Medtronic to pay $20M to settle kickback allegations

Medtronic's Covidien business has agreed to pay $20 million to resolve kickback allegations, becoming the company's third announced federal legal resolution in three months.

Medtronic, with operational headquarters in Fridley, agreed in the most recent case to settle claims that Covidien officials provided doctors with free and discounted services until late 2014 to illegally induce sales of its ClosureFast device that were later billed to Medicare and Medicaid programs.

Medtronic, which became the world's largest medical device company when it acquired Covidien in January 2015 for nearly $50 billion, did not admit liability or wrongdoing as part of the settlement announced by the government this week.

"As this case makes clear, companies must steer clear of violating the Anti-Kickback Statute or risk being pursued," Northern California U.S. Attorney David L. Anderson said in an announcement of the settlement on Monday.

"Medtronic cooperated fully with the Department of Justice during its investigation, and we believe our ongoing, rigorous compliance programs and ethical practices enabled us to reach a fair resolution of these cases," Medtronic said in a statement in early December.

Medtronic officials announced a criminal plea and two civil settlements totaling nearly $51 million last December, resolving three situations in which Covidien officials stood accused of using illegal means to promote sales of medical devices. Although the details of the ClosureFast case were not public at the time, a Medtronic spokesman confirmed on Tuesday that the statement from December applied to the just-announced resolution as well as the two other cases.

Because artificial financial incentives can drive overuse of health care, the federal Anti-Kickback Statute makes it illegal to pay doctors for Medicare business. A separate law called the False Claims Act allows whistleblowers to come forward with secret information about federal overbilling, including situations where violations of the kickback law make it illegal to bill Medicare.

In the just-settled case, three whistleblowers filed lawsuits against Covidien that alleged the medical device company provided free or discounted services to doctors that were considered "payments" under the law to promote sales of a venous reflux disease device called ClosureFast.

The payments included providing doctors with customized market plans for specific vein practices, scheduling and conducting "lunch and learn" meals to drive referrals to specific vein practices, and providing services like planning, promoting and conducting vein screening events to "cultivate new patients," according to the Justice Department's announcement. The services were provided to providers in California and Florida between Jan. 1, 2011, and Sept. 30, 2014.

The whistleblowers said the free and discounted services were intended to induce the doctors to buy Covidien ClosureFast radio-frequency ablation devices that were later billed to Medicare and state Medicaid programs.

"The government contended that Covidien provided discounted or free services to health providers — and so hoped to evade kickback charges," FBI San Francisco special agent in charge John Bennett said in the announcement.

In December, Medtronic revealed another legal settlement and a criminal plea related to Covidien sales tactics, including devices made by its Ev3 subsidiary, which was located in the Twin Cities.

In the criminal case, Medtronic agreed to have Ev3 plead guilty to a misdemeanor and pay $17.9 million in fines and forfeitures to resolve a case in which company sales staff encouraged surgeons to use "large quantities" of a product called Onyx Liquid Embolic System for unapproved and potentially dangerous uses.

The product is approved to be surgically injected into diseased blood vessels in the brain, but it was never approved for other vessels in the body where sales staff were encouraging it to be used, the U.S. Attorney's Office in Boston wrote.

Meanwhile, Medtronic agreed to pay $13 million to settle another civil case filed in California, this one accusing Covidien's sales staff of using the STRATIS national device registry as a way to pay hospitals to buy its Solitaire mechanical thrombectomy device, which retrieves clots from the brain after stroke.

"The settlement is a compromise of disputed claims and Medtronic makes no admission that the STRATIS Registry was improper or unlawful," Medtronic said in December.

Joe Carlson • 612-673-4779