Surgical device maker Arthrex fined $16M over alleged kickback scheme

Arthrex, which develops and manufactures surgical devices, therapies and procedures, has agreed to a settlement with the U.S. Department of Justice (DOJ) over allegations that it paid an orthopedic surgeon to recommend and use its products, leading to improper requests for Medicare reimbursement.

Arthrex claimed that the payments were royalties for the Colorado-based surgeon’s work developing the company’s SutureBridge and SpeedBridge devices, both designed for Achilles tendon repair. According to the DOJ, however, the payments were actually made in exchange for the surgeon’s use of Arthrex products.

Those allegations violate the Federal Anti-Kickback statute. Because of that, any Medicare claims filed for the tools and therapies used by the surgeon in exchange for Arthrex’s money are in turn violations of the False Claims Act.

To resolve the allegations, Arthrex has agreed to pay $16 million, with $2.5 million going to the whistleblower who initially brought the case to the government.

RELATED: Smith & Nephew scores a win in ongoing patent battle over suture technology

As part of the settlement, the Florida-based devicemaker has entered into a corporate integrity agreement with the U.S. Department of Health and Human Services’ Office of Inspector General (HHS-OIG).

Through that deal, Arthrex’s offerings will remain eligible for Medicare and other federal reimbursement plans as long as the company meets a series of requirements over the course of the mandated five-year period. Those requirements typically include hiring a compliance officer or committee, setting up a comprehensive employee training program, providing annual reports to HHS-OIG and more.

“Paying bribes to physicians to distort their medical decision-making corrupts the healthcare system,” said Nathaniel Mendell, acting U.S. attorney for the district of Massachusetts. “This settlement demonstrates our dedication to ensuring that taxpayers and patients get a healthcare system that is on the level. Kickbacks have no place anywhere in our healthcare system, and we will continue to identify and punish this illegal conduct.”

Despite the settlement agreement, Arthrex did not admit to any wrongdoing in the case.

RELATED: St. Jude Medical, Alere pay combined $65M to settle DOJ claims they knowingly sold defective devices

The DOJ has made a point in recent months of cracking down on allegations of fraud in the medical device industry. In July, for example, St. Jude Medical and Alere agreed to pay $27 million and $38.75 million, respectively, over claims that they continued to sell defective devices even after discovering their flaws. The claims in both cases originated well before Abbott, their shared parent company, purchased each of the two companies.

Barely a month later, Alere came to another settlement with the DOJ, this one for $160 million. In that case, the company and its now-defunct Arriva Medical subsidiary were accused of charging Medicare for shipments of its mail-order diabetes supplies without collecting the necessary copayments.