Medical product maker Hollister Inc. and medical product supplier Byram Healthcare Centers Inc. have agreed to pay a combined $21 million to settle whistleblower allegations that they violated the False Claims Act (FCA) by carrying out a years-long kickback scheme involving catheters and colostomy bag accessories. According to the U.S. Department of Justice (DOJ), the payouts include almost $11.5 million from Hollister and almost $9.5 million from Byram. This settlement resolves an FCA case brought in Massachusetts federal court by three employees of Coloplast Corp., a manufacturer, also named in the suit. That company agreed to pay a $3 million settlement in December.

The settlement agreements released described allegations of misconduct over a period from 2007 to 2014. It was claimed in the case that Hollister bribed Byram to promote its medical products, in violation of prohibitions on kickbacks in Medicare and Medicaid. Benjamin C. Mizer, head of the DOJ’s civil unit, said in a statement:

We will not permit such illegal payments to taint the decision-making of those who serve the beneficiaries of these important programs.

The companies allegedly reached an agreement in 2007 under which Hollister would pay Byram for the costs of cash incentives given to its sales representatives for every new order of Hollister barrier rings and strips. In 2012, the companies allegedly reached another agreement under which Hollister paid cash incentives for the Byram vice president who presided over the largest annual revenue growth for Hollister catheters. And from 2009 to 2014, Hollister paid $200,000 per year in “catalog funding” to incentivize Byram’s recommendation of its products, according to the settlement agreement. The company entered a five-year corporate integrity agreement as part of the settlement.

The complaint was brought by three whistleblowers: Kimberly Herman, a Minnesota resident and former Coloplast president; Kevin Roseff, a Florida resident and former Coloplast director; and Amy Lestage, a Massachusetts resident and Coloplast manager. Herman and Roseff say that they were fired for objecting to kickbacks, and Lestage says that she was placed on leave for joining the FCA case.

The suit alleges kickback arrangements that spanned much of the industry for continence care and ostomy goods. In addition to Hollister, Byram and Coloplast, a supplier called Liberator Medical Supply Inc. has also agreed to a settlement in the case. Liberator agreed to pay $500,000 last year. A number of other companies have been parties to the litigation, and certain allegations – including claims of retaliation by Coloplast – are still being litigated.

The federal government is represented by George B. Henderson II, Kriss Basil and Jay Majors of the U.S. Department of Justice, and Robert K. DeConti of the Office of Inspector General at the U.S. Department of Health and Human Services. The relators are represented by Paul W. Shaw and Taylor R. Neff of Verrill & Dana LLP, and Jeffrey E. Marcus of Marcus Neiman & Rashbaum LLP. The case is in the U.S. District Court for the District of Massachusetts.


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