Biomet Reaches Settlement Agreement for Bribery Charges

Facing allegations of bribery from the U.S. Department of Justice (DOC) and the U.S. Securities and Exchange Commission (SEC), Biomet Inc. has agreed to a settlement with the payment of a fine and restitution (to the tune of almost $23 million), in addition to entering a deferred prosecution agreement (DPA).

Through the DPA, the DOJ agrees not to prosecute the company provided that Biomet satisfies its obligations under the agreement during the next three years. The DPA also calls for the appointment of an independent external compliance monitor to review the company’s compliance, particularly in relation to its international sales practices for at least the first 18 months of the three-year term of the DPA.

A total of nearly $17.3 million of the settlement will be paid to resolve the charges brought by the DOC, and approximately $5.6 million will be paid to fulfill the SEC’s requirement that Biomet purge any profits and pay prejudgment interest.

The DOC and SEC allege that the company was in violation of the Foreign Corrupt Practices Act (FCPA) by bribing public doctors to gain their business in Argentina, Brazil and China between 2000 and August 2008. The agencies also allege that once the corrupt practices were identified, Biomet’s compliance and internal audit functions failed to cease unlawful payments to doctors. This is despite Biomet’s insistence in a statement issued today that they have “conducted [their] own extensive internal investigations, compliance assessments and audits.”

An email from a Biomet-linked distributor in China puts the nature of the bribery that took place in context. An excerpt released by the SEC reads:

“[Doctor] is the department head of [public hospital]. [Doctor] uses about 10 hips and knees a month and it’s on an uptrend, as he told us over dinner a week ago. …Many key surgeons in Shanghai are buddies of his. A kind word on Biomet from him goes a long way for us. Dinner has been set for the evening of the 24th. It will be nice. But dinner aside, I’ve got to send him to Switzerland to visit his daughter.”

Bribery to gain medical device business is often not as simple as cash changing hands. The suggestion of a vacation or an expensive dinner out is as effective and unethical as the imaginary cash-under-the-table bribe, and it is these practices that the FCPA seeks to identify and stop. Biomet is the third medical device company to pay a criminal penalty and sign a DPA for bribery of doctors overseas or employed by foreign governments.

The other side of the matter is, of course, the proper identification of corrupt practices.

In the United States, for example, the Physician Payments Sunshine Act, introduced in 2007, was meant to create a law common to all 50 states that would shed light on all monetary and other types of exchanges between healthcare manufacturers and physicians, thereby making bribery and other corrupt practices difficult or impossible. The federal law went into effect on Jan. 1 this year. It has, however, had the additional effect of creating legal obstacles for collaborations between manufacturers and physicians.

Biomet has neither admitted nor denied guilt in the matter brought against them, but in their aforementioned statement have made it clear that they are taking steps, as mandated in their deferred prosecution agreement, to prevent these corrupt practices from occurring again.

“Biomet has long been committed to upholding the highest standards of ethical and legal conduct both in the United States and abroad. Moving forward, we intend to continue to adhere to our enhanced global compliance procedures, and to promote the company’s commitment to the highest ethical standards in all the markets that we serve, according to the statement released by the Warsaw, Ind.-based firm.