¯ U~IT.E~D STAT~S DISTRICT COURT
FOR TIIE DI:STI’~I’CT O.F NEW JERSEY

U.S, DISTRICT COURT

UNITED STATES OF AMERICA, EX RELo)

)
)

[PAR~ x]

Plainliff,

)
) SEALED COMPLAINT

)

-v-

) ~o r~OT S~RVE

[PARTY Y]
D~f~ndants.

)
)
)

FILED IN CAMERA AND UNDER SEAL

 David R. Gross
Colin R. Robinson
SAIBER LLC

One Gateway Center, 13th Floor
Newark, New Jersey 07102-5311
(973) 622-3333
Gregory M. Utter (pro hae pending)
Joseph M. Callow, Jr. (pro haepending)
Danielle M. D’Addesa (pro haepending)
Brian A. Riddell (pro haepending)
KEATING~ MUETHING ~ KLEKAMP PLL

One East Fourth St., Suite 1400
Cincinnati, O1~o 45202

(513) 579-6400
Joel Hesch (pro hac pending)
Attorney at Law
3540 Ridgecroft Dr.
Lynchburg, VA 24503
(434) 592-4251

Attorneys for Relator
Richard Adrian

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA,
ex rel. RICHARD ADRIAN,

)
)
)
Relator/Qui Tam Plaintiff, )
)
-V)
)
OTISMED CORPORATION
)
1600 Harbor Bay Pkwy
)
Suite 200
)
Alameda, CA 94502
)
)
/o Registered Agent
)
Charlie Chi
)
527 Ivy Street
)
San Francisco, CA 94102
)

Civil Action No.

(SEALED)

COMPLAINT AND JURY DEMAND

TO BE FILED UNDER SEAL

DO NOT SERVE

 and
STRYKER CORPORATION
2825 Airview Blvd.
Kalamazoo, MI 49002
c/o Registered Agent
Curt R. Hartman
2825 Airview Blvd
Kalamazoo, MI 49002

and
HOWMEDICA osTEoNICS
CORPORATION d/b/a/STRYKER
ORTHOPAEDICS
325 Corporate Drive
Mahwah, NJ 07430
c/o Registered Agent
The Corporation Trust Company
820 Bear Tavern Road
West Trenton, NJ 08628

and
BIOMET, INC.
56 East Bell Drive
P.O. Box 587
Warsaw, IN 46582
c/o Registered Agent
Corporate Creations Network
105 East Jefferson Blvd
Suite 800
South Bend, IN 46601

and
BIOM:ET ORTHOPEDICS, LLC
56 East Bell Drive
P.O. Box 587
Warsaw, IN 46582

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

 c/o Registered A~ent
Corporate Creations Network
105 East Jefferson Blvd
Suite 800
South Bend, IN 46601

and
JOHN DOES 1-100,

Defendants.

)
)
)
)
)
)
)
).
)
)
)
)
)
)
)
)

This is an action by qui tam Relator Richard Adrian ("Relator"), through the undersigned
counsel, made on behalf of himself and the United States of America ("United States") to recover
damages and penalties arising from Defendants OtisMed Corporation, Stryker Corporation,
Howmedica Osteonics Corporation d/b/a Stryker Orthopaedics, Biomet, Inc., Biomet
Orthopedics, LLC, and John Does 1-100 (collectively "Defendants") using, making, conspiring,
presenting, or causing to be presented false statements and claims to the government in ~riolation
of the False Claims Act, 31 U.S.C. §3729 et seq. (and as amended in 2009). The Defendants
wrongfully conspired, obtained, or caused others to obtain substantial funds from government
healthcare programs, including but not limited to Medicare, Medicaid, and
TRICARE/CHAMPUS, through false claims and false statements made in connection with
medical services or devices provided by Defendants or those they conspired with, or caused to be
presented such false statements and claims since at least 2006. For instance, Defendants have
engaged in the following improper conduct (or caused others to engage in and!or bill for such
conduct), which violates the False Claims Act: (1) promoting, marketing, using, or causing to be
used non-FDA approved medical devices; (2) promoting, marketing, using or causing to be used

 off-label uses of medical devices or services; (3) promoting, marketing, engaging in, or causing
to be engaged in a practice of unbundling medical products or services; and (4) promoting,
marketing, engaging in, or causing to be engaged in a practice of violating Stark or anti-kickback
rules or regulations. Such improper conduct resulted in billing government healthcare programs
millions of dollars for knee replacements and hip replacements and resurfacings despite the fact
that medical devices used in such services were not approved by the FDA. It has also resulted in
millions of dollars in overbillings to the government by unbundling or separately billing MRrs
that were integral parts of knee replacements and hip replacements and resurfacings that should
not have been billed for separate and apart from these procedures.
Under the terms of the False Claims Act, this Complaint is to be filed in camera and
under seal and is to remain under seal for a period of at least sixty days and shall not be served
on the Defendants until the Court so orders. The Government may elect to intervene and
proceed with the action within the sixty day time frame, or within any extensions of that initial
sixty day period granted by the Court for good cause shown, after it receives both the Original
Complaint and the Material Evidence submitted to it.
For his cause of action, the Relator alleges as follows:
NATURE OF ACTION
1. This is an action to recover treble damages and civil penalties under the False
Claims Act, 31 U.S.C. §§ 3729-3733.
2. Under the False Claims Act, a private person may bring an action in federal
district court for himself and for the United States, and may share in any recovery. 31
U.S.C.§ 3730(b). That private person is known as a "Relator" and the action that the Relator
brings is called a qui tam action.

