Device Company Settles Open Payment Program Reporting Violation, Agrees to Pay Over $9.2 Million

November 03, 2020

On Thursday, October 29, 2020, the Department of Justice (DOJ) announced a settlement with medical device maker, Medtronic USA, Inc. (Medtronic). According to the Agency, the company settled False Claims Act allegations of providing illegal kickbacks to a physician along with allegations of failing to accurately report payments to the Open Payments Program. The settlement includes payment of $8.1 million to resolve False Claims Act through kickback violations and $1.1 million to resolve inaccurate reporting of payments to the Centers for Medicare & Medicaid Services (CMS).

This is the first enforcement action and settlement involving improper payments reported to CMS. The National Physician Payment Transparency Program, also known as the “Sunshine Act” or the “Open Payments Program”, a provision of the Patient Protection and Affordable Care Act, was enacted by Congress in 2010 to provide more transparency in the relationships between pharmaceutical and medical device manufacturers and healthcare providers.

Anti-Kickback allegations include payments made by Medtronic for more than one hundred and thirty social events held at a restaurant owned by South Dakota neurosurgeon, Wilson Asfora, M.D., a "targeted physician", over a nine-year period that Dr. Asfora requested be paid for by Medtronic since their business was "slow". The Settlement Agreement also states that such physician invited and selected the attendees for such events. The events were reported by Medtronic as business events to discuss Medtronic products, but were described in the Settlement Agreement as social gatherings that included lavish meals and alcohol. The payments to the physician were allegedly made to induce him to use Medtronic’s SynchroMed II intrathecal infusion pumps in his surgeries.

In addition to the illegal payments, Medtronic allegedly under-reported the payments or transfers of value to or at the direction of Dr. Asfora to CMS in terms of both indirect payments to Dr. Asfora and those made by paying the restaurant that was owned by Dr. Asfora. The Sunshine Act requires manufacturers to report payments and other “transfers of value” to physicians and U.S. teaching hospitals to CMS on an ongoing basis. Medtronic allegedly separately reported to CMS only the value of the food and drinks for each physician rather than reporting the total amount paid to the restaurant for the event. The Settlement Agreement also notes that sales employees withheld information from the company's compliance department that they knew Dr. Asfora owned the restaurant.

Brenna E. Jenny, HHS Deputy General Counsel and CMS Chief Legal Officer states in the News Release, "CMS’ Open Payments Program is intended to promote transparency and accountability in the healthcare system. Manufacturers that misreport their financial relationships with healthcare providers erode the integrity of the Open Payments Program and will be held accountable. CMS looks forward to continued partnership with the Department of Justice to resolve allegations of manufacturers skirting their Open Payments obligations."

A copy of the News Release is available here.

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