Start-Up Medical Device Fraud is Rampant in Silicon Valley

Silicon Valley has become a hotbed for start-up medical device companies…and also some medical device fraud. In particular, several medical device companies are marketing their devices illegally, all with the objectives of driving up revenues and stock valuation. With substantial whistleblower rewards available, employees and competitors are greatly incentivized to step forward and report these companies to the federal government.

Every manufacturer of a medical device is required by law to obtain marketing authorization from the FDA before distributing its device to the U.S. market. To receive the FDA’s stamp of approval, the manufacturer must clearly state the devices’ intended use. When the FDA gives the green light to the device(s), the manufacturer must only market the device(s) for the specific intended use.

Manufacturers may run afoul of the law when they decide to take their marketing in a new direction, outside of the FDA-approved or FDA-cleared indication. For example, a medical device manufacturer might decide to market its device to the pediatric provider community, even though the FDA only cleared the product for the adult patient population. These actions might trigger False Claims Act liability, if the marketing is based on misrepresentations to physicians about the safety or efficacy of the product to the pediatric population, and cause healthcare providers to submit claims to government healthcare programs for such unapproved uses.