4

 JURISDICTION
3. This Court has subject matter jurisdiction to adjudicate this action under 28
U.S.C. §§ 1331 and 1345.

4. The Court has. personal jurisdiction over the Defendants pursuant to 31 U.S.C.
§ 3732(a) because at least one of the Defendants transacts and has transacted business in this
District.
VENUE
5. Venue is proper in this District under 31 U.S.C. § 3732 and 28 U.S.C. § 1391(b)
and (c) because at least one of the Defendants resides and!or transacts business in this
District.
PARTIES
6. The Relator brings this action on behalf of the United States, including its agency,
the Department of Health and Human Services ("HHS") and its component, the Centers for
Medicare & Medicaid Services ("CMS"), formerly the Health Care Financing Administration
(’~ICFA"), TRICARE/CHAMPUS, and all other federal healthcare programs.
7. The Relator also brings this action on behalf of himself, as permitted under the
False Claims Act. Relator Richard Adrian is a citizen of the United States and a resident of
the State of New Jersey. Richard Adrian has been an employee of Defendant Stryker
Corporation from 1994-present in varying positions including branch sales manager for
different geographic areas, area director of sales, and senior director of sales. As such,
Richard Adrian has direct and independent knowledge, within the meaning of 31 U.S.C.
§ 3730(e)(4)(B), of the information on which the allegations set forth in this Complaint are

 based. Richard Adrian is the original source of the allegations, as defmed in 31 U.S.C.
§ 3730(e)(4)(B). Richard Adrian has knowledge of the false statements, records and claims
that Defendants knowingly falsely and fraudulently made or caused to be made in connection
with medical services or devices provided by Defendants or those they conspired with.
8. Defendant OtisMed Corporation ("OtisMed") is a privately held orthopedic
technology company that provides solutions for complex clinical problems in bone and joint
replacement. OtisMed’s focus is on developing and commercializing surgical solutions that
are customized.to each patient.
9. OtisMed’s iNtial offering was the OtisKnee product that enables surgeons to offer
custom fit total knee replacement. With OtisKnee, surgeons can purportedly match the size
and placement of the implant to the patient’s unique and normal (non-diseased) knee
anatomy. This new "custom fit" approach enables surgeons to preserve more of the patient’s
own bone and ligaments, which allegedly allows for. better implant fit, alignment and
longevity.
10. OtisMed’s OtisKnee product is based on OtisMed’s patent pending, proprietary
Shape-Match technology that uses 3-D sot~care that purportedly optimizes the size and
placement of custom fit knee before surgery based on the patient’s own normal (nonarthritic) knee anatomy. Prior to surgery, a special MRI is performed to take defined
measurements of the patient’s arthritic knee. OtisMed’s Shape-Match technology sog-ware
then creates a 3-D image of the knee, which is then Shape-Matched to the anatomically
correct virtual lmee model. From this information, medical devices known as custom cutting

6

 guides or blocks are created for surgeons to use during surgeryin making bone cuts that are
specific to the individual patient.
11. OtisMed has also developed hip replacement and hip resurfacing products that use
surgical guide tools and other medical devices for use in total hip replacement and hip
resurfacing surgeries.
12. Defendant Stryker Corporation ("Stryker") is a medical technology company
offering a range of products in orthopedics and other medica! specialties. Stryker’s products
include implants used in joint replacement, trauma, craniomaxillofacial, and spinal surgeries;
biologics; surgical, neurological, ear, nose and throat and interventional pain equipment,
endoscopic, surgical navigation, communications and digital imaging systems; as well as
patient handlh~g and emergency medical equipment.
13. Defendant Howmedica Osteonics Corporation d/b/a Stryker Orthopaedics
("Howmedica") operates as a subsidiary of Stryker .and engages in the development,
manufacture, and sale of orthopedic products and services. Howmedica offers hip, knee,
upper extremity, trauma, and spinal systems, as well as bone cement and bone substitutes.
14. Specifically in relation to total knee replacements, Stryker and/or Howmedica
have developed and!or designed the Triathlon Total Knee Replacement System that utilizes
OtisMed’s OtisKnee product and/or medical devices and technology to implant its own
prostheses to allow for custom fit total knee replacements.
15. Hereafter, for convenience, Stryker Corporation, its predecessors, wholly and
majority-owned subsidiaries - including Howmedica Osteonics Corporation d/b/a Stryker

