The Supreme Court decided Buckman in the context of a fairly large product liability litigation about implanted medical devices. In the years that followed, the plaintiffs in drug and device product liability litigation tried a number of arguments to cabin the impact of Buckman. For instance, they argued that it 1) did not apply unless the cause of action was actually titled “fraud on the FDA,” 2) did not apply to drug cases, 3) did not apply where they were right about information being withheld from FDA, 4) did not apply if there was also potential express preemption, 5) did not apply to cases involving recalled or withdrawn medical products, 6) did not apply to consumer protection claims brought by AGs, and 7) could not limit evidence offered to show fraud on FDA as a way to rile up the jury as long as there was some relevance to some non-preempted theory. Courts have not been consistent, but plaintiffs were wrong about all of this. (There are way too many posts to show we are right about the plaintiffs being wrong, so here is a general link to prior Buckman posts.) Because implied preemption is based on the Supremacy Clause, it does not apply to federal law causes of actions, such as RICO. But what about where a company sues another company in a commercial state law breach of contract action over the supply of an FDA-regulated medical product?
We know that FDA and CMS regulation of regenerative medicine and wound care products have been in flux recently. We also know that the uses of products derived from human or animal tissue/cells have been expanding rapidly, along with the technology supporting new products and uses. So, it is not surprising that the case we are discussing today involves such products and their evolving regulatory status. We do not normally discuss state trial court-level decisions unless they are from a large coordinated proceeding. We also do not normally discuss contract cases, but Desai v. StimLabs, LLC, No. 25CV014789, 2026 Ga. Super. LEXIS 3809 (Ga. Super. Ct. May 15, 2026), is an exception to both faux rules because of its treatment of Buckman. Given the regulatory history it discusses, we would not be surprised if there are other cases like Desai being brought against manufacturers of these products. Desai centers around the assertion that a dermatology practice was defrauded in connection with its contracts to purchase millions of dollars’ worth of four human cellular- and tissue-based products (“HCT/Ps”) from the manufacturer. Plaintiff used these products on its patients, charged CMS for the care, and was ordered to pay back close to $5 million, most of which it attributed to charges for the use of defendant’s four HCT/Ps. It sued the manufacturer under various theories, and the manufacturer moved to dismiss or for a more definite statement on the contract and fraud claims.
Because Desai was decided on a motion to dismiss, the facts are as alleged by plaintiff except for the few areas where the court took judicial notice. Whether HCT/Ps need pre-market approval depends on whether the intended use is limited to “homologous use only.” Id. at *3. Those that are—the products intended to “perform[] the same basic function or functions in the recipient as in the donor”—are called “361 HCT/Ps” and do not need pre-market approval. Id. In November 2017, FDA issued a final guidance on how to distinguish between the two basic regulatory categories, which announced limited enforcement—“enforcement discretion”—until May 2021. Id. at *4. (We know from a few minutes on-line that the guidance was issued after three years of comment, was amended a month later, and was superseded in July 2020, with the new guidance extending the enforcement discretion period until May 2021.) At some point in 2020, plaintiff entered into purchase contracts with defendants based on what it claimed were representations that the products were legally marketed as 361 HCT/Ps (without pre-market approval), they were “reimbursable by payors such as Medicare,” and nothing would change for the worse once the enforcement discretion period ended. Id. at *4-7. Those representations continued until at least May 2021. Plaintiff also alleged that the products were marketed as non-361 HCT/Ps because they were intended for broader uses of “reduc[ing] pain, inflammation, scarring, and wound healing.” Id. at *5-6. Plaintiff did not allege its own analysis of these issues at the time or the due diligence it did before buying, using, and submitting claims related to the products at issue. It did allege that defendant received a May 10, 2021, letter from FDA that raised the possibility that “its marketing of the Products may have been unlawful.” Id. at *8. Defendant was part of suits filed in 2022 and 2024 challenging CMS’s many denials of Medicare coverage for purported 361 HCT/Ps, including one of the ones plaintiff was buying from defendant. When plaintiff was audited by a CMS contractor for Texas in 2022 for submissions between April 2019 and April 2022, the focus was apparently on the non-homologous use of HCT/Ps, which is how it learned that there may not actually be Medicare coverage. Id. at *9-10. Even with the alphabet soup and many overlapping dates above, it should be apparent that there were factual pleading holes in the complaint. We will not really address the motion for a more definite statement, though.
At least implicitly, plaintiff contended that the four products were illegally marketed in violation of the FDCA. Explicitly, it contended that the “marketing materials” for the products misrepresented that they were suitable for non-homologous use under FDA requirements. Id. at *13. Other statements allegedly falsely represented that Medicare would pay for their use. In analyzing Buckman on the FDCA-related allegations, Desai first rejected plaintiff’s argument that Buckman was inapplicable where a private party also claimed to have been defrauded. “There the Supreme Court considered the substance of the asserted fraud claim and found pre-emption was appropriate because ‘the existence of these federal enactments [was] a critical element’ of the patients’ case.” Id. at *14. Citing cases we discussed here, here, and here, Desai rightfully focused on the question of whether the state law claim could exist without the FDCA. Those tied to FDA approval and alleged misrepresentations about approval could not, because they “would not exist but for the FDA’s regulations.” Id. at *16. So, those claims, portions of multiple counts, were impliedly preempted. (We note that Georgia is among the majority of states that do not recognize a failure to report to FDA as a state law claim.)
The claims based on alleged misrepresentations about Medicare coverage and what CMS would do in the future were not. As the cottage industry of relators pursuing False Claims Act cases over Medicare reimbursement shows, the Social Security Act and its brethren are not like the FDCA. Private rights of action exist, and CMS lacks exclusive enforcement authority. That means there is no Buckman-style preemption of claims based on misrepresentations about Medicare eligibility. However, fraud cannot be based on “conjecture about a future event” or a reading backward from future knowledge of regulatory development to a support for the intent to mislead in the past. As HHS regulation of a range of regulated medical products, not just HCT/Ps, seems to swing wildly, these principles are good to keep in mind for cases where Buckman is not a complete defense.
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