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By Eric Topor
March 1 — Medical device maker Olympus Corp. of the Americas agreed to pay $646 million to resolve criminal and civil charges that it paid millions in kickbacks to doctors and hospitals to secure product sales, the DOJ said March 1.
The settlement terms were included in a deferred prosecution agreement (DPA) in which Olympus admitted to a laundry list of kickback arrangements and agreed to post the agreement on its website for its three-year duration.
The settlement is split between a $312.4 million criminal penalty, a $310.8 million settlement on the civil claims and an additional $22.8 million criminal penalty for violation of the Foreign Corrupt Practices Act by Olympus Latin America Inc. (OLA), an Olympus subsidiary in Miami.
Laura F. Laemmle-Weidenfeld, an attorney with Jones Day in Washington, told Bloomberg BNA March 1 that Olympus's alleged lack of a compliance officer until 2009 “underscores the significance that the federal government places today on the adoption of an effective compliance program, particularly within the medical device industry.”
Laemmle-Weidenfeld said “the mere alleged lack of such a program appears to have driven the government to come down particularly hard on this defendant.”
The settlement with Olympus is the largest anti-kickback settlement with a medical device maker to date, the DOJ says.
OLA was accused of paying physicians and government health-care facilities in Central and South America to induce Olympus equipment sales from 2006 to 2011. The DOJ said OLA received a 20 percent reduction credit off its criminal penalty for cooperating with investigators.
The civil charges were the product of a civil lawsuit brought by a former Olympus compliance officer, John Slowik, who will receive $51.1 million of the civil settlement amount.
Laemmle-Weidenfeld told Bloomberg BNA that “the same types of physician relationships that can present risk under the federal anti-kickback statute also can present risk abroad under the FCPA when the relationships are with foreign government-employed doctors or foreign government-run institutions.”
She added that the government's decision to combine “a DPA with the federal government, civil [False Claims Act] settlements with the federal and various state governments, an FCPA plea by a subsidiary, and a Corporate Integrity Agreement” set “a new standard for a ‘global resolution.' ”
The DOJ said in a statement that the settlement with Olympus is the largest anti-kickback settlement with a medical device maker to date.
Olympus and its subsidiary “dropped the compliance ball and failed to have in place policies and practices that would have prevented the substantial kickbacks and bribes they paid,” U.S. Attorney Paul J. Fishman of the District of New Jersey said in a statement.
Fishman added that the punishment was appropriate, and, “at the same time, the deferred prosecution agreement takes into account the companies’ cooperation and commitment to fully functional corporate compliance.”
Olympus also entered into a five-year corporate integrity agreement as part of the settlement terms. The DPA also required Olympus to implement extensive compliance protections and procedures, including the retention of an independent monitor (former federal prosecutor Larry Mackey) to check Olympus's compliance through the duration of the DPA.
The government alleged that the Olympus kickbacks occurred between 2006 and 2011, and broadly took the form of “consulting payments, foreign travel, lavish meals, million of dollars in grants and free endoscopes.”
According to the government, the kickbacks resulted in an additional $600 million in sales revenue and profits of $230 million.
Olympus admitted specifically to supporting a $100,000 grant to a hospital customer to prevent loss of business to a competitor, awarding $5,000 to another hospital to close a $750,000 equipment sale, paying for a week-long trip to Japan for three physicians and giving another physician, who wielded influence over a hospital's equipment purchases, $400,000 in free equipment.
In a statement posted on its website, Olympus said it “acknowledges the Company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees. Olympus is committed to complying with all laws and regulations and to adhering to our own rigorous Code of Conduct which guides our business processes, decisions and behavior.” Olympus added that it “has implemented and will continue to enhance its robust compliance program.”
Pepper Hamilton LLP represented Olympus in the settlement.
To contact the reporter on this story: Eric Topor in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Janey Cohen at email@example.com
The Olympus Corp. of America DPA is at http://src.bna.com/cYj.
The civil settlement is at http://src.bna.com/cYg.
The corporate integrity agreement is at http://oig.hhs.gov/fraud/cia/agreements/Olympus_Corporation_of_the_Americas_02292016.pdf
The Olympus Latin America Inc. DPA is at http://src.bna.com/cY8.
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