Orthofix forks over $32M to settle kickback case

Orthofix International ($OFIX) has settled the kickback case against its Blackstone Medical subsidiary, paying $32 million to resolve charges that the company paid kickbacks--sometimes in the form of strippers and prostitutes--to doctors.

Orthofix bought Blackstone in 2006 for around $330 million, and shortly thereafter, a former regional manager sued the company, alleging that it paid doctors between $1,666 and $8,000 to use Blackstone products in surgery. And then it got more lurid: As CBS News reported, the suit alleges that, during a sales trip to Dallas, one Blackstone manager arranged prostitutes for doctors and took them to a strip club, at one point taking the stage herself and disrobing.

But that's all settled now, and the $32 million comes from the proceeds of an escrow fund established at the time of acquisition, Orthofix says. With the matter resolved, the company can finally move on, CEO Robert Vaters said in a statement. "Orthofix has made significant improvement to its compliance practices, and I look forward to a continued stronger focus on the company's operations, including investments in R&D to position the company for long-term growth," he said.

Now it only has to worry about its other kickback charges. In June, Orthofix agreed to pay about $42 million to settle federal claims that it paid doctors to use its spinal devices and illegally submitted Medicare insurance forms to get reimbursement. Last month, a judge tossed that agreement, saying it would unduly restrict future sentencing.

- read Orthofix's statement
- get background from CBS News

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