Medicare Advantage Plan Secures Right of Discovery against Primary Plans to Learn About Settlements with Insureds
Roy Franco
October 5, 2015

Infuse bone graft is FDA approved for certain spinal fusion procedures.  In 2002, Humana agreed to reimburse their insureds for off-label use in reliance on Medtronics’ medical literature that touted the benefits of the infuse product while underreporting its adverse effects.  Humana reversed this policy in February 2009 based on medical literature that questioned the safety and efficacy of Infuse in off-label procedures.  Notwithstanding, Humana continued to reimburse based on alleged fraudulent coding by providers.  On May 6, 2014, Medtronics settled multiple Infuse-related claims with at least one of Humana’s members.  Medtronics never shared any settlement information with Humana and this litigation ensued alleging several related counts of fraud and recovery rights under the Medicare Secondary Payer Private Cause of Action.

The fraud counts were interesting to read in this decision, and the author encourages its readers to review it even though it does not deal with Medicare Secondary Payer law.  The relationship between drug companies and providers can be potentially harmful to patients if the allegations contained in the Complaint are true.   The Court took the right course of action in dismissing these fraud claims, as particularity is required to defeat a Motion to Dismiss for failure to state a claim.   It will more than likely take a whistleblower, such as a provider or insider with the drug company before such allegations could get past procedural motions.

Humana had sought these fraud claims due to the fact that its exposures went beyond any applicable MSP claims.   It sought to recover not only for those claims that Medtronics settled, but for every single payment it made for Infuse, whether or not a claim was presented.  The claim was substantial, and requires factual detail as to allegations that go beyond mere conclusions which is why they were dismissed.

Notwithstanding, Humana prevailed on the MSP Private Cause of Action, which is no surprise based on the weight of authority developing in the 6th Circuit.  What makes this case unique is that Humana could not articulate the extent of its damages because it was not aware of any settlements.  We believe this is a case of first impression that requires defendants, such as Medtronics, to identify their settlements with Plaintiffs.  In this case, the court ordered discovery by Humana to that very point, and no doubt this decision will change the landscape of mass tort style settlements.  Humana is a Medicare Advantage Plan and appears to have secured a right that requires at least notice of settlement from the defendant, and presumably the plaintiff’s firms that represent them as entities that receive payment from a primary plan.

Franco Signor Commentary:  It is important to not ignore Medicare Advantage Plan rights.  The law is well established in Pennsylvania, New Jersey and Delaware that such plans have a recovery right under the Medicare Secondary Payer Act.  The In Re Avandia case in that jurisdiction has been persuasive in expanding those recovery rights in pockets of the 6th, 11th and 5th Circuits.  Notwithstanding personal beliefs on whether MAPs have the same recovery rights as Medicare or not, the weight of authority is shifting to the MAPs favor.  As you resolve claims involving Medicare beneficiaries, it makes sense as a matter of mitigating against such claims to identify the conditional payment obligation with traditional Medicare, and question the claimant if such obligation is zero, as potentially a Medicare Advantage Plans is involved.  If not, whether you are a defendant such as Medtronics or the plaintiff firm that resolved such claim, the exposure is real and could potentially subject you to discovery well beyond the settlement of the underlying claim.   To read the opinion from this recent case (Humana Inc. v. Medtronic Sofamore Danke USA, et. al 2015 U.S. Dist. LEXIS 134692) click here.


Roy A. Franco
Chief Client Officer
Franco Signor LLC