 Orthopaedics - equity joint ventures, and controlled affiliates will be collectively referred to
as Stryker.
16. In 2008, Stryker’s sales totaled $6.718 billion, which put it among the 12 largest
medical technology companies in the world.
17. In 2008, Stryker’s orthopedic products yielded approximately $5.5 billion in
sales, or 82% of Stryker’s total business.
18. Founded in 1977, Defendant Biomet, Inc. engages in the design, manufacture, and
marketing of surgical and non-surgical products primarily used by orthopedic surgeons and
other musculoskeletal medical specialists in the United States, Europe, and internationally.
Biomet Inc.’s reconstructive products include knee, hip, shoulders, and extremity joint
replacement systems, among others.
19. In September 2007, Biomet, Inc. became a private company when a consortium of
private equity firms purchased Biomet, Inc. for $11.4 billion.
20. Biomet Inc.’s 2009 fourth quarter consolidated earnings totaled $635.6 million.
21. Defendant Biomet Orthopedics, LLC operates as a subsidiary of Biomet, Inc. and
engages in the design, manufacture, and marketing of products primarily used by
musculoskeletal medical specialists in surgical and nonsurgical therapy in the United States
and internationally.
22. Specifically in relation to total knee replacements, Biomet, Inc. and/or Biomet
Orthopedics, LLC have developed and!or designed the Vanguard Complete Knee System that

 utilizes OtisMed’s OtisKnee product and!or medical devices, and techno!ogy to implant its
own prostheses to allow for custom fit total knee replacements.
23. Hereafter, for convenience, Biomet, Inc., its predecessors, wholly and majorityowned subsidiaries - including Biomet Orthopedics, LLC - equity joint ventures, and
controlled affiliates will be collectively referred to as Biomet.
24. Upon information and belief, there are additional Defendant John Doe entities that
are wholly or majority-owned subsidiaries, equity joint ventures, and/or controlled affiliates
of OtisMed Corporation, Stryker Corporation, and/or Biomet, Inc. that have participated in
the fraud, but have yet to be identified.
THE FALSE CLAIMS ACT

25. TheFalse Claims Act ("FCA") provides, in pertinent part, that:
(a)(1) Any person who (A) knowingly presents, or causes to be
presented, a false or fraudulent claim for payment or approval; 03)
knowingly makes, uses, or causes to be made or used, a false
record or statement material to a false or fraudulent claim; (C)
conspires to commit a violation of subparagraph (A), 03), (D), (E),
(F), or (G); . . . or (G) knowingly makes, uses, or causes to be
made or used, a false record or statement material to an obligation
to pay or transmit money or property to the Government

is liable to the United States Government for a civil penalty of not
less than $5,000 and not more than $10,000, as adjusted by the
Federal Civil Penalties Inflation Adjustment Act of 1990 (28
U.S.C. 2461 note; Public Law 104-410), plus 3 times the amount
of damages which the Government sustains because of the act of
that person ....
(b) For purposes of this section, the terms "knowing" and
"knowingly" (A) mean that a person, with respect to information
(i) has actual knowledge of the information; (ii) acts in deliberate

 ignorance of the troth or falsity of the information; or (iii) acts in
reckless disregard of the troth or falsity of the information, and (B)
require no proof of specific intent to defraud.
31 U.S.C. 9 3729. The mount of civil penalties has been increased by amendments, which
currently are set at $5,500 and $11,000 per claim.
THE MEDICARE PROGRAM~
26. In 1965, Congress enacted Title XVIXI of the Social Security Act to pay the costs
of certain health care services for eligible individuals. 42 U.S.C. 99 1395 et seq.
27. Medicare consists of two parts. Part A provides coverage for hospital costs,
services rendered by skilled nursing facilities, home health care, and hospice care. Part B, on
the other hand, provides coverage for physician services, outpatient hospital care, and other
miscellaneous medical services such as physical and occupational therapy. See 42 U.S.C.
§9 1395j-1395w24.
28. The U.S. Department of Health and Human Services ("HHS") is an agency of the
United States whose activities, operations, and contracts are paid from federal funds. The
Centers for Medicare and Medicaid Services ("CMS") is a division of HHS that is
responsible for the administration and supervision of the Medicare program. For the purpose
of administering Part A and Part B Medicare reimbursement claims, HI-IS contracts with
private local insurance companies, known as "carriers" and "fiscal intermediaries," to
receive, review, and pay appropriate reimbursement claims related to services provided to
Medicare beneficiaries. See 42 U.S.C. 9 1395u.
1 The other government healthcare programs, such as TRICARE/CHAMPUS, have
similar requirements and have similarly been defrauded by the Defendants. Whenever the term
Medicare is used, the allegations also include that other govemment healthcare programs were
similarly defrauded.

10

 MEDICARE COVERAGE AND REIMBURSEMENT

29. Medicare providers have a legal duty to familiarize themselves with Medicare’s
coverage and reimbursement rules, including those delineated in the Medicare Manuals.
Heckler v. Cmty. Health Serv. of Crawford County, Inc., 467 U.S. 51, 64-65 (1984).
30. The Medicare program is a defined benefits program whereby Congress has
prescribed how beneficiaries become eligible to receive payment for products and services
and defines the scope of those products and services. Medicare does not, however, identify
all covered products, services, treatments, procedures or technologies.
31. Because no statutory list of specific medical devices or services to be covered
exists, CMS, together with its contractors, have discretion to determine whether a specific
device or service meets the definition of a benefit category and then whether the device or
service using the device may be covered under the Medicare program.
32. To be eligible for Medicare coverage, a product or device not otherwise specified
or expressly excluded by Congress must be "reasonable and necessary’’ for the treatment of
illness or injury or to improve functioning of a malformed body member.
33. CMS has interpreted this "reasonable and necessary" standard to require a product
or service, at a minimum, to be safe and effective, which in turn, means that unless exempt, it
must have been approved or cleared for marketing by the FDA.
34. Since 1995, the categories of devices that may be covered under Medicare now
include:

