Covidien LP, the developer and promoter of radiofrequency vein ablation, has agreed to pay $17,477,947 to resolve allegations that it violated the False Claims Act by providing free or discounted practice development and market development support to physicians located in California and Florida to induce purchases of Covidien’s vein ablation products, the Department of Justice announced March 11.

Under the settlement agreement, Covidien, acquired by Medtronics in 2015, will pay an additional $1,474,892 to California and $1,047,160 to Florida for claims settled by these state Medicaid programs, which are jointly funded federal and state program.

The United States alleged that Covidien violated the Anti-Kickback Statute and, correspondingly, the False Claims Act by providing practice development and market development support to healthcare providers located in California and Florida from Jan. 1, 2011, through Sept. 30, 2014, to induce those providers to purchase ClosureFAST radiofrequency ablation catheters that were billed to Medicare and to the California and Florida Medicaid programs.

The practice and market development support Covidien provided included customized marketing plans for specific vein practices; scheduling and conducting “lunch and learn” meetings and dinners with other physicians to drive referrals to specific vein practices; and providing substantial assistance to specific vein practices in connection with planning, promoting, and conducting vein screening events to cultivate new patients for those practices.

The Anti-Kickback Act prohibits the payment of remuneration to induce the referral or use of items or services paid for by federal health care programs.  Remuneration includes not only cash payments but also offers or payments made “in kind.”

“The government contended that Covidien provided discounted or free services to health providers – and so hoped to evade kickback charges,” said Steven J. Ryan, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “Companies seeking to buy clients through such arrangements can expect to pay a steep price.”

Covidien cooperated in the government’s investigation, including by sharing the results of its extensive internal investigation and by assisting in the development of a sophisticated damages model, and received credit for its cooperation.

COVIDIEN WHISTLEBLOWERS

The settlement resolves allegations contained in lawsuits filed by Erin Hayes and Richard Ponder (former sales managers for Covidien) and Shawnea Howerton (a former employee of one of Covidien’s customers), which are pending in federal court in San Francisco. Whistleblowers Hayes and Ponder will receive $3,146,030 as their share of the federal recovery.

The lawsuits were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the United States for false claims and to share in any recovery.

The cases are captioned United States ex rel. Hayes, et al. v. Covidien, Inc., et al., Case No. C 14-1511-EDL (N.D. Cal.), and United States, et al. ex rel. Howerton v. Covidien, et al., Case No. C 15-0559-EDL (N.D. Cal.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

U.S. TROLLING FOR KICKBACKS

Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division, said the March 11 settlement serves as an important reminder to those in the healthcare community that unlawful kickbacks come in many forms and are not limited to monetary payments to providers.  Providing free or discounted services to healthcare providers to induce the use of certain items or services can lead to excessive and unnecessary treatments and drive up healthcare costs for everyone.”

FBI San Francisco Special Agent in Charge John F. Bennett said kickback schemes don’t just victimize those directly involved, they undermine the public’s trust in our healthcare system and drive up costs for everyone. “This significant settlement sends a clear message: healthcare providers who engage in this kind of activity and put their own greed before the needs of their patients will be aggressively pursued by the FBI and our federal partners.”

ACQUISITION COSTS CONTINUE

Since December, Medtronic has also agreed to pay a total of $50.9 million to settle a number of probes into marketing activities from ev3 and Covidien, including $17.9 million in an ev3-related off-label marketing case.

Just after the new fine for the kickbacks was announced in mid-March, Medtronic made Covidien a part of Medtronic’s Minimally Invasive Therapies business unit. VTN