Medical device company pays combined $42 million, pleads guilty to obstruction count to resolve False Claims Act case brought by qui tam relator

by Ben Vernia | June 10th, 2012

On June 7, the Department of Justice announced that Texas-based Orthofix had agreed to pay over $34 million to settle civil False Claims Act allegations, and nearly $8 million more as a criminal fine for obstruction of justice. According to DOJ’s press release:

Orthofix Inc., a Texas-based manufacturer of medical devices, has agreed to pay the United States $34,234,263 to settle allegations under the civil False Claims Act relating to the company’s sale of bone growth stimulator devices, the Justice Department announced today. The company has also agreed to plead guilty to a felony of obstruction of a federal audit, and to pay a $7,765,737 criminal fine.

The civil settlement announced today resolves a whistleblower lawsuit that was filed by Jeffrey Bierman. That lawsuit alleged that the McKinney, Texas-based company improperly waived patient co-payments, thus misstating their true cost and resulting in overpayments by federal programs; paid kickbacks to physicians and their staffs in the form of “fitter fees,” referral fees and other comparable fees, to induce the use of Orthofix products; caused the submission of falsified certificates of medical necessity; and failed to advise patients of their right to rent rather than purchase Orthofix products.

“The Justice Department has longstanding concerns about kickbacks and the routine waiver of co-payments, because they can impose significant costs on federal health programs that are not medically justified,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division. “The resolution of this matter yielded a substantial recovery for taxpayers, and should deter other companies from engaging in such conduct in the future.”

The company’s criminal guilty plea involved its failure to disclose information concerning its practices regarding certificates of medical necessity to a Medicare contractor during a June 2008 audit. Five individual Orthofix employees had previously pleaded guilty to criminal charges in connection with this matter.

The government announced that the company had agreed to enter into a Corporate Integrity Agreement with HHS, and that the relator would receive a reward of $9,243,251 (a 27% relator’s share of the civil portion alone, or 22% of the combined total).

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