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Analysis

Life Spine, Top Execs, to Pay $6M to Settle Kickback Allegations

By John Commins  
   November 12, 2019

The company 'aggressively recruited' dozens of surgeons with the potential to use a high volume of the company's products and hired them as paid 'consultants.'

Medical device maker Life Spine Inc., its founder and a senior executive will pay $6 million to settle allegations that the medical device maker paid millions of dollars in kickbacks to surgeons to use their implants, the Department of Justice said.

Under the settlement, Life Spine will pay $5.5 million, founder Michael Butler will pay $375,000, and Vice President for Business Development Richard Greiber will pay $115,000. Each defendant also admitted to the illegal conduct alleged n the government complaint.

The settlement was based on financial disclosures by Life Spine, which determined the company's ability to pay, DOJ said.

The federal government in July intervened in a whistleblower lawsuit that was brought against Huntley, Illinois-based Life Spine which showed that, from 2012 through 2018, Geiber and Butler "aggressively recruited" dozens of surgeons with the potential to use a high volume of the company's products and hired them to serve as paid "consultants."

These paid consultants agreed to transfer their patents and patent applications to Life Spine in exchange for payments and promised support to bring the surgeons' new products to market, DOJ said.  

Butler admitted that he tracked surgeons' use of Life Spine products to ensure that surgeons were generating sales revenues for the company and were fulfilling their "commitment" to use Life Spine products.

Life Spine admitted that it generated a report that compared surgeon consulting, royalty, and intellectual property payments to surgeon product usage levels, and then calculated an return on investment for each surgeon based on those figures. If a surgeon's usage was too low, Life Spine managers, including Butler, pressured the surgeon to use more Life Spine products.

The alleged kickbacks took the form of medical education agreements that paid surgeons to provide training and/or educational services; product development agreements that paid surgeons royalties for their positive input on new products; and intellectual property agreements that paid surgeons large up-front acquisition fees for their patents/patent applications.

The surgeons who were paid kickbacks generated half of Life Spine’s domestic sales of spinal products from 2012 through 2018. DOJ said the payments violated the Anti-Kickback Statute that ultimately resulted in false claims for payment from Medicare and Medicaid.  

Life Spine said in a media release that it was "pleased" to announce the settlement.

"The company has made significant progress formalizing and strengthening its compliance program, a process that began before any discussions with the government," the company said

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Photo credit: Mark Van Scyoc / Shutterstock.com


KEY TAKEAWAYS

These paid consultants transferred patents to Life Spine in exchange for payments and promised support to bring the surgeons' new products to market.  

Life Spine tracked surgeons' use of the company's products to ensure that surgeons were generating sales revenues for the company and were fulfilling their 'commitment.'

Life Spine generated reports that compared surgeon consulting, royalty, and intellectual property payments to surgeon product usage levels, and then calculated an ROI for each surgeon based on those figures.

If a surgeon's usage was too low, Life Spine pressured the surgeon to use more of its products.


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