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Orthopedic and Dental Industry News Complete Archive »

Medtronic Settles with DOJ on Kickbacks for $40 Million BY DAVID KRESSEL, JULY 18, 2006

Medtronic announced yesterday that it has settled with the Department of Justice regarding a qui tam lawsuit related to sales and marketing practices in its Spine group, particularly kickbacks to surgeons.

Qui tam lawsuits are better known as whistleblower suits. In 2002 and again in 2004, qui tam suits were filed under the False Claims Act and the Anti-Kickback Statute, claiming that Medtronic acquired and maintained customers by offering outsized "consulting" agreements to surgeons. These surgeons would use Medtronic's products while providing little-to-no value as consultants while receiving hundreds of thousands of dollars annually.

As a result of the settlement, the following will happen. Medtronic will deny any wrongdoing and put $40 million in escrow for the DOJ. The DOJ will move to have the suit dismissed, and the escrow will be released to the DOJ, and to the qui tam relator (whistleblower), will receive 15%-30% of the settlement.

In addition, Medtronic has signed a Corporate Integrity Agreement with the Office of the Inspector General (OIG) of HHS, which commits Medtronic for five years, at a senior level, to strengthen its compliance practices. In particular, Medtronic will create a database of all transactions with customers that do not involve revenue, which will be reviewed by senior management and third-party reviewers. The company will also need to improve its training and compliance practices.

For a sense of scale, Medtronic's Spine group has revenue over $2 billion annually, and an estimated $700 million in operating income.

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