Irvine California-based medical device manufacturer Acclarent Inc., a subsidiary of Johnson & Johnson, has agreed to pay $18 million to resolve allegations that the company caused health care providers to submit false claims to Medicare and other federal health care programs by marketing and distributing its sinus spacer product for use as a drug delivery device without U.S. Food and Drug Administration (FDA) approval of that use.

Also on Wednesday, July 20th, Acclarent’s former Chief Executive Officer, William Facteau, 47, of Atherton, California and former Vice President of Sales, Patrick Fabian, 49, of Lake Elmo, Minnesota were convicted following a six-week jury trial of 10 misdemeanor counts of introducing adulterated and misbranded medical devices into interstate commerce.

Johnson & Johnson acquired the California medical device manufacturer, Acclarent, in 2010. The company specializes in the development of minimally invasive ear, nose and throat (ENT) technologies. Allegations in this case surrounded the marketing and distribution of a sinus spacer known as the Relieva Stratus MicroFlow Spacer. Though the U.S. Food and Drug Administration (FDA) approved the spacer in 2006 for use in maintaining sinus integrity during a 2-week period post-surgery, Acclarent allegedly designed, engineered and marketed the spacer as a prescription corticosteroid-delivery device.

Off-label marketing is a common scheme used to increase revenue from pharmaceutical drug or device sales, and such activity violates the federal False Claims Act (FCA). When health care professionals bill government-funded health care programs like Medicare for products and services that are not FDA approved, each bill becomes a false claim.

In 2006, Acclarent received FDA clearance to market the Stratus as a spacer to be used only with saline to maintain sinus openings following surgery. The government alleged that Acclarent intended for the Stratus to be used instead as a drug-delivery device for prescription corticosteroids, including Kenalog-40, and that the device was specifically designed and engineered for this use.

The government further alleged that Acclarent marketed the Stratus as a drug delivery device even after the FDA rejected the company’s 2007 request to expand the approved uses for the Stratus. For example, Acclarent employees trained physicians using a video that demonstrated the Stratus being used with prescription corticosteroid Kenalog-40 and also used a white, milky substance resembling Kenalog-40 when demonstrating the Stratus.

In 2010, Acclarent added a warning to its label regarding use of active drug substances in the Stratus; however, the government alleged that Acclarent nonetheless continued to market the Stratus for drug delivery.

By May 2013, Acclarent discontinued all sales of the Stratus and the company agreed to withdraw all FDA marketing clearances for the device, which is no longer commercially available in the United States.

In 2011, former Acclarent ENT consultant, Melayna Lokosky, filed a civil lawsuit in the District of Massachusetts under the False Claims Act whistleblower (a/k/a qui tam) provision alleging the off-label marketing and FCA violations. Lokosky will receive approximately $3.5 million from the settlement.