Government spending on healthcare and the cost of healthcare in general has risen dramatically in the past few decades. With costs continuously escalating, the federal government has more incentive than ever before to root out the fraud and corruption in the healthcare sector that costs taxpayers billions of dollars each year.
In recent years, medical device and medical implant companies have increasingly become targets of successful whistleblower suits. By way of example, in March, 2016, medical device titan Olympus Corporation of the Americas agreed to resolve civil fraud liabilities under the False Claims Act for $623 million. This historic settlement, handled by resolved claims regarding systemic violations of the Anti-Kickback Statute brought by Kenney & McCafferty client John Slowik, former Compliance Officer at Olympus. The Olympus settlement represents the largest payment under the FCA by a medical device company.
The groundwork for the Olympus settlement was laid in 2007 when five orthopedic device manufacturers—Zimmer, DePuy Orthopaedics, Biomet, and Smith & Nephew—reached a settlement with the U.S. Attorney’s Office for the District of New Jersey in which the companies agreed to pay a total of $311 million to settle government claims under the anti-kickback statute and the civil federal False Claims Act. According to the whistleblower suit, the device companies entered into sham consulting agreements with thousands of physicians who agreed to use the paying company’s devices, which were ultimately paid for by Medicare. The physicians provided few services in return.
Examples of Medical Device/Implant Fraud
Federal laws prohibit kickbacks and improper compensation to doctors because these financial incentives often result in medically unnecessary treatment and the use of more expensive products. The following are common schemes perpetrated by medical device and medical implant manufacturers that could result in False Claims Act liability:
Examples of kickbacks include:
Any of these actions or others designed to increase sales or evade adverse effects reporting requirements for medical devices or implants covered under any government-funded healthcare program can be considered healthcare fraud. Whistleblowers who report these schemes are doing the public a great service because this type of fraud is essentially stealing scarce government healthcare funding from those who need it.