11

 a. Devices approved by the FDI~. through the premarket
approval (PMA) process;
No

Devices cleared by the FDA through the 510(k) process;

and
c.
FDA-approved investigational device exemption (IDE)
category B (questions of safety and effectiveness of the device have been
resolved) devices;
35. Statutory law and CMS policy, therefore, clearly preclude billing for non-FDA
approved devices that have not been approved through the PMA, 510(k) or IDE processes.
36. Furthermore, to receive Medicare reimbursement, health care providers, suppliers,
and practitioners must submit claims to the appropriate Medicare contractor. In addition to
meeting administrative requirements, claims must describe the items and services for which
payment is sought.
37. Medicare pays only for those services that are reasonable and necessary for the
diagnosis or treatment of illness or injury. See, e.g., 42 USC § 1395y(a)(I)(A).
38. Specifically, knee replacement services are billed under a diagnosis-related group
(Dt~G) code. Depending upon the exact procedure, such as full or partial knee replacement,
there are different DRG codes. Each DRG code entities a provider to a set or fixed payment
regardless of how much it costs the provider. In other words, a provider is paid a single
predetermined amount per procedure that matches a specific DRG code.
39. Providers are not permitted to unbundle or separately bill for services necessary to
the carrying out or performance of a single procedure and therefore cannot bill for each
separate service of a single knee replacement procedure.

12

 FACTUAL ALLEGATIONS
40. From at least 2006 through the present, Defendants have knowingly engaged in
systematic false and fraudulent schemes to defraud patients and government healthcare
programs out of si~ficant amounts of money.
41. Defendants have been knowingly using, making, conspiring, presenting or
causing to be presented false statements and claims to the government in violation of the
False Claims Act through a variety of improper schemes, including but not limited to falsely
or fraudulently (1) promoting, marketing, using, or causing to be used unapproved medical
devices; (2) promoting, marketing, engaging in, or causing to be engaged in the practice of
using off-label uses of medical devices or services; (3) promoting, marketing, engaging in, or
causing to be engaged in the practice of unbundling medical services; and (4) promoting,
marketing, engaging in, or causing to be engaged in the practice of violating Stark or antikickback rules or regulations.
UNAPPROVED MEDICAL DEVICES

42. According to Section 201(h) of the Federal Food Drag & Cosmetic Act, a medical
device is defined as: "an instrument, apparatus, implement, machine, contrivance, implant,
in vitro reagent, or other similar or related article, including a component part, or accessory
which is:
recognized in the official National Formulary, or the United States
Pharmacopoeia, or any supplement to them,
intended for use in the diagnosis of disease or other conditions, or in the cure,
mitigation, treatment, or prevention of disease, in man or other animals, or
intended to affect the structure or any function of the body of man or other
animals, and which does not achieve any of it’s primary intended purposes

13

 through chemical actio.n within or on the body of man or other animals and which
is not dependent upon being metabolized for the achievement of any of its
primary intended purposes."
43. Any product that meets the above definition of "medical device" is regulated by
the FDA and is subject to both pre-marketing and post-marketing regulatory controls.
44. Defendants, those they conspired with, and!or those they caused to submit false
claims engaged in a variety of schemes to defraud the government by promoting, marketing,
or using non-FDA approved medical devices in connection with custom fit knee replacement
services.
45. Government rules prohibit the government from paying for medical devices that
have not been approved by the FDA.
46. Upon information and belief, Stryker entered into an agreement to purchase
OtisMed. The sale is contingent upon the FDA approving OtisMed’s medical devices that
have already been used in numerous custom fit knee replacements by the Defendants.
47. Upon information and belief, during the summer of 2009, Stryker and/or OtisMed
applied for FDA 510(k) approval of OtisMed’s knee replacement medical devices. As of the
date of the filing of this Complaint, the FDA has not approved any of OtisMed’s custom fit
knee replacement medical devices under either the PMA, 510(k), or IDE processes.
Nevertheless, Defendants have billed the government millions for custom fit knee
replacement procedures performed improperly utilizing OtisMed’s non-FDA approved knee
replacement medical devices.

14

 " 48. Furthermore, upon information and behef, Defendants did not provide or include
all relevant information to the FDA in the 510(k) application, including all Medical Device
Reports, data or reports concemi_ng any problems, or complaints by patients or healthcare
providers regarding knee replacements that utihzed the unapproved medical devices. In
addition, they improperly gave others the wrong impression that the medical devices were
approved; they concealed patient complaints or MDRs; and they improperly caused reports to
be made identifying only the positive procedures and downplaying or concealing unfavorable
resuhs. Moreover, Defendants misstated the nature and classification of such medical
devices. Such concealments and false information about the medical devices constitutes
fraud which would act to void any potential FDA approval.
49. Upon information and behef, OtisMed also has deve!oped hip replacement and/or
hip resurfacing products that require use of surgical guide tools and other medical devices for
use during the surgical procedures. Defendants, those they conspired with, and/or those they
caused to submit false claims engaged in a variety of schemes to defraud the government by
promoting, marketing, or using non-FDA approved medical devices in connection with these
hip replacement and resurfacing services.
PROMOTING UNAPPROVED DEVICES

50. Stryker and OtisMed have entered into an agreement in which Stryker and
OtisMed would jointly or cooperatively promote or market to healthcare providers certain
knee replacement medical devices manufactured, produced, provided or .sold by OtisMed
and/or Stryker.

