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Spinal product company accused of kickbacks, settle in NY court

The Department of Justice (DOJ) recently accused a spinal company of using illegal kickbacks to grow their business. The DOJ accused the founder, president and chief executive officer (CEO) of the company as well as the vice president of business development of paying “millions of dollars of consulting fees, royalties, and intellectual property acquisition fees to surgeons” for the purpose of inducing the surgeons to use the company’s medical devices and equipment.

This case provides an example of how the government will build these types of claims. The allegations can move quickly. In this example, the government filed suit against the accused in July and settled the case within four months. The quick resolution of this case should serve as a reminder for those who own medical businesses to promptly seek legal counsel when facing similar accusations.

What were the allegations?

The government claims the surgeons who chose to use of these devices were largely motivated by financial gain as opposed to a review of which available device would be in the patient’s best interest. The surgeons would then file claims for payment with Medicare and Medicaid — claims the DOJ states were “kickback-tainted false claims.”

What was the evidence?

The DOJ gathered evidence to show the business owners had used these kickbacks from 2012 through 2018. This evidence included:

  • Increased sales after signing agreement. The DOJ had evidence to show a jump in usage of the product after the surgeons received royalties and consulting fees from the company.
  • Majority of physicians using product signed on to consulting deals with the company. The government was also able to show that over twenty of the thirty doctors who used the product received these payments.
  • ROI calculations. The business also kept records that included a return on investment (ROI) calculation that used data on surgeons’ usage and consulting fees.

Based on this and other evidence, the CEO and vice president agreed to settle the case as opposed to moving forward with litigation. As part of the settlement, the accused agreed to an admission of guilt and to pay the government almost $6 million.