by Ben Vernia | June 9th, 2010
In a June 9 press release, the Department of Justice announced that Cochlear Americas, a Colorado-based cochlear implant manufacturer (and American subsidiary of Australia’s Cochlear Ltd.), had agreed to pay $880,000 to settle claims that it paid kickbacks to healthcare providers. According to the press release:
The settlement resolves a lawsuit brought by a whistleblower, Brenda March, in 2004. The lawsuit, filed in the District of Colorado, alleged that Cochlear Americas violated the Anti-kickback Act and the False Claims Act by paying various forms of illegal remuneration to physicians who prescribed the use of the Cochlear-manufactured devices for Medicare and Medicaid patients.
The United States intervened in the lawsuit in January 2007, and then shortly thereafter, moved to stay the suit, while the United States pursued an administrative civil monetary penalties investigation against Cochlear. The settlement announced today resolves that administrative matter as well as the lawsuit initiated by the whistleblower.
The whistleblower, Brenda March, will receive $176,000 (a 20% share) of the settlement.
Good for Brenda March. Now, who were the physicians that received kickbacks?
Just about all off the cochlear implant surgeons received some type of “kickback” from Cochlear. This includes some of the biggest names in the industry like John Niparko or Noel Cohen.
This wasn’t always in the form of direct cash payments (i.e. consulting or speaking fees, free flights, allowing physicians to expenses gifts for family members when traveling on the company’s dime.) Although, Cochlear frequently made these payments as well. However, Cochlear lawyers like Peter L. Edwards and Jim Gale found new and creative kickback schemes that they felt were “gray areas” of the law that they could legally defend. This proved to be their downfall.
Two examples.
(1) Cochlear offered a dummy billing service called OMS that offered to handle all a physician office’s insurance paperwork fro cochlear implant claims for free, but only if the physician and patient signed a contract agreeing to be implanted with a Nucleus device.
(2) Cochlear then operated a Partners Program where it gave physicians “credits” towards free product every time they implanted a Nucleus device and took away credits when they implanted a competitor’s device.
Both of these are blatantly in violation of the Federal anti-kickback statute but back when they were in originated in the mid 1990s, this was a new area of law so Cochlear at the time thought they could get away with it. The problem was that as DOJ enforcement began to make clear that Cochlear’s schemes were illegal, arrogant company management like Ronald E. West and John Hrobsky simply refused to modify or change their practices, since they were so successful in controlling the refereall patterns of physicians and not letting new competitiors gain a foothold in the market. Cochlear has controlled over 70% of the market for its entire existence, and these illegal kickbacks are a big reason why.
Thanks for the details, destin.
This is an old thread about a case that will have impact for hearing impaired people for years to come.
Ms. March deserves every nickel she got, and a Nobel Prize for courage. She got to make a real difference in people’s lives.
Brenda March cashed in on information that previous employees had posted on cochlear implant Internet forums. So most of the “courage” should be credited to those who suffered years of retaliation not just from Cochlear but Nucleus users who insisted that their sainted company couldn’t possible be just like any other. Granted, Ms. March’s lawsuit brought them much validation, but it still was bad form.