DOJ Announces First Life Sciences Settlement Involving the Open Payments Program

The U.S. Department of Justice (DOJ) announced on October 29, 2020 it reached a more than $9.2 million settlement with Medtronic USA Inc. to resolve allegations it violated the False Claims Act (FCA) and Open Payment Program.[1] Specifically, Medtronic agreed to pay $8.1 million to resolve FCA allegations it paid kickbacks to induce a South Dakota neurosurgeon to use its SynchroMed II intrathecal infusion pumps. The kickbacks took the form of 130 social events involving lavish meals and alcohol at Carnaval Brazilian Grill, a restaurant Medtronic knew was owned by the neurosurgeon and his wife. The DOJ alleged that Medtronic’s sponsored events at the restaurant were social gatherings where attendees were selected and invited by the neurosurgeon, including social acquaintances, business partners, colleagues, referral sources, spouses, and significant others. Additionally, to hide this inappropriate conduct, the sales personnel involved falsely stated on internal expense reports that the events were educational or business discussions.

Medtronic also agreed to pay an additional $1.11 million to resolve allegations it violated the Open Payments Program by failing to accurately report to the Centers for Medicare & Medicaid Services (CMS) payments it made to the neurosurgeon in connection with these events.[2] Notably, this represents the first DOJ settlement related to the Open Payments Program, which CMS implemented in 2013.

The DOJ announced that as part of the settlement, Medtronic agreed to cooperate with the DOJ’s investigations of and litigation against other parties. Medtronic also took remedial action once it learned of the issue, including terminating a sales representative and sales manager and disciplining 12 other employees involved in the alleged misconduct.

This settlement confirms the DOJ’s willingness to pursue enforcement actions under the Open Payments Program, in addition to more traditional enforcement tools like the FCA and Anti-Kickback Statute. It also demonstrates a continued DOJ enforcement focus on inappropriate meals and social activities. 

Contact the authors or your Dinsmore attorney to further discuss this legal alert.