Dive Brief:

• Medtronic has agreed to pay $9.2 million to settle allegations it violated U.S. law by paying kickbacks to a neurosurgeon and failing to accurately report payments.

• The Department of Justice accused Medtronic of seeking to increase sales of its SynchroMed II infusion pumps by paying $87,000 to hold more than 130 events at a restaurant owned by a neurosurgeon they sought to influence.  

• Medtronic settled the allegations without admitting liability. An internal investigation by the company led to the termination of a sales representative and manager, plus the disciplining of 12 employees who knew about the events. The company in a statement noted these actions and said it is committed to the highest ethical standards.

Dive Insight:

The case against Medtronic centers on events that allegedly took place from 2010 to 2019 in South Dakota. According to DOJ, actions taken by Medtronic employees in the state caused the submission of false or fraudulent claims to Medicare, Medicaid and Tricare.

DOJ said Medtronic identified neurosurgeon Wilson Asfora as a “targeted physician” in the state and knew he owned a local restaurant, the Carnaval Brazilian Grill. Asfora told Medtronic the Carnaval’s business was slow, according to DOJ, and asked it to pay for events at the restaurant. 

Over a nine-year period, Medtronic allegedly paid $87,000 to hold more than 130 events at Carnaval. Internal expense reports said Medtronic discussed educational content or business information at the events. According to DOJ, the expense reports were intended to hide “inappropriate conduct.” In reality, DOJ said, the events were social gatherings with little to no talk about Medtronic products.

“Medtronic often paid for lavish meals and alcohol, with dinners from multicourse tasting menus and wines paired to each course,” DOJ said. “The setting for these wine dinners was not appropriate for educational or clinical discussion as attendees typically sat at a family-style table in an open area of Carnaval near the bar, with members of the public seated nearby.”

DOJ took issue with the guest list, too, accusing Medtronic of allowing Asfora to invite his “social acquaintances, business partners, favored colleagues, and potential and existing referral sources.” Medtronic allegedly paid for their meals and drinks. Spouses and significant others also attended most of the events at Asfora’s invitation, DOJ said, and Medtronic paid for some of their meals and drinks. 

In DOJ’s view, Medtronic knowingly and willingly paid kickbacks, in the form of payments to Carnaval, to induce Asfora to use its SynchroMed II infusion pumps. Medtronic agreed to pay $8.1 million to settle that allegation without admitting liability.

The remaining $1.1 million of the settlement agreement relates to allegations that Medtronic failed to accurately report payments to CMS and in doing so violated the Open Payments Program. Under the rules of the program, Medtronic needed to report payments to Asfora and Carnaval. DOJ said Medtronic employees withheld knowledge of Asfora’s ownership of Carnaval from their compliance department. Medtronic reported the value of what each physician consumed, not the total it paid to Carnaval.

"The settlement agreement contains no admission of liability," according to a company statement emailed by a spokesperson. "Medtronic remains committed to maintaining the highest standards of ethical conduct and compliance with all applicable regulatory guidelines."

News of the settlement comes one year after Sanford Health agreed to pay $20 million to settle False Claims Act allegations brought by DOJ in relation to surgeries performed by Asfora at the hospital. DOJ filed a false claims complaint against Asfora shortly after disclosing the Sanford settlement. That case is pending.