Financial

Department of Justice Imposes More Than $110 Million in Fines on Medical Device Makers

By Charles Andres and David Hoffmeister

On March 19, 2015, the U.S. Department of Justice and the U.S. Department of Health and Human Services issued their joint annual report on health care fraud and abuse control.1 The annual report states that during fiscal year 2014, the federal government won or negotiated approximately $3.3 billion in judgments and settlements, and attained additional administrative impositions in health care fraud cases and proceedings.2

The annual report details high-profile actions taken against pharmaceutical companies, physicians, pharmacies, hospitals, medical clinics, dental clinics, entities engaged in prescription drug fraud, and medical device companies.3 This WSGR Alert highlights the high-profile government actions against medical device manufacturers.

Federal Government Actions Against Medical Device Companies

  1. Boston Scientific and its Guidant subsidiaries agreed to pay $30 million to settle civil False Claims Act (FCA)4 allegations that over a period of three years, Guidant knowingly sold defective defibrillators to health care facilities, which in turn implanted the devices into Medicare patients. The settlement resolved allegations that two lines of Guidant’s implantable defibrillators contained an “arcing” defect that caused the defibrillators to short circuit. The government alleged that although Guidant fixed the defect, the company continued to sell its remaining stock of the old, defective versions of the devices and took steps to hide the problem from patients, doctors, and the U. S. Food and Drug Administration (FDA). In February 2010, Guidant pleaded guilty to criminal charges of misleading the FDA and failing to submit a labeling change to the FDA relating to the defective devices.5
  2. Abbott Laboratories, Inc., agreed to pay $5.5 million to resolve civil FCA allegations regarding false claims submitted to Medicare for surgical procedures involving carotid and peripheral vascular and biliary stents. The government alleged that Abbott knowingly paid prominent physicians unlawful kickbacks with the expectation that these physicians would arrange for the hospitals with which they were affiliated to purchase Abbott’s vascular products for use in treating Medicare beneficiaries.6

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Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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