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Medical Device Maker Merit Medical To Pay $18 Million To Settle Allegations Of Improper Payments To Physicians

Gerald Scroop

October 14, 2020

Medical device maker Merit Medical Systems Inc. (MMSI), of South Jordan, Utah, has agreed to pay $18 million to resolve allegations that the company caused the submission of false claims to the Medicare, Medicaid, and TRICARE programs by paying kickbacks to physicians and hospitals to induce the use of MMSI products, the Department of Justice announced today. 

“Paying kickbacks to doctors in exchange for referrals undermines the integrity of federal healthcare programs,” said Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division.  “When medical devices are used in surgical procedures, patients deserve to know that their device was selected based on quality of care considerations and not because of improper payments from manufacturers.”

The Anti‑Kickback Statute prohibits offering or paying anything of value to induce the referral of items or services covered by Medicare, Medicaid, TRICARE, and other federal healthcare programs.  The statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives.

The settlement announced today resolves allegations that, for over six years, MMSI engaged in a kickback scheme to pay physicians, medical practices, and hospitals to induce their use of MMSI products in medical procedures performed on Medicare, Medicaid, and TRICARE beneficiaries.  Under the guise of an internal program known as the Local Advertising Program, MMSI allegedly provided remuneration to healthcare providers in the form of millions of dollars in free advertising assistance, practice development, practice support, and purported unrestricted “educational” grants to induce the healthcare providers to purchase and use a wide variety of MMSI products.  These products included MMSI’s EmboSphere devices, which generally were used for uterine fibroid embolization procedures, and its QuadraSphere devices, which generally were used for other types of embolization procedures.  Despite publicly claiming that its financial assistance was designed to “increase the awareness” of medical treatments, MMSI allegedly provided it only to select healthcare providers to reward past sales, induce future sales, and steer business to MMSI and away from MMSI’s competitors.  The government alleged that MMSI disregarded numerous warnings that its conduct may violate the Anti-Kickback Statute, including warnings from MMSI’s own Chief Compliance Officer, during the course of the alleged kickback scheme.  Of the $18 million to be paid by MMSI, $15.21 million will be returned to the federal government, and a total of $2.79 million will be returned to individual states, which jointly funded claims involving MMSI devices that were submitted to state Medicaid programs.

“Merit Medical provided millions of dollars of advertising and other marketing support to healthcare providers to induce sales of its products,” Attorney for the United States Rachael A. Honig.  “Unlawful kickbacks like these distort the market for medical devices upon which our healthcare system depends.  For years, Merit Medical ignored internal warnings and refused to abide by the rules that apply to every other medical device company.  With today’s settlement, they are paying the price for that refusal.”

 Along with the civil settlement, MMSI entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG).  The CIA requires MMSI to hire a compliance expert and an independent review organization to analyze its systems and transactions.  “No health care company’s compliance program can be effective without commitment and support from the company’s leaders,” said HHS-OIG Chief Counsel Gregory Demske.  “As happened here, ignoring your compliance officer’s concerns about payments to referral sources is a great way to become a defendant in a kickback case.”

The allegations were originally made in a lawsuit filed under the whistleblower provisions of the False Claims Act by Charles J. Wolf, M.D., the former Chief Compliance Officer of MMSI.  The act permits private parties to sue for false claims on behalf of the United States and to share in any recovery.  Dr. Wolf will receive $2.65 million from the federal share of the settlement.

The government’s pursuit of this lawsuit illustrates the government’s emphasis on combating healthcare fraud.  One of the most powerful tools in this effort is the False Claims Act.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services, at 800‑HHS‑TIPS (800-447-8477).   

The settlement with Merit Medical was the result of a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of New Jersey, with investigative support by HHS-OIG and the Federal Bureau of Investigation. 

The lawsuit is captioned United States ex rel. Wolf v. Merit Medical Systems, Inc., No. 2:16-cv-01855-CCC-MF (D.N.J.).  The claims resolved by the settlement are allegations only and there has been no determination of liability.

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