Medicare Compliance & Reimbursement

Ortho device makers pay $311 million to settle anti-kickback charges

Federal prosecutors are coming down hard on consulting arrangements between surgeons and device manufacturers.

Replacement knees and hips are a booming market for device manufacturers as the hard-trotting baby boomers wear their bodies down, reports The Wall Street Journal.

Four orthopedic device makers have paid a total of $311 million to settle allegations from the HHS Office of Inspector General (OIG) and the Department of Justice, announced New Jersey U.S. Attorney Christopher J. Christie in a Sept. 27 press release.

"Financial inducements in the form of consulting agreements were entered into with hundreds of surgeons throughout the 2002-2006 time frame," the U.S. Attorney's office says. Surgeon consultants were paid "tens to hundreds of thousands of dollars per year" and "were often lavished with trips." The companies admit to no criminal wrongdoing.

The four companies are entering into five-year Corporate Integrity Agreements (CIAs) with the OIG and will pay the following settlements:

• Zimmer Inc., based in Warsaw, IN: $169.5 million.

• Depuy Orthopaedics Inc., also based in Warsaw, IN and a subsidiary of Johnson & Johnson: $84.7 million.

• Smith & Nephew of Memphis, TN: $28.9 million

• Biomet Orthopedics Inc., also of Warsaw, IN: $28.9 million.

A fifth company, Stryker Orthopedics Inc., of Mahwah, NJ, will pay no fines because it was the first to cooperate voluntarily with prosecutors. Stryker will be under a CIA.

The investigation had been hanging over the device manufacturers since early 2005, The Wall Street Journal reports. Once the CIAs were announced, shares generally rose.

To protect themselves against kickback allegations, surgeons and device manufacturers should have fair market value consulting arrangements, and they should disclose any consulting agreements to patients and hospitals.

Editor's Note: For more details about the agreements and compliance tips from the CIAs, go to www.usdoj.gov/usao/nj/press/index.html.