Heart Device Maker, Hospitals in Three States Will Pay $3.8M to Settle Whistleblower Kickback Allegations

John Commins, June 7, 2010

Heart device maker St. Jude Medical Inc. and hospitals in Ohio, Minnesota, and Kentucky have paid the United States $3.8 million to settle whistleblower false claim allegations that St. Jude paid the hospitals kickbacks to secure heart-device business, the Justice Department announced.

St. Jude Medical Inc., based in St. Paul, MN, will pay $3.7 million. Parma Community General Hospital, in Parma, OH, will pay $40,000; and Norton Healthcare in Louisville, KY, will pay $133,300.

Federal prosecutors said in a media release that the kickbacks included alleged retroactive rebates that were paid based on a hospital's previous purchases of St. Jude heart-device equipment, and rebates that St. Jude paid for purchases of heart-device equipment sold by its competitors to induce future purchases of similar equipment from St. Jude.

"Hospitals should base their purchasing decisions on what is in the best interests of their patients," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We will act aggressively to ensure that choices about healthcare are not tainted by illegal kickbacks.”

Calls to St. Jude Medical Inc. and Parma were not immediately returned Friday afternoon.

The settlement was initiated by whistleblower Jerry Hudson, who will receive $640,050.

Norton Healthcare issued a statement late Friday from Chief Legal Officer Robert Azar, which stated the following:

"As a result of its involvement in pending litigation not involving Norton Healthcare, the federal government identified customer rebate programs from a medical device manufacturer that were determined to be problematic.

"Norton participated in one of these rebate programs for a year beginning in 2003. When the federal government brought this matter to our attention last year, we opted to voluntarily resolve the issue through settlement rather than the possibility of litigation.

"Norton Healthcare has no other similar vendor arrangements and has now satisfactorily concluded this matter without acknowledging any inappropriate internal business practices."

John Commins

John Commins is a senior editor at HealthLeaders Media.

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