Medtronic Settles False Claims Act Allegations for $9.2 Million Includes First Open Payments – Sunshine Act Enforcement Action

Last week, the United States Department of Justice (DOJ) announced a $9.21 million settlement with Medtronic USA Inc., based on allegations that the company violated the False Claims Act by paying kickbacks to a neurosurgeon as well as the Open Payments Program by failing to accurately report payments made to the neurosurgeon.

DOJ False Claims Act Allegations

According to the DOJ, Medtronic complied with requests by South Dakota neurosurgeon, Wilson Asfora, MD, to pay for social events at Carnaval Brazilian Grill, a restaurant Medtronic knew Asfora owned. The social event tabs included pricey meals and Medtronic allegedly made the payments to benefit Asfora and induce him to use Medtronic’s SynchroMed II intrathecal infusion pumps – implantable devices used to deliver medication to patients.

The United States alleged that Medtronic’s sponsored events at the restaurant were social gatherings for which Asfora chose who to invite, including his social acquaintances, business partners, and colleagues, as well as current and potential referral sources. Asfora would choose who would be invited and Medtronic allegedly picked up the tab for the guests’ meals and drinks. Over a nine-year period, from September 1, 2010 to September 30, 2019, Medtronic allegedly paid for more than 100 such even  for which Medtronic over $87,000 to Dr. Asfora’s restaurant in direct violation of Medtronic’s own established written compliance policies.

Open Payments Program Allegations

As noted above, the settlement also resolves Medtronic’s liability under the Centers for Medicare and Medicaid Services (CMS) Open Payments Program. The Open Payments Program requires medical device manufacturers to disclose to CMS payments or other transfers of value to a physician (such as Asfora). The United States alleged that Medtronic made payments to the restaurant, knowingly owned by Asfora, at Asfora’s request, but underreported the payments to CMS.

It is important to note, however, that while Medtronic sales employees knew of Asfora’s ownership of Carnaval and his requests that Medtronic pay for events at Carnaval, the sales employees did not give that information to Medtronic’s compliance department.  Medtronic subsequently fired 12 employees over this incident.

According to the DOJ, the open payments underreporting took place from April 1, 2014 to April 1, 2020.  The underreporting consisted reporting only the value of the food and drinks to specific attendees and not the full value paid to the restaurant owned by Dr. Asfora.

Is Open Payments the Next DOJ Focus?

“CMS’ Open Payments Program is intended to promote transparency and accountability in the healthcare system.  Manufacturers that misreport their financial relationships with healthcare providers erode the integrity of the Open Payments Program and will be held accountable,” said Brenna E. Jenny, HHS Deputy General Counsel and CMS Chief Legal Officer.  “CMS looks forward to continued partnership with the Department of Justice to resolve allegations of manufacturers skirting their Open Payments obligations.”

The settlement breaks down into $8.1 million to resolve the False Claims Act violation allegations and an additional $1.11 million to resolve the Open Payments Program violation allegations.

Asfora and two of his other companies remain defendants in a separate False Claims Act lawsuit, in which the United States alleges that Asfora received kickbacks to use certain implants in his spinal surgeries.

Analysis

Ownership of a restaurant for corporate events opens new areas of compliance enforcement.  Who would have thought to check the ownership records of the restaurant for the event you are holding.

Often ownership records are not easy to obtain especially if their is a LLC or corporation involved.  It also outlines the importance for sales staff to report any issues they find, i.e. the doctor owns the restaurant.   This settlement should serve as a reminder to sales reps, “no paying for parties period!”  For what it is worth, the food looks delicious.