New Enforcement Frontier? Medtronic Settles Medical Device Kickback Case for $9.9 Million

A number of government attorneys have spoken at compliance conferences over the last year and noted that the days of billion dollar off-label settlements may be behind us. Johnson & Johnson’s $2.2 billion settlement in 2013, Abbot’s $1.5 billion settlement in 2012, and Pfizer’s $2.3 billion settlement in 2009 all involved conduct from the early 2000s. Most pharmaceutical companies have put in strict compliance programs since, which rigorously separate off-label education from off-label promotion. Instead, we have heard that the government may be setting its sights on medical device companies engaged in anti-kickback schemes.

Just recently, Medtronic Inc. agreed to pay $9.9 million to resolve allegations under the False Claims Act that the company used various types of payments to induce physicians to implant pacemakers and defibrillators manufactured and sold by Medtronic.

Alleged Kickback Scheme

The United States alleged that Medtronic caused false claims to be submitted to Medicare and Medicaid by using a variety of kickbacks to induce physicians to implant Medtronic’s pacemakers and defibrillators. According to the government, Medtronic paid the remuneration to persuade the physicians to continue using Medtronic products or to convert their business from a competitor’s products. Specifically, Medtronic allegedly induced physicians to use its products by:

• Paying implanting physicians to speak at events intended to increase the flow of referral business;
• Developing marketing/business development plans for physicians at no cost; and
• Providing tickets to sporting events.

Importantly, Medtronic did not admit to the allegations. They settled, and in the process avoided the risk of going to trial and losing—resulting in the “death sentence” of exclusion from Medicare, Medicaid, and other federal healthcare programs.

The Department of Justice announcement highlights the government’s increasing focus on medical devices.

“Improper financial incentives have the potential to compromise physician medical judgment,” said Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division. “This case demonstrates the Department of Justice’s commitment to pursue medical device manufacturers that use improper financial relationships to influence physician decision-making.”

Special Agent in Charge Ivan Negroni of the U.S. Department of Health and Human Services Office of Inspector General’s San Francisco Office stated: “As this settlement indicates, health care executives who try to boost profits by paying kickbacks to doctors will instead pay the government for their improper conduct.”

The settlement is the result of a whistleblower complaint filed by a former Medtronic employee, Adolfo Schroeder. The qui tam provisions of the False Claims Act allow whistleblowers to share in the settlement to encourage bringing company behavior to light. Schroeder will receive $1.73 million from the recovery.

The settlement with Medtronic Inc. was the result of a coordinated effort among the Department of Justice’s Civil Division; the U.S. Attorney’s Office for the Eastern District of California; and the Office of Inspector General of the U.S. Department of Health and Human Services.