Utah-based medical device company pays $1 million to settle kickback allegations

by Ben Vernia | July 5th, 2022

On July 1, the Department of Justice announced that a Utah-based medical device distributor had agreed to pay $1 million to settle civil allegations that the company caused false claims to be submitted, because they were tainted by illegal kickback payments to doctors. According to DOJ’s press release:

Reliance Medical Systems LLC, a distributor of spinal implant devices headquartered in Bountiful, Utah, its owners, Bret Berry and Adam Pike, and two of their physician-owned distributorships have agreed to pay $1 million to resolve a lawsuit against them alleging that they violated the False Claims Act by paying physicians to use Reliance medical devices in spinal surgeries on their own patients.  

The Justice Department’s lawsuit alleged that the defendants operated physician-owned distributorships (PODs) that, in reality, were vehicles for the payment of kickbacks to induce physicians to use Reliance’s medical devices in their surgeries. The Anti-Kickback Statute prohibits offering or paying anything of value to encourage the referral of items or services covered by federal health care programs. 

The Justice Department contends that the defendants’ PODs paid physicians based on their referrals, made false statements to health care providers, and terminated physicians who did not refer enough patients. The complaint alleged that Berry and Pike were recorded attempting to induce a spine surgeon to join Kronos Spinal Technologies, one of Reliance’s PODs, by offering to pay him a share of the profits he generated for Kronos after he proved his “loyalty” to Kronos.

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The United States filed this lawsuit in 2014, and this settlement was reached after the first day of trial. The case is captioned United States of America v. Reliance Medical Systems, LLC, et al., No. 14-6979 (C.D. Cal.). 

This settlement is the most recent in a series of settlements with persons affiliated with Reliance Medical Systems. The Civil Division previously recovered over $9.25 million from owners of Reliance PODs.

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The case arose from a government investigation, rather than from a whistleblower’s qui tam complaint.

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