A federal judge in Minnesota has tossed out a lawsuit against Medtronic that claimed the world's largest device maker had defrauded the federal government by failing to pass along discounts it received for expedited shipping of medical devices to hospitals.
U.S. District Judge David Doty ruled this week that the plaintiffs, Bay Area-based Cavallino Consulting, had failed to produce concrete evidence showing that Medtronic knowingly overcharged the government for expedited shipping costs of medical devices to hospitals owned or run by the government.
Cavallino argued that Medtronic should have passed along discounts of 35 percent to 65 percent that it purportedly received for expedited shipping from UPS and FedEx, which amounted to millions of dollars in discounts.
While that interpretation might not be "unreasonable," Doty wrote, the language of Medtronic's federal contract doesn't explicitly require the medical device maker to do so. Rather, the contract simply says that government is responsible to pay an extra "rate" for expedited shipping, notwithstanding any discounts Medtronic might have received.
"The provision does not clearly require Medtronic to charge government hospitals for expedited shipping costs actually incurred," Doty wrote in his Tuesday order. "Absent such clarity, Medtronic could not have 'knowingly' submitted a false claim to the government as that term is defined under the [federal False Claims Act]."
Doty also ruled that Cavallino failed to show how any specific device shipment was billed for inappropriately, and it was "pure speculation" how much Medtronic might have received in discounts.
"We are pleased with the outcome," Medtronic spokesman Fernando Vivanco wrote in response to an inquiry about the ruling.
Justin Berger, one of the California-based attorneys representing Cavallino, said the plaintiffs believe Doty was overly strict in applying existing law to the case, but no decision has been made on an appeal.
