Kickback Case Settles for Record-breaking $646 Million

By Kelly A. Briganti, Editorial Director, G2 Intelligence

It has been billed as the largest total amount in U.S. history paid for alleged violations of the Anti-kickback Statute by a  medical device company. The Department of Justice announced last week that a medical device company agreed to pay $623.2 million in settlement of criminal and civil cases alleging payment of kickbacks to hospitals and physicians. Another $22.8 million would be paid by a subsidiary to settle criminal charges under the Foreign Corrupt Practices Act.

Olympus Corp of the Americas (OCA) has agreed to the settlement amount plus a three-year deferred prosecution agreement (DPA). A DPA is an agreement under which the government will defer prosecution and dismiss the charges if the defendant company fulfills various obligations. OCA also entered into a corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General (OIG) that includes obligations to implement a code of conduct, training and education, and requirements for consulting arrangements, grants and review of travel expenses. On its website, the company acknowledges the settlements and expresses a commitment to compliance: “Olympus leadership acknowledges the Company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees. Olympus is committed to complying with all laws and regulations and to adhering to our own rigorous Code of Conduct which guides our business processes, decisions and behavior. The Company has implemented and will continue to enhance its robust compliance program.”

“For years, Olympus Corporation of the Americas and Olympus Latin America dropped the compliance ball and failed to have in place policies and practices that would have prevented the substantial kickbacks and bribes they paid,” said U.S. Attorney Paul J. Fishman of the District of New Jersey, in a statement. The government says the agency didn’t have proper training and compliance programs and didn’t have a compliance professional until 2010. As part of the DPA, the company must improve training and its compliance program, maintain a confidential hotline and website for reporting compliance issues and implement a program requiring “executives who engage in misconduct or fail to promote compliance to forfeit up to three years of performance pay.” The company’s announcement of the settlements in fact includes phone and web contact information for reporting “inappropriate product promotion or questionable conduct.”

The government alleged that OCA paid consulting payments, foreign travel expenses, lavish meals and millions of dollars in grants and free endoscopes to hospitals and physicians in exchange for sales. The subsidiary settled separate criminal charges that it violated the Foreign Corrupt Practices Act by making payments to health care providers at government owned facilities in Central and South America.

The claims arose out of a whistleblower lawsuit brought by the company’s former chief compliance officer. That whistleblower will receive $51 million according to the government.

“In addition to yielding a substantial recovery for taxpayers, this settlement should send a clear message that we will not tolerate these types of abusive arrangements, and the pernicious effects they can have on our health care system,” added Principal Deputy Assistant Attorney General Benjamin C. Mizer, in the settlement announcement.