Medical Device Company Pays $42 Million to Settle Medicare Fraud Allegations

Orthofix International NV, a medical device company headquartered in Netherlands Antilles, has agreed to pay the Government $42 Million to settle allegations stemming from  its marketing of a non-invasive bone growth stimulators Orthofix Spinal-Stim, the Orthofix Cervical-Stim and the Orthofix Physio-Stim. Further, Orthofix has agreed to plead guilty to obstruction of a federal audit, a criminal felony count.

A civil qui tam action, which was filed in the District of Massachusetts, revealed that Orthofix allegedly falsified Certificates of Medical Necessity and overcharged Medicare in order to support claims that were submitted to the Government.  Orthofix charged Medicare $4000 for each device when in fact they cost the company only $1000 each to manufacture.  Further, the complaint alleged that Orthofix engaged in kickback schemes involving not only physicians and their staff but also patients and sales agents in order to promote the use of these devices.  In some cases company employees would coach physicians as well as their staff in order to fraudulently fill out paperwork extending the medical need to be “9 months” for Medicare patient.  Some employees would even forge signatures of doctors in order on the Certificate of Medical Necessity.  In addition, Orthofix was alleged to have waived patient’s co-payments in order to successfully receive orders.

Orthofix is a global medical device company which has manufacturing, administrative and training facilities in the United States.  The settlement consists of a $7.65 million criminal fine and $34.23 million (plus interest) qui tam/False Claims Act civil settlement.  In addition, the company has agreed to enter into a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services.

This case is significant, in our view, as the investigation has been broad-based resulting in numerous felony charges against executives, employees and contractors of Orthofix.  These charges resulted from the payment of kickbacks, lying to a federal grand jury and falsifying patients’ records.

More information for whistleblowers is located at the Nolan & Auerbach, P.A. website.