Orthopedic device company pays nearly $2.4 million to settle kickback allegations

by Ben Vernia | October 26th, 2011

On October 25, the Department of Justice announced a settlement of kickback allegations against DFine, Inc., a maker of devices used in spinal surgery. According to DOJ’s announcement:

DFine Inc. of San Jose, Calif., has agreed to pay the United States $2.39 million to resolve allegations under the False Claims Act (FCA) that the company paid kickbacks to induce physicians to use certain of the company’s devices that are used in treating spinal fractures, the Justice Department announced today.

The United States contends that DFine used customer surveys known as User Preference Evaluations (UPE) as vehicles to pay participating physicians illegal kickbacks to induce them to use the company’s vertebral augmentation devices. Although DFine ostensibly collected product information from participating physicians, each UPE survey required use of a new DFine device in a patient, the majority of whom were Medicare beneficiaries. In each case, DFine paid physicians up to $500 per patient to participate in the survey. The government alleges that DFine provided improper remuneration in the form of travel expenses, lavish dinners, entertainment and promotional speaker fees to doctors located in Chicago and Little Rock, Ark. The United States further alleges that DFine solicited physicians to convert their business from a competitor’s product and/or persuade the physicians to continue using DFine products.

According to the United States, DFine’s alleged conduct violated the Anti-Kickback Statute. Among other things, that law prohibits offering or paying remuneration to induce referrals of items or services covered by Medicare, Medicaid or other federally-funded programs.

The case was brought by a qui tam relator, or whistleblower, who will receive $250,000 (a 10.4% relator’s share). (The False Claims Act typically provides for at least a 15% share, and the Department did not explain the difference).

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