Arthrex Reaches $16 Million Settlement Over Alleged False Claims Act Violations
On November 8, 2021, the United States Department of Justice (DOJ) announced that it reached a settlement agreement with Florida-based medical device company Arthrex, Inc., resolving allegations that Arthrex violated the False Claims Act by paying kickbacks and causing the submission of false claims to the Medicare program.
The DOJ had alleged that from August 2010 through March 5, 2021, Arthrex agreed to provide remuneration to a Colorado-based orthopedic surgeon – Peter Millett. The payments were purportedly royalty payments for Dr Millett’s contributions to Arthrex’ SutureBridge and SpeedBridge products, two different Arthrex product lines used by surgeons in joint repair surgery. However, in reality, the payments were actually intended to induce his use and recommendation of Arthrex’ products.
The settlement mentions an interesting scenario: in 2006, Arthrex denied Millett’s request for royalties for his contributions to SutureBridge and SpeedBridge. However, when Millett threatened to realign his loyalty to an Arthrex competitor in 2010, Arthrex not only acquiesced to the royalty request (past and future), but paid royalties at a higher percentage rate than was ordinary practice. Therefore, the United States believes that at least one purpose of the payments from Arthrex to Millett was to induce him to purchase, order, or recommend the purchasing/ordering of Arthrex medical devices.
According to the DOJ, this arrangement is a violation of the Federal Anti-Kickback Statute as well as the False Claims Act as the scheme caused the submission of false or fraudulent Medicare claims.
Corporate Integrity Agreement
Arthrex also agreed to enter into a five-year Corporate Integrity Agreement (CIA) as part of the settlement. Under the CIA, Arthrex must appoint a Compliance Officer who reports directly to the President of Arthrex, as well as appoint a Compliance Committee (that includes the Compliance Officer and other members of senior management). Arthrex is also responsible for retaining a Compliance Expert with experience and expertise in compliance with Federal health care program and FDA requirements. The Compliance Expert, among other things, shall review the effectiveness of the compliance program for each reporting period of the CIA.
The CIA also includes requirements related to speaker programs, including creating an annual budget and needs assessment process that identifies the needs for (and the estimated numbers of) speaker program activities for the following year. The annual speaker program budget should identify the total budgeted amounts to be spent on speaker programs and the compliance personnel shall be involved in reviewing and approving the plans – including any future modifications.
More Information
A more in-depth review of this settlement can be found in the upcoming issue of our sister publication, Policy & Medicine Compliance Update.
Reactions
Peter Millett’s Attorney
Interestingly, the DOJ has not brought a case against Dr. Millett. His lawyer released a statement that says the allegations concerning the royalty payments are “manifestly untrue” and that Millett was entitled to the payments. “The truth is that Arthrex properly agreed to pay Dr. Millett, who in his arm’s length dealings with Arthrex was represented by legal counsel, royalties for his invention and contributions, which have tremendously improved surgical outcomes for millions of rotator cuff repair patients throughout the world, including some of the most elite athletes in professional sports,” Marc Kasowitz, attorney for Millett, wrote. “Whatever Arthrex’s reasons for entering into its settlement, Dr. Millett unquestionably was entitled to those royalties, and the fact that [the] DOJ has not commenced any action against Dr. Millett confirms that he has never engaged in any improper or illegal conduct.”
Arthrex’ Attorney
“Arthrex has entered into a settlement agreement with the Department of Justice and the U.S. Department of Health and Human Services-Office of Inspector General to resolve an alleged historical civil claim regarding Arthrex’s collaboration with a healthcare professional,” Jack Pirozzolo, attorney for Arthrex, said in a statement to Becker’s Spine Review. “We fully cooperated with the government’s investigation and remain committed to upholding the highest standards of ethical behavior and corporate integrity. This settlement provides stricter government oversight on how we collaborate with the hundreds of surgeons required to design, extensively test and teach other surgeons on the safety and efficacy of our minimally invasive orthopedic surgery products and related surgical procedures.”
United States Government
“Paying bribes to physicians to distort their medical decision-making corrupts the health care system,” said Acting U.S. Attorney Nathaniel R. Mendell for the District of Massachusetts. “This settlement demonstrates our dedication to ensuring that taxpayers and patients get a health care system that is on the level. Kickbacks have no place anywhere in our health care system, and we will continue to identify and punish this illegal conduct.”