Medtronic to pay $51M to settle DOJ claims against its Covidien and ev3 acquisitions

Medtronic has agreed to pay nearly $51 million to settle claims against two of its more recent acquisitions—Covidien and ev3—related to the promotion of a medical device for unapproved use, as well as an alleged system of kickbacks for another device.

As part of the agreement, ev3 agreed to plead guilty to misdemeanor charges stemming from the company’s sales force being directed to convince surgeons to use its Onyx Liquid Embolic System outside of its approved uses in the brain, where it is surgically injected to block the flow of blood to vessel malformations.

According to the DOJ, ev3’s sales reps, sometimes within the operating room, would push the product’s use in larger-than-approved quantities for untested procedures outside of the brain. From 2005 to 2009, ev3’s management also set up sales quotas and bonuses for reps to sell Onyx for unapproved uses, and trained them on how to instruct physicians in the potentially risky procedures.

That work continued even after FDA officials expressed safety concerns over the product’s use outside the brain at a 2008 meeting with ev3 executives, the DOJ said. Minnesota-based ev3 will pay a fine of $11.9 million and forfeit $6 million for violating the Food, Drug and Cosmetic Act. ev3 was acquired by Covidien in 2010, which in turn was bought out by Medtronic in 2015 through a massive $50 billion inversion deal.

Under the overarching settlement, Medtronic agreed to pay $20 million, though it had no role in the matter, and pledged to implement new compensation structures to make sure Onyx’s sales force is not incentivized to sell the device for unapproved uses. Medtronic also agreed to adopt new compliance and reporting terms for Onyx’s sales and marketing work for three years.

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Separately, Covidien paid $13 million to settle civil False Claims Act allegations from a whistleblower that claimed the company used a patient registry to funnel kickbacks to hospitals and institutions for using its Solitaire mechanical thrombectomy device, designed to retrieve blood clots in certain stroke patients.

The U.S. government alleged Covidien caused false claims to be submitted to Medicare and Medicaid by paying hospitals and institutions to use the device. According to the case, Covidien launched a registry and paid fees to participating institutions beginning in August 2014.

The company paid each time participants used a new Solitaire device and reported clinical data from treating stroke patients. The case also alleged that Covidien solicited certain hospitals and used the registry to steer business away from its competitors.

In a statement, Medtronic said the settlements are related to actions occurring largely before it acquired Covidien or ev3, and that it makes no admission of improper or unlawful activities. “Medtronic has made significant investments in ensuring that it fulfills its obligations to all of its stakeholders and to do business the right way,” the company said.