15

 5.1-: Biomet and OtisMed have entered into a similar agreement in which Biomet and
OtisMed would jointly or cooperatively promote or market to healthcare providers certain
knee replacement medical devices manufactured, produced; provided or sold by OtisMed
and!or Biomet.
52. Upon information and belief, OtisMed divided the country into two, whereby
Stryker would promote or market in the Eastern portion of the United States and Biomet in
the Western portion of the United States.
53. Defendants were aware or should have been aware that OtisMed had never sought
to obtain FDA approval for its medical devices used in knee replacements. Nevertheless, the
Defendants continued to promote, market, or co-market use of such unapproved medical
devices. In addition, Defendants promoted or engaged in off-label uses of such medical
devices.
54. OtisMed’s medical devices were an integral and necessary part of the custom fit
knee replacement procedures and systems that were promoted, marketed, or co-marketed by
the Defendants.
55. OtisMed engaged in co-marketing and promotional efforts regarding unapproved
medical devices with both Stryker and Biomet. This included internal training and marketing
sessions, jointly providing materials to health care providers, and/or providing materials on
behalf of one another. Examples also include, but are not limited to, the following:
a. OtisMed provided to Stryker and Biomet sales and management employee
materials for distribution to hospitals, surgeons and ~ centers.

16

 b.
At the request of Stryker and/or Biomet, employees were trained both in
groups and individually to sell OtisMed technology together with implant products of Stryker
and/or Biomet. This included OtisMed videos, literature, and bone models, which were jointly
utilized.
c.
OtisMed used Stryker and/or Biomet employees to help promote surgeon
training sessions, i.e. dinner meetings, and other.promotional activities, such as the OtisMed
"cocktail party" sales presentation at the American Academy of Orthopedic Surgeon meetings
during 2007 and 2008.
d.
OtisMed provided marketing services for hospital and surgeons through
Stryker and/or Biomet sales force employees and an independent marketing company hired by
OtisMed. This service was to help promote the use of more OtisMed devices, more MRIs, and
more knee implants from Stryker or Biomet.
56. Groups of employees of the Defendants met together to combine the various
marketing and promotional activities that had been used over the past several years to prepare
a new set of training materials, which were used during a "dry run" to launch a large
marketing push once the sale of OtisMed became official. The following training materials
were used in the dry run, but also represent activities that the Defendants had been doing
since at least 2006:
a.
"Hospital Selling Guide." This undated overhead
presentation was used, and is currently being used, by the Defendants as training
materials for promoting the custom fit knee, a term used by the Defendants to
promote their products and services. The presentation targets "Hospit.al
Administrators, Internal Review Boards, Surgeons, and OR Staff." It directs
Defendants’ employees to target such healthcare providers and provides them with
selling points as to why they should use products and services by the Defendants.
b.
"Surgeon & Hospital Selling Strategies for OtisMed." This
undated overhead presentation was used, and is currently being used, by the
Defendants to show employees how to target surgeons and hospitals. It contains
the OtisMed logo. At the conclusion of the presentation, the slide reads: "Push the
marketing so it ties the physician and hospital to OtisMed."
c.
"MRI Qualification Process." This undated overhead
presentation was used, and is currently being used, by the Defendants to show
employees how to target hospitals and how to use monetary incentives to
convince them to use their products and services. It also recognizes that "there is
currently no CPT code for the OtisMed sequence," and thus supporting knowledge

17

 that the device.is not approved by the FDA and therefore Defendants did not
approach CMS to determine if it could be billed.
57. In addition, OtisMed routinely traveled with employees of Stryker and Biomet
and conducted joint presentations to healthcare providers. They also f~equently coordinated
travel arrangements.
58. Stryker and Biomet pushed the sale of OtisMed because that would require the
provider to use their total knee replacement products which are the only ones that were
recommended to be used with OtisMed’s OtisKnee product and/or medical devices and
technology.
59. Statements made by Stryker managers regarding its knowledge that it was
’ improperly promoting or marketing unapproved medical devices include:
a.
"This is going to get us all in trouble." This was made
during the summer of 2009 in response to a "dry run" of the training for Redwood,
the company secret codenamefor OtisMed.
b. "I work with CMS all the time and if anyone ever blew the
whistle we would be in deep trouble." Made after July 14-15, 2009 meeting.
c.
"We should not be taking any trips that involve comarketing with OtisMed." This was made in response to concerns that Stryker
was improperly marketing OtisMed devices, which it knew were not FDA
approved. However, despite the stated comments, Defendants continued to
engage in joint training and joint marketing efforts.
d.
"[T]hey should not be making travel plans with the
OtisMed people." Another statement made in response to concerns that Stryker
was improperly marketing OtisMed medical devices. Again, despite the stated
comments, Defendants continued to engage in joint training and joint marketing
efforts.
60. In short, Defendants knew that the knee replacement medical devices were not
approved by the FDA, but continued to promote, co-promote, market, co-market; conspire

