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Medtronic settles lawsuits accusing company of kickbacks
The settlement requires the company to maintain an electronic database recording all non-sales-related transactions between the business unit and its customers.
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Medtronic Inc. officials announced that the company will pay the federal government $40 million to settle charges that its spinal implant division, Medtronic Sofamor Danek, paid kickbacks to physicians to persuade them to use the company’s products.
The U.S. Department of Justice accused the company and its spine subsidiary of paying kickbacks through what officials described as “sham consulting agreements, sham royalty agreements and lavish trips to desirable locations” offered to physicians from 1998 to 2003, according to the New York Times.
Medtronic is at the center of two lawsuits filed in Federal District Court in Memphis, Tenn. Both Medtronic and Medtronic Sofamor Danek deny any wrongdoing.
The recent settlement addresses the first lawsuit, which was filed in 2002 by a private citizen. Justice department officials are seeking to have the second lawsuit dismissed.
In a Medtronic press release, Art Collins, Medtronic’s CEO, said the company has “cooperated fully with the government during its investigation of the allegations, and we believe our company-wide efforts regarding business conduct and ethical practices assisted us in achieving a practical resolution of these cases.”
To resolve the matter, Medtronic has entered into a five-year agreement with the Office of the Inspector General/Health and Human Services that “further strengthens its employee training and compliance system surrounding sales and marketing practices,” according to the release.
The agreement requires Medtronic Sofamor Danek to create an electronic database to “capture and manage all non-sales-related transactions between the business unit and its customers.” Those transactions will be subject to an established set of internal controls and review processes, and will be monitored by Medtronic senior management, its chief compliance officer, and an outside review organization.
The company will also pay a $40 million civil settlement into escrow pending dismissal of the related lawsuits. Medtronic will record a one-time charge in its current first quarter ending July 28 to account for the payment.
In the company press release, Medtronic officials said the lawsuits are not related to product quality, safety or efficacy, and do not affect the company’s ability to produce or sell any product or service. The settlement also specifically states that Medtronic and Medtronic Sofamor Danek deny any wrongdoing.