Law360 (November 8, 2021, 10:22 PM EST) — An orthopedic device company accused of paying millions in kickbacks to a surgeon in exchange for his using and recommending its products has agreed to a $16 million settlement in a whistleblower suit, the U.S. Department of Justice said Monday.
The settlement with Florida-based Arthrex Inc. resolves the government’s allegations the company violated the False Claims Act by paying a Colorado orthopedic surgeon millions of dollars under the guise of royalty payments, which the DOJ said violated the federal Anti-Kickback Statute. The alleged scheme, which purportedly took place from August 2010 through March 5, 2021, involved the submission of false Medicare claims for orthopedic procedures, according to the DOJ.
Nathaniel R. Mendell, acting U.S. attorney for the District of Massachusetts, said in a statement that the settlement “demonstrates our dedication to ensuring that taxpayers and patients get a health care system that is on the level.”
“Paying bribes to physicians to distort their medical decision-making corrupts the health care system,” Mendell said. “Kickbacks have no place anywhere in our health care system, and we will continue to identify and punish this illegal conduct.”
Counsel for Arthrex didn’t immediately respond to a request for comment Monday. The company agreed not to deny the allegations, according to the settlement.
According to the DOJ, Arthrex had an agreement with Dr. Peter Millett to pay him for purportedly contributing to the development of certain orthopedic products. But the company actually made the payments to induce him to use and recommend its products, the DOJ alleged.
The case was filed in February 2020 by relator Joseph B. Shea under the qui tam provisions of the False Claims Act, which allow private parties to file suit on behalf of the government and to share in any recovery. Shea will receive $2.5 million from the government.
A separate suit Shea brought against Millett indicated that Shea lives in Massachusetts and that a company Millett owned is based there.
David W.S. Lieberman of the Whistleblower Law Collaborative, counsel for Shea, said in a statement that “we are grateful the United States moved so quickly and worked collaboratively with us to obtain this settlement.”
The settlement also includes a five-year corporate integrity agreement with the U.S. Department of Health and Human Services, the DOJ said. And it includes interest on the $16 million payment accruing at an annual rate of 1.375% from March 5, 2021, until the day of payment, according to the settlement. Shea is to get a 15.625% share of the interest received by the government.
Joseph R. Bonavolonta, special agent in charge of the FBI’s Boston Division, said in a statement that while Arthrex may have believed it could increase profits by paying the kickbacks, “today’s $16 million settlement makes it clear that its unscrupulous scheme backfired.”
“Anyone involved in, or entertaining, similar activity should know that health care fraud is a priority for the FBI, and we will pursue anyone trying to misuse this country’s vital health care system,” Bonavolonta said.
The settlement indicates the DOJ acted on behalf of the Office of Inspector General of the Department of Health and Human Services.
Arthrex is represented in-house by John W. Schmieding and by Jack W. Pirozzolo, Mark B. Langdon and Joseph R. Dosch of Sidley Austin LLP.
The government is represented by Assistant U.S. Attorneys for the District of Massachusetts David J. Derusha and Charles B. Weinograd and by Andrew Jaco, a trial attorney with the DOJ’s Civil Division.
Shea is represented by David W.S. Lieberman, Robert M. Thomas Jr. and Suzanne E. Durrell of Whistleblower Law Collaborative.
The case is United States ex rel. Shea v. Arthrex Inc. et al., case number 20-cv-10210, in the U.S. District Court for the District of Massachusetts.
By Sarah Jarvis
–Editing by Jill Coffey
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