDA medical device laws and regulations,” to Federal Health Care Programs for the use of its compromised IVD products. ...