Medical device company Arthrex Inc has agreed to pay $16 million to settle claims that it paid a Colorado orthopedic surgeon millions of dollars in kickbacks to use and recommend its products, the U.S. Justice Department said on Monday.
The settlement resolves allegations first raised in a whistleblower lawsuit filed in Boston federal court that had accused Naples, Florida-based Arthrex of causing Medicare to make payments for its products based on false claims.
Arthrex did not admit wrongdoing as part of the settlement. Jack Pirozzolo, Arthrex’s lawyer at Sidley Austin, did not respond to a request for comment.
The lawsuit was brought under the False Claims Act, which allows whistleblowers to sue companies on the government’s behalf to recover taxpayer money paid out based on fraudulent claims. The Justice Department may intervene in such cases following an investigation.
The government said that Arthrex from August 2010 through March 2021 made payments to a doctor in Vail, Colorado, to purchase, order or recommend Arthrex medical devices under the guise of a royalties agreement.
The department said the agreement ostensibly covered contributions of the doctor, Peter Millett, to the development of its SutureBridge and SpeedBridge products used in joint repair surgeries.
The government said Arthrex paid him at a higher percentage rate than its usual for royalties.
The government alleged Arthrex as a result violated the Anti-Kickback Statute and, in turn, the False Claims Act by causing third parties to submit false claims for payment to the government healthcare program Medicare.
The department has not brought a case against Millett. Marc Kasowitz, his lawyer at Kasowitz Benson Torres, in a statement said the allegations concerning the royalty payments are “manifestly untrue” and that he was entitled to the payments.
“The fact that DOJ has not commenced any action against Dr. Millett confirms that he has never engaged in any improper or illegal conduct,” Kasowitz said.
Under the False Claims Act, whistleblowers are entitled to a percentage of any recovery. In this case, Joseph Shea, a former New England sales representative for one of Arthrex’s distributors, will receive $2.5 million.
“We are grateful the United States moved so quickly and worked collaboratively with us to obtain this settlement,” said David Lieberman, a lawyer for Shea at Whistleblower Law Collaborative.
The case is U.S. ex rel. Joseph P. Shea v. Arthrex Inc, U.S. District Court, District of Massachusetts, No. 20-10210.
For the United States: David Derusha and Charles Weinograd of the U.S. Attorney’s Office for the District of Massachusetts; and Andrew Jaco of the U.S. Justice Department’s Civil Division.
For Arthrex: Jack Pirozzolo, Mark Langdon and Joseph Dosch of Sidley Austin
For Shea: David Lieberman, Suzanne Durrell and Robert Thomas of Whistleblower Law Collaborative
EDITOR’S NOTE: This story has been updated to include comment from the doctor’s lawyer.
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