Orthofix's $42M kickback settlement rejected by judge

Back in June, Orthofix International ($OFIX) agreed to pay $42 million to settle charges the company used kickbacks to promote the sale of its bone growth stimulators and defrauded Medicare. But now a federal judge in Massachusetts has rejected the deal.

Orthofix agreed to plead guilty to obstructing a government audit and pay a $7.8 million fine, in addition to $34.2 million in a civil whistleblower suit, but Judge William Young said accepting the offer would unduly restrict future sentencing, Bloomberg reports. "I have extreme unease of treating corporate criminal conduct like a civil case," Young told prosecutors in rejecting the payment.

As the news service notes, it remains unclear whether Young's ruling also nixes the $34.2 million civil settlement.

The company faced two cases: a single felony criminal charge of obstructing an audit and a separate civil suit brought by a whistleblower, alleging that Orthofix illegally promoted its Spinal-Stim, Cervical-Stim and Physio-Stim bone growth stimulators and paid kickbacks to doctors. The suit also accused the company of illegally submitting Medicare insurance forms to get coverage for its products.

Orthofix had set aside $43 million to cover the costs of its guilty plea, but Young's ruling will force the company to regroup.

For its part, Orthofix says it stands by the initial plea agreement and will continue to discuss the matter with federal prosecutors despite the court's rejection. CEO Robert Vaters said in a statement the company is confident "this matter will be resolved amicably and in a manner that is in the best interests of our shareholders."

- read Orthofix's statement
- get more from Bloomberg

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