The United States Attorney’s Office of the Southern District of Alabama reported that, as of September 16th, the medical device company Exactech has agreed to pay an $8 million settlement. Whistleblowers in Alabama and Maryland alleged that the company knowingly violated the False Claims Act (FCA) by selling defective products for use in knee-replacement surgeries. In response, Exactech unsuccessfully argued that the qui tam provision of the FCA was unconstitutional.
The whistleblowers alleged that Exactech was aware of deficiencies in two products, the finned tibial tray and the polyethene component of their Logic and Truth knee replacement system. The parts failed prematurely at a rate higher than is considered acceptable for beneficiaries of Medicare, Medicaid, and the U.S. Department of Veterans Affairs insurance. Exactech may have been aware of some of these deficiencies as early as January 2008.
The two settled cases were brought forth by whistleblowers, also known as relators, under the qui tam provision of the FCA, which allows private individuals to file lawsuits on behalf of the government. Qui tam whistleblowers can receive between 15% and 30% of the money recovered.
The whistleblowers from Alabama will receive $1,329,360, and the one from Maryland will be allotted $565,360.
Kelly Hayes, U.S. Attorney for the District of Maryland, said, “Patients who need a medical device to enjoy their lives rely on device manufacturers to put patient safety first. When a manufacturer learns that its device is defective, it must promptly and transparently address the problem.”
Although the case has been resolved by settlement, the constitutional arguments presented by the defendant, Exactech, represent a concerning installment in a recent pattern of challenges to the qui tam provision of the False Claims Act. In United States ex rel. Wallace v. Exactech, Inc., Exactech moved to dismiss the case under the Appointments and Take Care Clauses of Article II of the Constitution. These clauses require an officer to be appointed by the President, and that the President “take care that the laws be faithfully executed.”
Judge L. Scott Coogler denied the motion and found that the “Defendant’s constitutional arguments lack merit.” Whistleblowers are not considered officers and thus the Appointments Clause does not apply. He also found that the Executive Branch maintained sufficient control over relators, writing, “Although they bring actions under the U.S. Government’s name, they wield only the limited powers of a civil litigant.” It is evident that whistleblowers do not prevent the President from acting; thus, the Take Care Clause argument has no basis.
In late 2024, Judge Kimberly Mizelle of the Middle District of Florida found the FCA unconstitutional in U.S. ex rel. Zafirov v. Florida Medical Assocs., LLC. Fortunately, Judge Coogler upheld the FCA’s constitutionality, as has every court since Zafirov. There is no precedent, nor are there any just reasons for nullifying the FCA.
The FCA is one of the most powerful anti-corruption laws in the US, and the qui tam provision is a crucial mechanism of it. Without information and cooperation with private individuals, the vast majority of fraud against the government would not be detected.
Protecting vulnerable patients from corrupt companies is one of many crucial functions of anti-corruption legislation. The government must remain committed to upholding the FCA for the sake of the health and safety of its citizens.
The claims resolved by the settlement are allegations only. There has been no determination of liability.
