November 12, 2012

The U.S. Department of Justice announced on November 2, 2012 that Orthofix International NV (“Orthofix”), a spinal implant and other spinal products manufacturer headquartered in Curacao, has agreed to pay the United States $30 million to settle allegations that its subsidiary, Blackstone Medical Inc., paid illegal kickbacks to physicians in order to induce them to use the company’s products. The alleged scheme included sham consulting agreements that sometimes paid upwards of $8,000 per month, sham royalty arrangements, sham research grants that were as much as $18,000, and travel and entertainment payments for strip clubs and prostitutes for spinal surgeons.

Orthofix further ageed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services that provides for procedures and reviews to be put in place to avoid and promptly detect similar conduct in the future.

The settlement culminated a whistleblower lawsuit filed pursuant to the False Claims Act for which the whistleblower will receive $8 million from the settlement. The lawsuit was captioned United States ex rel. Hutcheson v. Blackstone Medical, Inc., et al., Civil Action No. 06-11771-WGY (D. Mass.).

In announcing the settlement, the U.S. Attorney for the District of Massachusetts stated, “This settlement demonstrates the government’s continued resolve to ensure that patients receive, and the government pays for, health care that is based solely on sound medical judgment, not compromised by kickbacks. We believe that this is a just and meaningful resolution that is in the best interests of the citizens of the Commonwealth and taxpayers across the nation.”

The Acting Assistant Attorney General for the Department’s Civil Division noted, “Kickbacks to physicians are incompatible with a properly functioning health care system. They can corrupt physicians’ medical judgment and cause misallocation of vital health care resources. Today’s settlement reflects the progress we are making in the ongoing fight against abusive and illegal practices in the healthcare industry.”


Earlier this year, Orthofix  agreed to pay $42 million to resolve a separate whistleblower lawsuit and a criminal probe of allegations that it paid kickbacks to doctors who used its bone-growth stimulators. One of Orthofix’s units agreed to plead guilty to a single felony count of obstructing a U.S. government audit and agreed to pay a $7.8 million fine. Orthofix also will pay $34.2 million to resolve another whistleblower claim that it defrauded the federal Medicare program regarding bone-growth stimulators that patients used to promote their healing process after their surgeries.


Why do medical device manufacturers continue to act as if they will not get caught when they attempt to skirt the law? Probably because they either believe they will not get caught or, if they do get caught, the financial benefit of engaging in such activities will be outweighed by any settlement amount and/or fine that they may be required to pay. Regardless, such illegal activities must never be condoned and the laws must be reinforced to make it more costly for those medical device manufacturers that get caught acting on the wrong side of the law.

If you have information regarding potential fraud being committed by a medical device manufacturer or a pharmaceutical company, you may be entitled to share in a portion of any settlement or judgment that may be obtained from the wrongdoers. You should promptly consult with a False Claims Act attorney or medical malpractice attorney to discuss your possible claim.

Click here to visit our website or telephone us on our toll-free line, 800-295-3959, to be connected with false claim lawyers or medical malpractice lawyers in your state who may be able to assist you with your False Claims Act claim.

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