Medical Device Fraud

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:

  • Providing physicians with financial inducements (kickbacks) in exchange for use of company’s implant or medical device. Physicians or hospitals that accept these types of inducements can also be held liable under the False Claims Act, as in the case of the $3.8 million settlement announced in June 2010 involving kickback allegations against St. Jude Medical Inc., a heart device manufacturer, Parma Community General Hospital, and Norton Healthcare.
  • Marketing an implant or medical device for off-label uses or rewarding physicians with financial inducements to entice off-label use.
  • Manufacturing implants or medical devices known to be defective and failing to comply with defect reporting requirements, particularly where the defect is likely to cause death or serious bodily injury.  The failure to disclose a known defect in connection with the FDA-approval process can also lead to False Claims Act liability.

Examples of kickbacks include:

  • Paying the cost of educational conferences in resort locations
  • Providing unrestricted grants
  • Paying consulting or royalty fees not commensurate with fair market value of the services provided, but which instead are calculated to influence the physician’s choice of medical device or implant.

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.

The attorneys at Kenney & McCafferty Law Firm have the skills and experience to hold wrongdoers accountable for their fraudulent actions — and help you maximize your whistleblower reward

To report medical device fraud, contact Kenney & McCafferty Law Firm at 800-533-1015 or email us.

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