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White Collar + Fraud + Investigations + Compliance
Last week, the Department of Justice announced that DePuy Synthes, Inc. (“DePuy”), a subsidiary of Johnson & Johnson, agreed to pay $9.75 Million to resolve allegations that it violated the False Claims Act by paying kickbacks to an orthopedic surgeon based in Massachusetts to induce his use of DePuy products.
There are a few things to note here. First, these allegations are a bit unusual in that the kickbacks were actually used outside of the U.S. The Government alleges that DePuy provided the surgeon with free implants and other products for use in surgeries performed overseas (remuneration) to induce the surgeon to use DePuy products in surgeries that were performed in the U.S. In other words, the surgeon allegedly used the free products in the surgeries that performed outside of the U.S. and with patients that were not federal healthcare beneficiaries. But that remuneration was arguably sufficient to induce the surgeon to use (and bill for) DePuy products in the U.S.
Second, unsurprisingly, the kickbacks provided were more so in the range of thousands of dollars, whereas DePuy settled for millions. This should be a reminder to companies considering engaging in some type of giveaway that the risk in doing so is so much more costly than the perceived value. (Just, don’t do it!) Aside from the potential criminal implications, the civil exposure is generally quite large.
Third, it is important to note that DePuy admitted to at least some of the Government’s allegations and the settlement likely reflects some cooperation credit earned for this admission. That said, when you look at the settlement agreement, restitution (or single damages) is listed as $4,018,889.95 and DePuy paid $7,234,001, meaning that the multiplier for this settlement was 1.8, not much less than doubles. Given that presumably meager cooperation credit, it appears (from the outside looking in) that the federal government was less enthusiastic about the level of cooperation here, and that could be impacted by a number of factors that are not public.
Fourth, the surgeon’s name appears to be redacted from the settlement agreement and purposely not included in the press release. One would assume that a resolution is likely still being negotiated with the surgeon.
The press release related to this announcement is provided here.
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