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Justice Department Imposes Fines of More Than $100 Million on Medical Device Makers

Apr 8, 2015

In their joint annual report on health care fraud and abuse control, the U.S. Department of Justice and the U.S. Department of Health and Human Services say that during fiscal year 2014, the federal government won or negotiated approximately $3.3 billion in judgments and settlements.

The report describes actions taken against pharmaceutical companies, physicians, pharmacies, hospitals, medical and dental clinics, and medical device makers, JD Supra reports.

Among the actions reported:
Boston Scientific agreed to pay $30 million to settle False Claims Act (FCA) allegations that its Guidant subsidiary knowingly sold defective defibrillators to health care facilities and those devices were implanted in Medicare patients. Two lines of Guidant's implantable defibrillators had a defect that caused the defibrillators to short circuit. The government alleged that although Guidant fixed the defect, the company hid the problem from patients, doctors and the Food and Drug Administration (FDA) and continued to sell the remaining, defective devices, JD Supra reports.

Abbott Laboratories, Inc., agreed to a $5.5 million settlement to resolve civil FCA allegations over false claims submitted to Medicare for surgical procedures involving its stents. The government alleged that Abbott knowingly paid unlawful kickbacks to physicians so they would arrange for their hospitals to purchase Abbott's vascular products for use in treating Medicare patients. Genzyme Corp. agreed to pay $22.3 million to resolve allegations about its marketing of Seprafilm, an implant used to reduce internal scarring after surgery. Seprafilm is approved for use in open abdominal surgery, but not for minimally invasive surgeries. Genzyme had been marketing the product for minimally invasive procedures and hospitals were submitting claims to federal health care programs for uses of Seprafilm that were not reimbursable.

In another settlement, CareFusion Corp. agreed to pay $40.1 million over allegations that it paid kickbacks and promoted unapproved uses of ChloraPrep, a material for preoperative skin preparation. CareFusion was alleged to have made unsubstantiated representations about the appropriate uses of ChloraPrep, according to JD Supra.

Device maker Medtronic, Inc. agreed to a $9.98 million settlement to resolve civil FCA allegations that the company paid kickbacks to induce physicians to use its pacemakers and defibrillators, JD Supra reports. An $8.3 million settlement with device maker Smith & Nephew resolved allegations that the company violated the Trade Agreements Act by selling devices to the government that had been manufactured in Malaysia, when the contract required the devices to be manufactured in the United States.

Many of these settlements come about because of lawsuits filed by whistleblowers under the qui tam provisions of the False Claims Act. The qui tam provisions allow private parties to bring suit on behalf of the government and, if the suit succeeds, to share in the funds recovered. According to a recent Justice Department news release, the Justice Department has recovered more than $23.9 billion through False Claims Act cases since January 2009, with more than $15.2 billion recovered in cases involving fraud against federal health care programs. The False Claims Act is "one of the most powerful tools" in the effort to reduce such fraud, Justice Department officials say.

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