18

 and otherwise cause others to use and submit false statements and claims to the government
relating to knee replacements which used such non-FDA approved medical devices.
61. Upon information and belief, Defendants also knew that OtisMed’s hip
replacement and hip resurfacing medical devices were not approved by the FDA, but
continued to promote, co-promote, market, co-market, conspire and otherwise cause others to
use and submit false statements and claims to the government relating to hip replacements
and hip resurfacings which used such non-FDA approved medical devices.
UNBUNDLING MEDICAL SERVICES

62. In addition, Defendants, those they conspired with, and/or those they caused to
submit false claims engaged in a variety of schemes to defraud the government by marketing,
promoting, or billing for parts or services, such as MR.Is, that were a necessary or integral
part of the knee replacement procedure and therefore received more government funds than
they were entitled.
63. In order to bill for a MRI, a provider must show an independent diagnostic need.
Generally, an MRI may be used by providers to help assess whether a knee replacement is
needed. In those instances, the MRI may be a diagnostic event and billable. The allegations
here, however, are far different. The Defendants encouraged providers to separately bill
MRI’s that were an integral and necessary part of their unique method of custom fit knee
replacements.
64. OtisMed and the other Defendants are using what they refer to as a custom fit
knees. It requires that a very specific MR1 be taken in a precise manner in a specific
timeframe. It is not used to diagnose that a knee replacement is needed. Rather, it is
19

 conducted after a physician determines two separate things: (1) that a knee replacement is
already needed; and (2) that it will use Defendants’ products and services.
65. This special MRI is needed only for OtisMed products because OtisMed uses an
MP,_I to design two custom cutting guides or blocks that fit the patient’s anatomy. Without
this special MRI, the custom cutting guides or blocks cannot be created!designed by OtisMed
and, in turn, a physician therefore cannot use the Defendants’ custom fit knee replacement
systems.
.66. This new method of custom fit knee replacements used by the Defendants is
different than the rest of the providers in the United States. The processes used by the
Defendants require an additional and special MRI. This special BdXI determines the size of
parts and precise places to cut bones for each individual patient. Defendants consider the
MRI integral to using their products and performing a custom fit knee .replacement using
their systems. (See supra ~[ 10).
67. Even assuming that a physician might use an MRI in assessing whether a knee
replacement is needed, it would still need to conduct another special MRI if it planned to use
the Defendants’ products. The Defendants have very specific and exacting requirements for
the MRI and will not use a prior, diagnostic MRI. For instance, the special MR1 needed to
perform a knee replacement utilizing the Defendants’ custom fit products must be conducted
by a MXI entity certified by OtisMed. In short, only if a physician chose to use the
Defendants’ custom knee system would such an MR1 be needed and in fact be essential.
Conversely, if it chose another company’s knee replacement components or process, an MR1
would not be needed at all for the surgical knee replacement procedure.

20

 68. Government programs pay a fixed fee utilizing a DRG code process for paying
for knee replacements. In other words, providers receive a set or fixed amount depending
upon the type of knee replacement, i.e. full or. partial. This payment is not dependent upon
the actual costs to the provider. For instance, if a DRG code pays providers $10,000 for a
certain knee replacement, the provider is paid that amount regardless of its costs. However,
under this system of payment, a provider may not unbundle the procedures into separate
components and submit requests for payment based on different steps or processes in the
same knee replacement. This is known as unbundling, which is prohibited by government
healthcare programs.
69. Here, Defendants devised or used schemes of promoting, marketing, or engaging
in the practice of unbundling medical services and promoting, marketing, or engaging in the
practice of violating Stark or anti-kickback rules or regulations. For instance, Defendants
in£ormed healthcare providers that they could and should consider billing for the special
MRI, which is needed only if they use Defendants’ products. In other words, it told the
provider to go ahead and bill the full DRG code for the knee replacement procedure to the
government, but to then submit an additional bill for the special MRI needed if it chose the
Defendants’ custom fit knee products.
70. When Defendants contacted some healthcare providers, they were told that their
knee replacement devices and services cost more than others. Therefore, to induce them to
use their products and services, Defendants devised fraudulent schemes to cause others to
submit false bills to the government. For instance, they trained their employees to tell
providers that this special MRI needed only if it used Defendants’ products or process can be
a revenue maker. Specifically, they encouraged healthcare providers to unbundle the special
21

 MRI from the other aspects of the knee replacement procedure in order to receive more than
the DRG code for the knee replacement procedure would permit. In other words, although
this MRI was integral to the knee replacement procedure using OtisMed’s medical devices,
Defendants marketed and promoted that the providers unbundle the special MRI and submit
two separated bills: one for the special M2LI used in the knee replacement and another using
the DRG code for the knee replacement procedure.
71. The Defendants trained its employees to show doctors just how much more they
could bill the government if they unbundle the speciai MRI. They even. suggested that they
use related entities to perform the MRIs and thus engage in illegal self-referrals in violation
of Stark and anti-kickback laws to make even more money.
72. Groups of employees of the Defendants met together to combine the various
marketing and promotional activities that had been used over the past several years to prepare
a new set of training materials, which were used during .a "dry run" to launch a large
marketing push once the sale of OtisMed became official. The following training materials
were used in the dry run, but also represent activities that the Defendants had been doing
since at least 2006:
a.
"Hospital Selling Guide." This undated overhead
presentation was used, and is currently being used, by the Defendants as training
for promoting the custom fit knee, a term used by the Defendants to promote their
products and services. The presentation targets "Hospital Administrators, Internal
Review Boards, Surgeons, and OR Staff." It identifies the MRI as an "ancillary
service opportunity" and goes on to suggest and show hospitals how to form inhouse MRI systems to farther increase their revenue. It goes on to list as a selling
point that hospitals could bill an average of $800 per MRI and make an extra
$200,000 for such MRI billings for every 200 knee replacements.
b. "Surgeon & Hospital Selling Strategies for OtisMed." This
undated overhead presentation was used, and is currently being used, by the
22

