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Lawsuit Alleges Medical Device Makers Paid Illegal Kickbacks to Doctors

Aug 13, 2008 | Parker Waichman Alonso LLP

A Pennsylvania medical supply company is suing six joint implant manufacturers over alleged illegal kickbacks to doctors.  The lawsuit, filed in U.S. District Court in Pittsburgh on Monday, alleges that the defendants blocked Intermedics-McCullough out of the market despite selling  inferior and more costly products by offering kickbacks "for the purpose of gaining exclusive access to the lucrative replacement hip, knee and joint industry and to the orthopedic industry in general."

According to the Pittsburgh Post-Gazette, the lawsuit names Zimmer Inc. and Zimmer Holdings Inc.; DuPuy Orthopedics; and Biomet Inc., all of Warsaw, Ind.; Smith and Nephew Inc. of Memphis, Tenn.; Stryker Orthopedics of Mahweh, N.J.; and Stryker Inc., of Kalamazoo, Mich. as defendants.  The lawsuit also names dozens of local doctors as recipients of illegal payments.

Allegations of kickbacks by medical device makers are nothing new.  A New Jersey based federal probe completed last year found  that the  manufacturers named in the Intermedics-McCullough suit made lucrative payments to U.S. physicians  between 2002 and 2006 as a way to encourage doctors to favor their products. Stryker Orthopedics cooperated with prosecutors and escaped a fine, but agreed to federal monitoring for 18 months. The other companies, Zimmer Holdings Inc., Depuy Orthopaedics Inc., Biomet Inc. and Smith & Nephew Inc. agreed to a $311 million settlement with the Justice Department and the U.S. Department of Health and Human Services.

Since the settlements were reached, some members of Congress have pushed for laws that would require better disclosure of payments made to doctors. The Physician Payments Sunshine Act, for example, would require companies to disclose all gifts, fees or other compensation of more than $500 a year.

According to the Post-Gazette, Intermedics-McCullough sold replacement hip joints, knees, shoulder implants and other orthopedic and surgical products to local hospitals and orthopedic surgeons.  The Intermedics-McCullough lawsuit claims that from 1988 to 2007, the defendants "paid illegal kickbacks and provided numerous forms of illegal payments" to doctors and hospitals, and that Intermedic's sales began to drop after 1996 as a result of those practices.

Among the alleged illegal payments listed in the lawsuit  was one in excess of $8 million from Zimmer to Dr. Harry Rubash, formerly of the University of Pittsburgh Medical Center and now chief of orthopedic surgery at Massachusetts General Hospital.  In total, the lawsuit lists more than 200 payments, ranging from a few hundred dollars, to the $8,073,997 paid to Dr. Rubash.