Medtronic to Pay $23.5 Million to Settle Whistleblower Cases in Two Federal Courts

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The Department of Justice announced Dec. 12 that device maker Medtronic agreed to pay $23.5 million to resolve allegations that it violated the False Claims Act by using physician payments related to postmarket studies and device registries as kickbacks to induce doctors to implant the company's pacemakers and defibrillators.

According to DOJ, the government alleged Medtronic caused false claims to be submitted to Medicare and Medicaid by using two studies and two device registries as vehicles to pay participating physicians illegal kickbacks to induce them to implant Medtronic's devices.

DOJ said the settlement resolves allegations contained in two whistleblower lawsuits filed under the qui tam provisions of the FCA that are pending in Minnesota, where Medtronic is based, and California. As part of the resolution, the whistleblowers will receive payments totaling more than $3.96 million from the federal share of the recovery, the government said.

The two cases are:

 United States ex rel. Onwezen v. Medtronic, D. Minn., Civ. No. 0:07-sc-04777; and

• United States ex rel. Schroeder v. Medtronic, E. D. Cal., No. 2:09-cv-0279.

“Today's settlement highlights one of the key purposes of the Anti-Kickback law—to ensure that the judgment exercised by health care providers in treating Medicare and Medicaid patients is not influenced by unlawful payments,” Benjamin Wagner, U.S. attorney for Eastern District of California, said in the government's statement.

On Dec. 12, Medtronic said its agreement with DOJ is for a previously disclosed “industry-wide review of post-market clinical trials and device registries.”

The device company added that it “makes no admission that any studies were improper or unlawful.”

Marshall Stanton, vice president of clinical research and reimbursement for the Cardiac and Vascular Group at Medtronic, said, “Medtronic is happy to have this investigation behind us, so we can continue designing and executing clinical trials that generate evidence to improve patient care, outcomes, and cost effectiveness.”

Use of Studies and Registries

DOJ explained that postmarket studies are intended to assess the clinical performance of a medical device or drug after it has been approved by the Food and Drug Administration. Registries are collections of data maintained by a device manufacturer concerning its products that have been sold and implanted in patients, according to the DOJ statement.

DOJ said that, although Medtronic collected data and information from participating physicians, each of the studies and registries required a new or previous implant of a Medtronic device in each patient, and in each case Medtronic paid participating doctors a fee ranging from approximately $1,000 to $2,000 per patient. The government alleged that Medtronic solicited physicians for the studies and registries in order to convert their business from a competitor's product, and/or to persuade the physicians to continue using Medtronic products.

“Medicare and Medicaid beneficiaries depend on their physicians to make decisions based on sound medical judgment, especially when they are choosing which pacemaker or defibrillator to implant,” B. Todd Jones, U.S. attorney for the District of Minnesota, said in the statement. “Medical device manufacturers must not be permitted to use improper payments to cloud that judgment.”

DOJ said the Medtronic case was the result of an investigation by the DOJ Civil Division, the U.S. Attorney's Office for the District of Minnesota, the U.S. Attorney's Office for the Eastern District of California, the Office of Inspector General at the U.S. Department of Health and Human Services, and the FBI.

The law firm of Sanford Wittels & Heisler filed the suit in the Minnesota federal court, and it represents two of the four relators in the Medtronic cases: Kathy Onwezen and Alan Brill. Three relators (Onwezen, Elaine Bennett, and Brill) will share a settlement of some $3.8 million, while the fourth relator (Adolfo Schroeder) will receive $160,160.

According to the settlement agreement, Medtronic is represented by Stephen Immelt and Corey Roush of Hogan Lovells US LLP.


Text of the settlement agreement is at http://op.bna.com/hl.nsf/r?Open=bbrk-8phl7t .  

A 2008 complaint in the Minnesota case is at http://op.bna.com/hl.nsf/r?Open=bbrk-8phlgw .