5th Circ. Won't Revive $219M FCA Suit Against Abbott Labs

The Fifth Circuit on Wednesday refused to revive a $219 million False Claims Act suit by a would-be whistleblower accusing Abbott Laboratories of improperly marketing bile duct stents for veins, ruling the district court had correctly dismissed some claims and rejected a new trial.

Former Abbott salesman Kevin Colquitt had been trying to keep alive his claims that Guidant Corp., a company Abbott had acquired, and Abbott itself were avoiding having to meet more stringent standards set by the U.S. Food and Drug Administration by peddling biliary stents in place of vascular ones, according to filings in the case.

U.S. District Judge Barbara M.G. Lynn had refused to give Colquitt a new trial a year ago, concluding the April 7 jury verdict that cleared the medical device maker didn’t go against the evidence, court records show. The Fifth Circuit on Wednesday affirmed that ruling, finding no reversible error in Judge Lynn’s rejection of some evidence from the trial and, in particular, that some of Colquitt’s claims were barred because they’d already been publicly disclosed.

For one thing, the panel wrote, Colquitt relied on the company’s notifications to the FDA to show they were fraudulent, pointing to the dimensions of some of the stents that would render them unusable for bile ducts but perfect for veins. Those papers, the court said, are public.

“The district court saw that Colquitt hoisted himself with his own petard,” the panel wrote. “These public papers were all that one would have needed to discover the purported fraud — Abbott must have intended the stents for vascular use, contrary to its representations in its 510(k) notices, because the stents could not fit in the biliary tree but would fit arteries and veins.”

Colquitt initially sued Johnson & Johnson’s Cordis Corp. and Boston Scientific Corp., along with Abbott, claiming the medical device makers pushed off-label uses of the stents. In 2013, Judge Lynn cut J&J and Boston Scientific from the case, but denied several attempts by Abbott to avoid a trial.

The U.S. chose not to intervene in Colquitt’s lawsuit.

At trial, Colquitt’s lawyers argued Abbott had deliberately marketed stents cleared only for implantation in bile ducts to the much larger market for vascular stents, which are implanted in arteries. Colquitt claimed the company’s off-label marketing caused doctors to submit more than 35,000 false claims for reimbursement, costing Medicaid and Medicare more than $219 million from 2004 to 2006.

Abbott argued that Colquitt, who later went to law school and now works for Standly Hamilton LLP — the firm handling his case — was only looking for a big payday from the device maker, which in 2006 bought the vascular device division of Guidant Corp. for $4.1 billion. Among other things, Abbott argued that its marketing of the stents for vascular use was an “open secret” known by officials within the government.

Colquitt’s initial bid for a new trial had argued the court improperly excluded evidence showing health regulators didn’t tacitly approve off-label use of the stents, causing the jury to incorrectly find that Abbott didn’t violate the FCA by misleading the Centers for Medicare & Medicaid Services. His appeal traced purported court errors further back, starting with the judge’s conclusion that allegations including fraudulent inducement for payment were publicly disclosed and thus off limits.

The district judge was wrong to dismiss part of the case under the public disclosure bar, applied the wrong pleading standard for how to judge assertions of regulatory compliance, gave the jury wrong instructions, and excluded evidence that would have shown the government was both misled and disapproved of the company’s conduct, Colquitt said in his opening brief.

The Fifth Circuit panel, in its 21-page decision on Wednesday, found the district court’s decisions supportable by information in the court record.

A spokesman for Abbott and an attorney for Colquitt didn’t immediately respond to requests for comment after business hours on Wednesday.

Circuit Judges Carl E. Stewart, Patrick Higginbotham and Gregg Costa sat on the panel that reached Wednesday's decision.

Colquitt is represented by Christopher S. Hamilton and Meagan Martin of Standly Hamilton LLP, Andrew M. Beato of Stein Mitchell Cipollone Beato & Missner LLP, Kelly R. Bagby and Maame Gyamfi of the AARP Foundation Litigation and Kirsten M. Castañeda of Alexander Dubose Jefferson & Townsend LLP.

Abbott is represented by Jim Hurst, Andrew Kassof, Elizabeth Hess and James Hileman of Kirkland & Ellis LLP and George Bramblett and Jeremy Kernodle of Haynes and Boone LLP.

The case is U.S. ex rel. Colquitt v. Abbott Laboratories et al., case number 16-10814, in the U.S. Court of Appeals for the Fifth Circuit.

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