Settlement Involving Artifical Hip and Knee Makers Reached

posted on:
November 16, 2007


Four of the nation’s biggest makers of artificial hips and knees have agreed to pay a total of $311 million in penalties to settle federal accusations that they used fake consulting agreements and other tactics to get surgeons to use their products.

The four companies had been charged by the United States Attorney in Newark, New Jersey, with criminal conspiracy to violate anti-kickback laws. But they will not be prosecuted if they follow new compliance procedures under federal monitoring for the next 18 months. Christopher J. Christie, the United States Attorney in Newark, had this to say about the case:

This industry routinely violated anti-kickback statutes by paying physicians for the purpose of exclusively using their products. Prior to our investigation, many orthopedic surgeons in this country made decisions predicated on how much money they could make – choosing which device to implant by going to the highest bidder.

The device makers will pay financial penalties to settle potential civil charges against the companies and preserve their ability to receive federal Medicare reimbursements. A fifth big maker of orthopedic devices, Stryker Orthopedics, accepted federal supervision for the next 18 month. But this company was not subject to criminal charges because it was the first to cooperate in the investigation, according to the government.

Stryker Orthopedics, a Mahwah, New Jersey-based unit of Stryker Inc. of Kalamazoo, Michigan, did not reach any settlement of potential civil charges, and it’s not clear whether anything in connection with the investigation might lead to civil charges or any restriction on Medicare reimbursements.

The other four companies involved included Biomet, the DePuy Orthopaedics unit of Johnson & Johnson, and Zimmer Holdings, all based in Warsaw, Ind.; as well as Smith & Nephew, a British company whose orthopedics subsidiary has headquarters in Memphis, Tennessee. The government said that together the five companies represented 95% of the hip and knee implant market.

Similar dynamics exist in other segments of the medical devices business, as reflected by the agreement last year by Medtronic, the leader in spinal devices, to settle a separate government anti-kickback investigation by paying $40 million. That settlement is currently on appeal by one of the whistle-blowers who brought the practices to the government’s attention.

Zimmer, the market leader, is paying $169.5 million to settle the civil charges. DePuy, which is paying $84.7 million, said in a news release that the company “supports this agreement and the government’s efforts to further positive change throughout the industry.” Additionally, Smith & Nephew is paying $28.9 million and Biomet $26.9 million.

It should be extremely disturbing to all of us who pay taxes to the federal government to constantly hear about large corporations cheating the government, getting caught, paying a fine, and going forward with no real regret. It’s time for a meaningful crackdown on corporate crime.

Source: New York Times

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