Feds Dismiss Charges Against Orthopedic Device Manufacturers

The U.S. Department of Justice (DOJ) has dismissed criminal charges against four orthopedic device makers that were accused of violating federal anti-kickback laws for making improper payments to surgeons who used their products. A fifth device maker avoided charges and cooperated early on.

Officials at the U.S. Attorney’s Office in Newark, N.J., dismissed complaints against Zimmer Holdings Inc., Biomet Inc., and the DePuy division of Johnson & Johnson (all Warsaw, Ind.), as well as London-based Smith & Nephew, after the companies completed 18 months of mandated reforms. A fifth company, Kalamazoo, Mich.-based Stryker Corp., also completed the terms of its agreement with the government, but it cooperated in the criminal investigation early on and was not the subject of a complaint or fines. Under the deferred prosecution agreements, Zimmer paid $169.5 million; Johnson & Johnson, $84.7 million; Smith & Nephew, $28.9 million; and Biomet, $26.9 million.

The complaints, which were filed in September 2007, claimed the firms handed out excessive consulting fees to physicians as incentive to use their products. The DOJ also alleged the use of improper perks or excessive payments for physician education or travel. Consulting payments to surgeons by the companies dipped to $105 million in 2008 from $272 million in 2007, while the total number of physicians receiving payments from the companies declined to 628 in 2008 from 1,693 in 2007, according to the Department of Justice.

The DOJ began investigating the industry in 2005.