Orthofix will cough up $42M to settle kickback case

Orthofix International ($OFIX) will pay $42 million in fines to resolve long-standing criminal and civil proceedings, alleging the company used kickbacks to promote the sale of its bone growth stimulators and submitted bogus Medicare insurance forms to maximize reimbursement.

The case has already taken down four former Orthofix employees and a physician's assistant, all of whom have pleaded guilty to various charges relating to the case. And now the Curaçao-based company itself will plead guilty to a single federal charge of obstruction of a federal audit. The company's financial cost here breaks down this way: A $7.65 million criminal fine, plus $34.23 million to resolve a whistleblower lawsuit brought under the False Claims Act. Orthofix was ready for this. As Bloomberg noted, the company already announced it set aside $43 million to resolve the false claim allegations.

Jeffrey Bierman, a Midwest healthcare consultant, filed the lawsuit several years ago and notified the government back in 2003. He also helped develop the government's case, according to Getnick & Getnick, the law firm that represented him. His lawsuit alleged that Orthofix illegally promoted its Spinal-Stim, Cervical-Stim and Physio-Stim bone growth stimulators. Specifically, Orthofix was alleged to have illegally filled out Medicare insurance forms (certificates of medical necessity) to ensure coverage for the products, whether or not a physician agreed it was necessary. The company also faced allegations that it didn't tell patients they could rent rather than buy Orthofix products, and that it offered or paid kickbacks, according to the government's announcement of the deal.

Orthofix has not conceded liability or wrongdoing as part of the civil settlement, the Boston Business Journal notes in its coverage.

So far, a physician assistant has pleaded guilty to accepting kickbacks from Orthofix for ordering the company's bone growth stimulator products. A former company vice president of sales, regional sales director, and two territory managers have also pleaded guilty to various charges involving interaction with Medicare and a subsequent government audit.

Meanwhile the U.S. government continues its inquiry into how four other manufacturers of bone growth stimulators marketed their products: Biomet ($BMET), DJO, OrthoLogic and Smith & Nephew ($SNN).

- read the U.S. Attorney's Office release
- check out the whistleblower lawsuit announcement
- here's Bloomberg's coverage
- check out the BBJ story