False Claims Act Lawsuit | Lawsuit Settlements | Medical Product Liability

Case Overview

Medical device manufacturer Exactech Inc. has agreed to pay US$8 million to settle allegations under the False Claims Act that it improperly billed federal healthcare programs (Medicare, Medicaid, and the Department of Veterans Affairs) for defective knee implant components. The settlement comes amid a wave of litigation over recalled implants, whistleblower claims, and related bankruptcy proceedings. (Constantine Cannon)

Key Allegations & Components at Issue

The U.S. government’s case (which originated from whistleblowers) focused on two problematic parts of Exactech’s total‑knee replacement systems:

1. Finned tibial tray (metal component inserted in the tibia) — Allegedly having unacceptably high failure rates during 2008‑2018. (Constantine Cannon)
2. Polyethylene component in some of Exactech’s knee systems — Allegedly defective in the period 2019‑2022. These plastic components are alleged to degrade prematurely. (Constantine Cannon)

These defects allegedly meant that the implants “failed prematurely at a higher than acceptable rate,” which in turn rendered them not “medically reasonable and necessary.” Since federal health programs only reimburse for services and products that meet that standard, Exactech was accused of submitting false claims. (Constantine Cannon)

Legal Basis & Whistleblower Involvement

• False Claims Act (FCA): The government’s claim under the FCA is that Exactech sought reimbursement for medical devices that did not meet the standard of being reasonable and necessary due to high failure rates. (Constantine Cannon)
• Whistleblowers: Several whistleblowers were involved. An Alabama case brought forward claims under the False Claims Act; other whistleblowers in Maryland also raised related allegations. Part of the settlement will provide awards to those whistleblowers—approximately US$1.3 million to the Alabama whistleblowers and about US$565,000 to the Maryland whistleblower. (Constantine Cannon)

Context: Recall, Litigation & Bankruptcy

To understand the settlement, it must be viewed within the broader context of Exactech’s legal and regulatory struggles:

• In 2021‑2022, Exactech issued voluntary recalls of several joint replacement devices (knee, hip, shoulder) owing to “non‑conforming packaging” that allowed excess exposure to oxygen (oxidation), which in turn could degrade implants prematurely. (Reuters)
• Patients filed thousands of lawsuits, alleging device failures, pain, swelling, need for revision surgery, bone loss, instability, etc. These have been consolidated in multidistrict litigation (MDL) in New York and in state courts. (Rosenfeld Injury Lawyers LLC)
• Exactech filed for Chapter 11 bankruptcy in Delaware in late 2024 to restructure amid mounting liabilities. (Reuters)

Details of the Settlement

• The US$8 million settlement resolves the government’s FCA claims connected to the defective knee components. (Constantine Cannon)
• The amount reflects Exactech’s financial condition, as the settlement was approved in the context of its bankruptcy proceedings. The government acknowledged that due to Exactech’s financial state, a larger amount was not feasible. (Constantine Cannon)
• Whistleblower compensation: As above, the whistleblowers will receive payments from the settlement proceeds. (Constantine Cannon)

Legal Issues & Implications

1. “Reasonable and Necessary” Standard
   The FCA claims rest on the legal requirement that products/services billed to federal health programs must be “medically reasonable and necessary.” If a device has a high failure rate or serious defects rendering its performance poor, it may fail that standard. Exactech’s case illustrates how failures in design, manufacturing, or packaging (which lead to defects) can trigger liability under FCA, even if not all devices fail. (Constantine Cannon)
2. Whistleblower Incentives & Exposure
   The act of whistleblowers uncovering alleged fraud plays a critical role in triggering enforcement. The rewards given (in this instance, over US$1 million in total) show the government’s willingness to compensate those who come forward. It underscores corporate risk when employees or others challenge conformity with safety, reporting, or statutory obligations.
3. Regulatory Reporting Duties & Device Safety
   Exactech is also under scrutiny for allegedly failing to properly monitor, investigate, or report adverse events to FDA, or to take sufficient corrective action when evidence of defects surfaced. Complaints assert that even as patients reported failures and implants were failing, internal investigations were insufficient or delayed. (CBS News)
4. Bankruptcy & Mass Tort Strategy
   Exactech’s financial restructuring is directly tied to its litigation exposure. The FCA settlement comes as part of bankruptcy proceedings, which complicates how much claimants may eventually recover, how judgment creditors are treated, and how funds are allocated.

Open Questions & Potential Risks

• Extent of Remaining Liability: The FCA settlement is just one area of liability. There remain thousands of personal‑injury claims, MDL litigations, and product liability cases that could result in much larger payouts. (Reuters)
• Private Equity Ownership Scrutiny: Exactech is owned by private equity firm TPG. In many tort and bankruptcy contexts, plaintiffs will attempt to hold owners liable or responsible, especially where internal documents suggest knowledge of defects. Whether, and to what extent, TPG might face liability remains a contested issue. (Reuters)
• Disclosure and FDA Oversight: How regulatory agencies respond to evidence of defect, industry practices around reporting adverse events, and enforcement actions may shift, especially under pressure from whistleblower cases.
• Patient Remedies: Affected patients will still need to pursue their claims in MDLs or state court to obtain compensation for medical expenses, revision surgeries, pain/suffering, lost wages etc. The FCA settlement does not directly compensate individual patients (except via related litigation); it resolves government reimbursement claims.

Conclusion

The US$8 million settlement by Exactech under the False Claims Act represents a significant legal and financial consequence of alleged device defects, delayed or deficient reporting, and alleged misrepresentations about the performance of medical implants. But while it provides some resolution for the government’s billing claims, it does not close the book on the broader mass tort exposure facing Exactech from patients who say they suffered physical harms.

For medical device manufacturers, this case underscores the high stakes of quality control, regulatory compliance, and transparency. When product defects emerge—whether from design, packaging, or performance—companies may not only face consumer lawsuits but also exposure under federal fraud statutes when those defects impair reimbursement eligibility under government health programs.