Instrumed and Avalign: The Pre-1976 Claim Its Own Quality Chief Rejected

In the Instrumed unapproved devices settlement, Avalign Technologies, Inc. and its subsidiary Instrumed International, Inc. agreed to pay $9.5 million to resolve civil fraud claims over selling uncleared surgical devices under a false pre-1976 exemption claim. Instrumed’s own quality and regulatory chief had said the company could not claim the exemption. Its distributor challenged the evidence, too. The devices kept selling.

The Justice Department announced the settlement on September 13, 2019. Both companies made admissions as part of the settlement. The government joined a case brought by a whistleblower under the False Claims Act.

According to the Justice Department, CareFusion bought and distributed Instrumed devices. Medical providers used the uncleared devices in spinal surgeries, circumcisions and other procedures, then submitted claims to Medicare and Medicaid. An assertion about a product’s history traveled through the supply chain into procedures billed to taxpayers.

What Pre-Amendment Status Required

Pre-amendment status was Instrumed’s claimed reason for selling the devices without obtaining the required Food and Drug Administration clearances. As the Justice Department explained the requirement in this case, one condition was that the device’s owner had marketed it before May 28, 1976.

Instrumed was relying on the devices’ history to sell them without clearance. In its complaint, the government alleged that Instrumed had neither obtained the required clearances nor demonstrated that the exception applied.

The evidence Instrumed offered matters as much as the label it used. It relied on excerpts from a catalog issued by the devices’ original manufacturer and an affidavit, a sworn statement from an Instrumed employee. CareFusion would repeatedly challenge those materials.

The Warning Came From Inside Instrumed

In February 2009, Instrumed’s head of Quality and Regulatory Affairs answered an inquiry about an Instrumed device with a direct rejection of the claimed exemption. The companies admitted that the email said:

The message identified the gap in the company’s explanation: its own marketing history. The objection came from the person responsible for quality and regulatory affairs inside the business.

CareFusion Challenged the Catalog and Affidavit

By April 2009, Instrumed and CareFusion were exchanging correspondence about whether they could legitimately rely on the exemption. According to the companies’ admissions, CareFusion repeatedly told Instrumed that the catalog excerpts and employee affidavit were insufficient. Instrumed never supplied CareFusion with a satisfactory affidavit supporting its claim.

The catalog came from the original manufacturer. The email concerned Instrumed’s own marketing history. Those were different things, and the customer’s request for a satisfactory affidavit remained unanswered.

The FDA Warning Followed the Internal Objection

The companies also admitted that in March 2014, the Food and Drug Administration issued a warning letter determining that the devices were not pre-amendment devices legally on the U.S. market before the cutoff. Their admissions included Instrumed’s eventual discontinuation and recall of the products, and its continued sales of the covered devices throughout the period from 2007 to 2014.

Its own quality chief and its customer had challenged the exemption years before the FDA’s letter. The devices kept selling.

Where the Devices Became Government Claims

The Justice Department said providers submitted Medicare and Medicaid claims for procedures in which the uncleared devices were used. The companies admitted that some devices passed through Instrumed’s customers to hospitals and other medical providers, who used them in procedures billed to federal health care programs. The manufacturer sold the product. The provider performed the procedure and sent the reimbursement claim.

That separation is familiar in the device business. For implanted devices, a surgeon may make or strongly influence the product choice, the hospital or surgery center buys it, and Medicare ordinarily includes the device in payment for the procedure or stay. The clinical choice, purchase and government payment sit with different participants.

For a quality or regulatory insider, the correspondence explains what the manufacturer knew about the claimed authorization. Sales and distribution records can connect the disputed products to the providers who bought them. Clinical and billing records address their use and the claims that followed.

CareFusion Settled for Its Part in the Sales

CareFusion agreed to a separate $3.3 million settlement with the United States and certain states for its part as the distributor. In the distributor settlement announcement, the Justice Department said CareFusion admitted buying and selling devices that lacked the required FDA approval or clearance.

CareFusion admitted selling devices Instrumed had wrongly claimed qualified for the pre-amendment exception. CareFusion was both the customer challenging the evidence and a distributor selling the products onward.

The manufacturer settlement covered Avalign and Instrumed together. CareFusion answered separately for its own conduct in the same sales chain.

What Kind of Proof Is Needed to Be a Whistleblower?

In this case, the quality chief’s email showed what the company knew about its claimed exemption. That is the kind of inside evidence our whistleblower experts can assess with you, alongside the sales and government claims that followed.

A quality employee may understand why an authorization explanation failed. A distribution employee may know which products kept moving after the customer raised its objections. Someone involved in purchasing or clinical use may see where those products entered patient care. Those are different views of a transaction that ultimately reached a government health care program.

The Journal of Forensic and Investigative Accounting’s 2020 paper, A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud, identifies two contributions whistleblowers make to False Claims Act enforcement: they bring inside information about fraud to light and supplement the government’s limited enforcement resources.

A purchase record shows a sale. A regulatory email can show why the seller knew its explanation failed. That difference is where an insider’s knowledge can add something the government’s payment records cannot show.

How Much Is a Whistleblower Claim Worth?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Saw the Authorization Story From Inside

If you saw a device keep selling after its authorization evidence was challenged, tell our whistleblower experts what happened. We work beside you to build the case around what the company knew and where its products went, bringing in medical device fraud whistleblower lawyers who understand FDA authorization and government reimbursement. Your knowledge of the product and the decisions behind its sale belongs at the center of that work.