Covidien to Pay $17.4M to Settle Kickbacks Allegations

Federal prosecutors said the illegal remuneration took the form of free or discounted medical practice and market development support for physicians.

Covidien LP will pay more than $17.4 million to settle whistleblower allegations that it provided illegal kickbacks to physicians to entice the use of its vein ablation products, the Department of Justice said.

The alleged kickbacks, violations of the False Claims Act and the Anti-Kickback Statute, took the form of free or discounted medical practice and market development support for physicians in California and Florida, DOJ said.

Assistant Attorney General Jody Hunt for DOJ's Civil Division said the settlement "serves as an important reminder to those in the healthcare community that unlawful kickbacks come in many forms and are not limited to monetary payments to providers."

"Providing free or discounted services to healthcare providers to induce the use of certain items or services can lead to excessive and unnecessary treatments, and drive up healthcare costs for everyone," Hunt said.

Federal prosecutors alleged that Covidien provided the illegal remuneration to physicians in California and Florida from Jan. 1, 2011, through Sept. 30, 2014, to induce them to buy Covidien's ClosureFAST radiofrequency ablation catheters that were billed to Medicare and to the California and Florida Medicaid programs.

The catheters are used to treat venous reflux disease, a disease often marked by the presence of varicose veins.

The illegal support allegedly provided by Covidien included customized marketing plans for specific vein practices; scheduling and conducting "lunch and learn" meetings and dinners with other physicians to drive referrals to specific vein practices; and providing assistance to specific vein practices in connection with planning, promoting, and conducting vein screening events to cultivate new patients for those practices.

"The government contended that Covidien provided discounted or free services to health providers – and so hoped to evade kickback charges," said Steven J. Ryan, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. "Companies seeking to buy clients through such arrangements can expect to pay a steep price."

Under the settlement agreement, Covidien will pay an additional $1.47 million to California and $1 million to Florida for claims settled by these state Medicaid programs. 

The settlement resolves whistleblower lawsuits filed by two former sales managers for Covidien and a former employee of one of Covidien's customers. The whistleblowers will share more than $3.1 million of the settlement.

HealthLeaders' requests for comment from Covidien were not returned Tuesday morning.