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Medical products company to pay feds $30 million to settle lawsuit over whistleblower kickbacks

Monday, November 12, 2012 by: J. D. Heyes
Tags: medical products, kickbacks, lawsuit

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(NaturalNews) As the healthcare industry becomes more regulated, more expensive and less enticing to would-be physicians and other providers, expect to continue to see fraud and other abuses of trust rise, all in the name of turning a dollar.

The latest example involves a Nevada medical implant and surgical products company, Orthofix International NV, which recently agreed to a $30 million federal fine to settle allegations by whistleblowers that a subsidiary of the firm paid improper kickbacks to spinal doctors to use its products.

In announcing the settlement, the U.S. Justice Department said Orthofix agreed to resolve claims that Blackstone Medical Inc. "provided surgeons with travel, entertainment and benefits including sham consulting, royalty and research deals," The Associated Press reported, citing a statement from the department's civil division in Washington, D.C.

'Pleased' with being fined?

Despite the agreement; however, the publicly traded subsidiary, which is based in the Caribbean island nation of Curacao, as well as Leesville, Texas, did not admit to doing anything wrong.

The actual settlement amount was $32 million, the department said - $30 million in fines and settlement costs and $2 million in legal fees for whistleblowers Susan Hutcheson and Philip Brown of Florida. The department said Hutcheson will get $8 million from the settlement.

In a statement, Orthofix president and top executive Robert Vaters said in Leesville that he was actually pleased with the final settlement, which was the result of a civil lawsuit filed in September 2006 in U.S. District Court in Massachusetts and agreement reached in February of this year.

The AP said:

The complaint alleged false claims for payments were submitted to Medicaid, Medicare and the TRICARE program for military service members, retirees and their families. It listed 67 doctors and medical firms and said most received stipends of up to $6,000 per month.

The report said Kathryn Feeney, the resident agent in charge for the Defense Criminal Investigative Service office located in New Haven, Conn., noted that kickbacks such as those alleged against the orthopedic and surgical firm were undermining the TRICARE system, which used to provide healthcare services to the military, among others.

The acting assistant attorney general for the Justice Department's Civil Division, Stuart F. Delery, warned such illegal compensation activities can "corrupt physicians' medical judgment and cause misallocation of vital health care resources."

Vaters - who, amazingly, was promoted to CEO from CFO (chief financial officer) in June - appeared to have a history of questionable operating tactics. In his statement, he also cited the resolution of a separate case involving federal Foreign Corrupt Practices action against his company.

The fraud will only get worse as regulations pile up

"Orthofix has made significant improvement to its compliance practices, and I look forward to a continued stronger focus on the company's operations," he said.

In addition to paying the monetary damages and awards, Orthofix also agreed to enter into a corporate integrity agreement with the inspector general for the Department of Health and Human Services.

In funding the agreement, the company said it planned to use proceeds from an escrow fund established in connection with the acquisition of Blackstone, a company it gained in 2006. Since then, Blackstone has been moved from bases in New Jersey and Massachusetts to Texas.

There were early signs that may have signaled why the company believed it had to coax doctors into buying and using its products, to boost sales. Orthofix announced last December that it was adopting a restructuring plan which involved cutting an unspecified number of jobs while banking savings of about $7 million a year.

As the healthcare industry in America becomes more and more regulated, expect to see more cases where companies will try to cheat the system in order to boost bottom lines.





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