 Defendants to show employees how to target surgeons and hospitals. It contains
the OtisMed logo. It also contains similar language about promoting
"ancillary service opportunity."
c.
"MRI Qualification Pro’ces~." This undated overhead
presentation begins by recognizing that the MRI used for the knee replacement
utilizing their new approach "is an integral part of OtisKnee Process." It also
recognizes that a "Hospital will likely opt to recoup revenue." In addition, the
overhead states that "there is currently no CPT code for the OtisMed sequence."
Moreover, the overhead states: "MRI is billed to patients insurance."
73. Specifically, the "Hospital Selling Guide" presentation states, i~ relevant part:

Selling Points: Traditional vs CFK (Custom Fit Knee)
ANCILLARY SERVICE OPPORTUNITY

MRI Volume - The 3-D imaging required for pre-operative
planning, positioning, and creation of the custom cutting guides
provides for increased Magnetic Resonance Imaging (’WIRI")
volume.
ROI - Based on the increased demand for this type of imaging, the
facility has the potential to reduce fixed costs per exam while
improving return on investment of an in-house MRI system.
74. Statements made by Stryker managers regarding its knowledge that it was
improperly promoting or marketing the unbundling of MiRI and other services or devices
include:
a.
"We should not discuss MRI reimbursement which will get
us all in trouble since it is a clear violation." Made after July 14-15, 2009
meeting.
b.
"My hospitals are making money with OtisMed MRI
reimbursement and even saving on operating room drugs." Made by sales
manager.
c.
"We will be in major trouble if we continue to market
reimbursements like we are showing in our slides and discussions at this
meeting." Made after July 14-15, 2009 meeting.

23

 75. Defendants did not approach CMS or its agents to. determine if a provider could
bill separately for the special M:RI. Nor did Defendants ask whether its custom fit knee
replacement procedure, which utilized non-FDA approved medical devices, could be billed at
all or under which particular DRG code.
76. In short, Defendants knew that the MRIs were an integral part of the .knee
replacements utilizing OtisMed products and services, yet they promoted, co-promoted,
marketed, co-marketed, conspired and otherwise caused others to submit false statements and
claims to the government by unbundling the MRI and other items and billing them as
separate services or products, therefore enabling the providers to receive more Medicare
reimbursement than they were entitled. The Defendants also told providers that they can
make even more money if they used a related entity to perform the MRIs and thus engage in
self-referrals, which would violate Stark and anti-kickback roles.
77. Upon informaion and behef, special MRIs were also an integral part of the hip
replacements and hip resurfacing procedures utilizing OtisMed products and services, yet
Defendants promoted, co-promoted, marketed, co-marketed, conspired and otherwise caused
others to submit false statements and claims to the government by unbundling the MRI and
other items and billing them as separate services or products, therefore enabling the providers
to receive more Medicare reimbursement than they were entitled. The Defendants also told
providers that they can make even more money if they form a related entity to perform the
MRIs and thus engage in self-referrals, which would violate Stark and anti-kickback rules.
78. Upon information and belief, the alleged misconduct by Defendants Stryker and
Biomet in paragraphs 40-77 also violated their respective corporate integrity type agreements

24

 with the government stemming from a settlement occurring on or about September 2007, in
which they agreed, among other things, to comply with compliance rules and monitoring. As
a result, the government was additionally harmed.
COUNT I
VIOLATION OF THE FALSE CLAIMS ACT
31 U.S.C. § 3729(a)(1) (1990)/31 U.S.C. § 3729(a)(1)(A) (2009)

79. Relator incorporates by reference the allegations set forth in paragraphs 1 through

78 as though fully set forth herein.
80. As set forth above, Defendants knowingly presented, or caused to be presented,
false or fraudulent claims for payment to officials of the United States Government in
violation of3i U.S.C. § 3729(a)(1) (1990) and 31 U.S.C. § 3729(a)(1)(A) (2009).
81. By virtue of the false or fraudulent claims made by the Defendants, the United
States suffered actual damages and therefore is entitled to multiple damages under the False
Claims Act, to be determined at trial, plus a civil penalty for each violation.
COUNT H
VIOLATION OF THE FALSE CLAIMS ACT
31 U.S.C. § 3729(a)(2) (1990)/31 U.S.C. § 3729(a)(1)(B) (2009)
82. Relator incorporates by reference the allegations set forth in paragraphs 1 through
78 as though fully set forth herein.
83. As set forth above, Defendants knowingly made, used, or caused to be made or
used false records or statements material to a false or fraudulent claim in violation of 31
U:S.C. § 3729(a)(2) (1990) and 31 U.S.C. § 3729(a)(1)(B) (2009).

