Medtronic Settles Kickback Probe

Medtronic Inc. is delivering a considerable dose of holiday cheer to the federal government, agreeing to pay $23.5 million to settle allegations that it paid doctors to use its pacemakers and defibrillators.

The settlement resolves two whistleblower lawsuits that claim the company paid doctors between $1,000 and $2,000 per patient to implant Medtronic pacemakers and defibrillators. The Minneapolis, Minn.-based firm allegedly used two post-market studies and two device registries as vehicles to pay the illegal kickbacks to doctors, according to the U.S. Justice Department. Prosecutors contend the kickbacks were used to convince physicians to switch from a competitor’s product or continue using Medtronic devices.

“Medicare and Medicaid beneficiaries depend on their physicians to make decisions based on sound medical judgment, especially when they are choosing which pacemaker or defibrillator to implant,” B. Todd Jones, a U.S. attorney in Minnesota, said in prepared remarks. “Medical device manufacturers must not be permitted to use improper payments to cloud that judgment.”

Medtronic previously disclosed the anticipated settlement and recorded a $24 million expense in its 2011 fiscal year, according to U.S. Securities and Exchange Commission filings. Marshall Stanton, M.D., vice president of clinical research and reimbursement for the Cardiac and Vascular Group at Medtronic, issued a brief statement about the settlement on behalf of the company, saying “Medtronic is happy to have this investigation behind us, so we can continue designing and executing clinical trials that generate evidence to improve patient care, outcomes and cost effectiveness.”

Medtronic’s settlement is the latest in a string of federal kickback investigations involving U.S.-based device manufacturers. Two years ago, Boston Scientific Corp. settled a kickback lawsuit for $22 million, while St. Jude Medical Inc. resolved allegations in January by paying $16 million. And Medtronic could wind up paying even more money to the federal government: The company has not yet resolved allegations that it paid kickbacks and royalties to doctors for using its Infuse bone growth product for unapproved procedures.

In the company’s most recent earnings call, Medtronic executives attributed an 8 percent revenue decline from its Cardiac Rhythm Disease Management unit to declining procedure volumes resulting from legal investigations around stents and defibrillators.