Medical Company Settles Whistleblower’s False Claims Act Case

Medtronic (NYSE: MDT) has agreed to pay $9.9 million to settle a False Claims Act case brought by a whistleblower who claimed the company violated the Anti-Kickback Statute.

Medtronic, based in Minneapolis, Minnesota, is one of the world’s largest medical technology companies. Medtronic was founded in 1949, has over 46,000 employees and operates in 140 countries. According to Medtronic’s website, its Cardiac Rhythm Disease Management unit accounted for $5 billion, or approximately 30%, of Medtronic’s total $16.6 billion revenue in fiscal year 2013.

According to the Department of Justice, in 2009, a former Medtronic employee, Adolfo Schroeder, filed a lawsuit under the qui tam provisions of the False Claims Act alleging that Medtronic paid illegal kickbacks to physicians to induce them to implant in their patients pacemakers and defibrillators manufactured and sold by Medtronic. The government alleged that Medtronic violated the Anti-Kickback Statute which prohibits anyone from offering or paying anything of value to induce referrals of Medicare, Medicaid or any other patient covered by a Federal health care program.

Specifically, the whistleblower alleged that Medtronic directed its sales staff and marketing managers to provide physicians with cash payments, consulting jobs for the physicians’ family members, automobiles, expensive trips and meals, entertainment, and tickets to sporting events in exchange for the physicians’ agreement to implant Medtronic’s devices in their patients. In addition, the government alleged that Medtronic paid physicians to speak at events intended to increase referrals and developed marketing/business plans for physicians at no cost to the physicians.

The settlement resolves the lawsuit filed under the qui tam provisions of the False Claims Act in the United States District Court for the Eastern District of California (Case No. 2:09-CV-0279). The whistleblower will receive approximately $1.73 million of the settlement proceeds as his reward under the False Claims Act.

The False Claims Act permits individuals, known as relators, to bring claims on behalf of federal and state governments and their agencies, against individuals and entities who have committed fraud against the government. The relators may be entitled to share in a percentage of any funds recovered in the action.

If you know of fraud against the government, click here to see if you many have a case under the False Claims Act.