25

 84. By virtue of the false records or statements made by the Defendants, the United
States suffered actual damages and therefore is entitled to multiple damages under the False
Claims Act, to be determined at trial, plus a civil penalty for each violation.
COUNT III
VIOLATION OF THE FALSE CLAIMS ACT
31 .U.S.C. § 3729(a)(3) (1990)/31 U.S.C. § 3729(a)(1)(C) (2009)

85. Relator incorporates by reference the allegations set forth in paragraphs 1 through
78 as though fully set forth herein.
86. This is a claim for civil penalties and treble damages under the False Claims Act.
87. By virtue of the acts described above, Defendants have knowingly conspired
.together to defraud the Federal Government by engaging in conduct including, but not
limited to, promoting, co-promoting, marketing, co-marketing, or using non-FDA approved
medical devices; promoting, co-promoting, marketing, Co-marketing, or using off-label uses
of medical devices or services; promoting, co-promoting, marketing, co-marketing, or
engaging, or causing providers to engage, in a practice of unbundling medical services; and
promoting, c.o-promoting, marketing, co-marketing, or. engaging, or causing providers ti~
engage, in a practice of violating Stark or anti-kickback rules or regulations.
88. Defendants’ conspiracy defrauded the United States by causing or getting false or
fraudulent claims allowed or paid.
89. As set forth in the preceding paragraphs, Defendants violated 31 U.S.C.
§ 3729(a)(3) (1990) and 31 U.S.C. § 3729(a)(1)(C) (2009) and have thereby damaged and

26

 continue to damage the United States Government by .their actions inan amount to be
determined at trial.
COUNT IV
VIOLATION OF THE FALSE CLAIMS ACT
31 U.S.C. § 3729(a)(7) (1990)/31 U.S.C. § 3729(a)(1)(G) (2009)
90. Relator incorporates by reference the allegations set forth in paragraphs 1 through
78 as though fully set forth herein.
91. As set forth above, Defendants knowingly made, used, or caused to be made or
used false records or statements material to an obligation to pay or transmit money or
property to the Government, or knowingly concealed or knowingly and improperly avoided
or decreased an obligation to pay or transmit money or property to the Government in
violation of 31 U.S.C. § 3729(a)(7) (1990) and 31 U.S.C. § 3729(a)(1)(G) (2009).
92. By virtue of the false records or statements made, used, or caused to be made or
used by the Defendants, the United States suffered actual damages and therefore is entitled to
multiple damages under the False Claims Act, to be determined at trial, plus a civil penalty
for each violation.
PRAYER FOR RELIEF
WHEREFORE, the United States and Relator demand that judgment be entered against
the Defendants and in favor of the Relator and the United States as follows:
’ 1. On the First, Second, Third and Fourth Causes of Action under the False Claims
Act, as amended, for the amount of the United States’ damages, multiplied by three as
required by law, and such civil penalties as are permitted or required by law;

 2. That the Relator be awarded the maximum share amount allowed pursuant to 31
U.S.C. § 3730(d);
3. That the Relator be awarded all costs and expenses of this action, including
attorney fees, expenses and costs as permitted by 31 U.S.C. § 3730(d).
4. That the United States and Relator receive all such other relief as may be just and
proper.
,REQUEST FOR TRIAL BY JURY
Pursuant to Rule 3 8 of the Federal Rules of Civil Procedure, Relator hereby demands a
trial by jury.

28

 1,1.espectfully submitl:ed,

Colin RoNnson
SA~SER LLC
One Gateway Center, 13~’ Floor
Newark, New Jersey 07102-5311
Phone: (973) 622-3333
Fax: (973) 622-3349
mail: crobinson~).saiber.eom
and
Gregory M. Ut:ter (pro hae pemling)
Joseph M. Callow, Jr. (pro hac p~:ndin.g’)
Danielle M, D’Addesa (pro hacpendin.g)
Brim~ A. Riddell ~ro hac.pemling)
~AT[NG~ ~llg’l’II1,N(; ~ KLEKAMP PLI,

One Bast gourfla St., Sui~ 1400
Cinchmatl, Ohio 45202
Phone: (513) 579-6400
Fax: (513) 579-6457
Email: ~tNy@kmklaw.com
and

Joel t-Iesch ~ro hacpen.ding)
Attorney at Law
3540 Ridgeerofl Dr.
Lynch’burg, VA 24503
Phone: (,134) 592-4251
Attorneys for Relator Richa.rd Ad,’i~n

29

 CERTIFICATE OF SERVICE
The u.ndersigned eerti’5~, s that on this 2nd day of Ootober, 2009, a cop y of t/he foregoing
Complaint and a Disclosure Statement were served on file individuals below via Fed Ex
Deliwry;

Hen. Ralph ].
Newark United Sta{es Attorney’s Office
P~t~r Rodino Federal Building
970 Broad Slzea
Suite 700
Newark, N,I 07102

Hen.. Eri.c H. Holder,
Altorney General of the United SI.atos
51 I. 1 Main Juslice Building
I0th & Conslitulion Ave. N.W,
Washington, DC 20210

Colin R. Robinson

30