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BOSTON - (Mealey's) Orthofix Inc. on June 7 pleaded guilty to a federal felony count of obstructing a federal audit and agreed to pay nearly $42 million in criminal fines and civil penalties for illegal promotion of its bone-growth stimulators (United States of America v. Orthofix, Inc., No. 1:12-cr-10169, United States of America, ex rel. Jeffrey Bierman v. Orthofix International, N.V., et al., No. 1:05-cv-10557, D. Mass.).
(Criminal information. Document #28-120621-002F.)
In a criminal information filed June 7 in the U.S. District Court for the District of Massachusetts, the U.S. Attorney's Office alleged that Orthofix obstructed a federal audit by manipulating certificates of medical necessity that doctors are required to sign by Medicare. The government alleged that the manipulation took place by Orthofix sales representatives filling out the forms, forging physicians' signatures or filling out or coaching physicians' staff to list nine months as the time the devices are needed without regard to a physician's medical judgment.
In a press release, the U.S. Attorney's Office said Medicare payments accounted for about 25 percent of sales of Orthofix bone growth stimulators.
The stimulators are the Spinal-Stim and Cervical-Stim devices.
Auditor Not Told
The government said that in June 2008, a Medicare contractor audited Orthofix at its headquarters in McKinney, Texas, to ensure compliance with Medicare supplier standards. The government said that Orthofix failed to disclose that many of its territory managers filled out certificates of medical necessity with no input from physicians, that a number of territory managers coached doctors or their staffs to list nine months as the length of time patients needed the devices and that territory managers forged doctors' signatures on the certificates.
Under a plea agreement filed simultaneously with the criminal information, Orthofix agreed to pay a criminal fine of $7.65 million.
In addition, Orthofix agreed to pay $34.23 million to resolve a False Claims Act lawsuit filed on behalf of the federal government in the District of Massachusetts by Jeffrey Bierman. The whistle-blower alleged that Orthofix: improperly waived patient co-payments and thus misstated the true costs of the devices and caused overpayments by the federal government, submitted falsified certificates of medical necessity to get federal payment for the devices, failed to tell patients that they could rent the devices rather than purchase them and offered or paid kickbacks in the form of "fitter," referral or other fees to induce use of its devices.
Bierman will receive more than $9 million as his statutory share for bringing the false claims lawsuit. In its press release, the U.S. Attorney's Office said "Bierman participated substantially in the development of the investigation that gave rise to the civil settlement."
Corporate Integrity Agreement
In his complaint, Bierman said he learned of the irregularities while providing billing services for durable medical equipment.
In addition to the guilty plea, fine and penalty, Orthofix agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services.
The guilty plea was submitted to Judge William G. Young.
The government says Orthofix has not conceded liability or wrongdoing to the false claims allegations.
Last year, Orthofix announced that it was finalizing agreements to settle the criminal and civil claims for $43 million.
5 Prior Guilty Pleas
Before the company's plea and settlement, five people pleaded guilty in the District of Massachusetts to paying kickbacks, lying to a grand jury and falsifying patient medical records, the U.S. Attorney's Office said. The defendants included a company vice president, a regional sales director, two territory managers and a physician's assistant employed by a doctor.
In the criminal case, the government is represented by U.S. Attorney Carmen M. Ortiz and Assistant U.S. Attorneys David S. Schumacher and Jeremy M. Sternberg of the U.S. Attorney's Office in Boston. Orthofix is represented by Brien T. O'Connor of Ropes & Gray in Boston and Jeffrey M. Schumm of Orthofix.
In the False Claims Act lawsuit, Bierman is represented by Lesley A. Skillen and Neil V. Getnick of Getnick & Getnick in New York, Scott J. Tucker of Tucker, Heifetz & Saltzman in Boston and G. Robert Blakey of the Notre Dame Law School in Notre Dame, Ind. Orthofix is represented by Kirsten V. Mayer, Justin J. Wolosz, Terrell J. Iandiorio and Brien O'Connor of Ropes & Gray.
The government is represented in the whistle-blower lawsuit by Shannon Kelley of the U.S. Attorney's Office in Boston.
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