A federal judge in Michigan tossed a whistleblower lawsuit against Stryker Corp. (NYSE:SYK) that accused the company of a kickbacks scheme, but gave the plaintiffs a window to amend their complaint.
Judge Robert Jonker of the U.S. District Court for Western Michigan ruled that Robert Laucirica and the U.S. government failed to prove their contention that Stryker sales reps initiated a kickbacks scheme with Dr. Hari Parvataneni, an orthopedic surgeon at the University of Miami’s Jackson Memorial Hospital.
Laucirica, a sales rep for Zimmer Deptula Inc., a distributor for Zimmer Holdings (NYSE:ZMH) based in Ft. Lauderdale, Fla., sold about $100,000 worth of Zimmer products to Parvataneni. When he checked back with the doctor a few weeks later, according to court documents, Parvataneni hadn’t used any of the Zimmer devices. The doctor told Laucirica that Stryker res had taken him to dinner and offered to fund the training of Parvataneni’s residents and research in return for using Stryker products. Laucirica filed a qui tam lawsuit alleging a kickbacks scheme “under which Dr. Parvataneni agreed to use Stryker’s medical devices for implantation into Medicare patients in exchange for Stryker’s agreement to fund the training of Dr. Parvataneni’s residents and various research projects,” according to court documents.
Jonker ruled May 3 that the suit failed to provide enough specifics about the alleged scheme to prove its accusations, because it does not supply any times or places when the alleged kickbacks occurred and doesn’t allege any specific injury from the supposed fraud.
“The skeletal factual allegations in the complaint do not ‘raise a reasonable expectation that discovery will reveal evidence of illegal [conduct],'” the judge wrote. “On the contrary, the conduct Mr. Laucirica describes in his affidavit — the basis of all of his allegations — is neutral on its face and could just as easily support an inference of legality as of illegality. A medical device company’s funding of research and training is not per se illegal. Legality depends on whether the funding was bona fide and in compliance with applicable rules and regulations or whether the funding was simply a cleverly disguised cover for a flat-out bribe or kickback. Nothing in Plaintiff’s allegations make the inference of illegal intent and conduct any more plausible than the inference of legal intent and conduct.”
Jonker gave Laucirica and the U.S. government 21 days from the date of his decision to amend their complaint to address its deficiencies.
It’s the second time in as many months that Stryker managed to dodge a lawsuit. In April, a federal judge in Texas tossed a lawsuit against the company over an allegedly defective hip implant, ruling that federal law preempts the suit.