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Probe into Medical Device Kickbacks Now Targets Doctors

Mar 24, 2008 | Parker Waichman LLP Federal investigators looking into kickbacks in the orthopedic device industry have apparently set their sites on another target - doctors who received these illegal incentives.  The physician investigation is just the latest chapter in the government's ongoing probe of the financial arrangements often made between medical device makers and the doctors who use their products.  So far, the kickback investigation has uncovered excessive consulting agreements, lavish trips and other perks  the makers of hip and knee implants handed out as rewards to surgeons who used their products.

A recently completed New Jersey Attorney General’s Office probe alleged that orthopedic device companies paid U.S. physicians lucrative fees for nominal services between 2002 and 2006. One, 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.

According to The New York Times, Lewis Morris, the chief counsel in the federal office that pursues civil complaints of Medicare fraud, told an audience of hundreds of doctors, company representatives and investors this month in San Francisco at the annual meeting of the American Academy of Orthopedic Surgeons that the government will now be taking a hard look at doctors who are "soliciting kickbacks” from the makers of hip and knee replacements.  

Although industry executives told The New York Times that they have heard that some doctors have received subpoenas, none have been publicly identified.  According to the Times, the government has not argued that any of the kickbacks led to unnecessary knee or hip surgery or maltreatment of any patients. Nor has it established a direct link to higher Medicare costs.  However, doctors can be convicted of violating Medicare’s antifraud statutes simply for submitting a bill for a procedure linked to a kickback, whether or not the procedure was necessary.

During a hearing last month before the Senate Special Committee on Aging, Assistant inspector general Gregory Demske told lawmakers that four makers of artificial hips and knees paid doctors more than $800 million in royalties and fees in four years to influence their choice of implants.  While he did not identify these companies, Demske said that together they controlled three-quarters of the $9.4 billion worldwide market for hip implants  and knee replacements. Demske and other witnesses told the panel such payments have enriched doctors and distorted the market by bolstering sales of lower-quality devices. Demske said such payments are difficult to regulate, because it is hard for investigators to determine which are legitimate, and which are kickbacks.

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