Manufacturer of Medical Devices Agrees to Pay $42 Million in Criminal Fines and Civil Penalties

by Mike Mintz on June 20, 2012 · 1 comment

in Legal News and Trends,Litigation,

A manufacturer of the bone-growth stimulators Spinal-Stim and Cervical-Stim, Orthofix, recently pleaded guilty in Massachusetts federal court to a felony count of obstructing a federal audit, and it agreed to pay approximately $42 million in criminal fines and civil penalties for illegally promoting the stimulators.  See United States of America v. Orthofix, Inc., No. 1:12-cr-10169 and United States of America, ex rel. Jeffrey Bierman v. Orthofix International, N.V., et al., No. 1:05-cv-10557, D. Mass.  According to federal prosecutors, Orthofix sales representatives forged the signatures of doctors on forms that were provided to Medicare. The sales representatives also either filled out forms themselves or coached medical personnel to complete the forms, and on these forms, they claimed, falsely, that the stimulators were needed for nine months, totally disregarding a physician’s medical judgment.  Medicare covered approximately one-fourth of Orthofix’s sales of stimulators.

Four years ago a Medicare representative audited Orthofix.  The audit revealed that Orthofix did not disclose that many of its territory managers completed certificates of medical necessity without actually soliciting the input of a doctor first.  Several of these managers instructed doctors and their staff to incorrectly state that patients needed their stimulators for nine months, and it was also revealed that the managers forged doctors’ signatures.

Out of the $42 million Orthofix agreed to pay as part of its plea deal, the criminal fine totaled $7.65 million, and the civil penalty totaled $34.23 million.  The civil fine arose out of a lawsuit filed under the False Claims Act on behalf of the federal government by whistle blower Jeffrey Bierman.  According to Bierman, Orthofix inappropriately waived patient co-payments, thereby providing false information regarding the true costs of the stimulators, and causing the government Medicare program to overpay for the devices.  According to Bierman, Orthofix also submitted false certificates of medical necessity in order to get Medicare to cover the devices, and Orthofix did not inform patients that they had the cheaper option of renting the devices instead of buying them.  Orthofix also paid kickbacks and other types of referral fees to induce patients to use their devices.  Bierman will receive $9 million out of the civil fine as a result of his help in the investigation.

Bierman first learned of Orthofix’s shenanigans when he provided billing services for medical equipment.

In addition to Orthofix’s guilty plea, it agreed to execute a ‘corporate integrity agreement’ with the Office of Inspector General of the Department of Health and Human Services.

Orthofix has never conceded liability or wrongdoing to the false claims allegations.  Before Orthofix entered its guilty plea and agreed to settle, five people associated or employed by Orthofix, including an Orthofix vice president, territory managers and a regional sales director along with a physician’s assistant all pleaded guilty to paying kickbacks, lying in front of a grand jury and falsifying patient medical records.


{ 1 comment… read it below or add one }

Phillip Minton, MD wrote onJuly 4, 2012 at 6:05 pm

This matter exemplifies the dangers inherent in a system where pharmaceutical companies and medical device makers can influence physicians by the use of financial inducements. This system needs to be reconsidered.


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