- Medical Equipment Distributor Gets $646m Compliance Reminder
- March 18, 2016 | Authors: Richard H. Blake; Rick L. Hindmand; Jane Marie Pine Wood
- Law Firms: McDonald Hopkins LLC - Cleveland Office ; McDonald Hopkins LLC - Chicago Office ; McDonald Hopkins LLC - Cleveland Office
- The Department of Justice (DOJ) provided a fresh reminder this week of the importance of effective compliance programs when it announced two related settlements requiring the nation’s leading endoscope distributor and its subsidiary to pay a combined $646 million to resolve kickback allegations under federal and state False Claims Acts and the Foreign Corrupt Practices Act (FCPA). The DOJ touted this as the largest payment to date for violations of the Medicare/Medicaid Anti-Kickback Statute by a medical device company.
Olympus Corp. of the Americas (OCA) agreed to pay $623.2 million to resolve civil and criminal allegations that it paid kickbacks to physicians and hospitals in order to induce purchases of OCA’s endoscopes and related equipment. The alleged kickbacks included consulting payments that were characterized as shams, as well as foreign travel, lavish meals, grant money and free endoscopes.
The DOJ’s press release highlighted the absence of compliance policies, with U.S. Attorney Paul J. Fishman observing that OCA and its subsidiary “dropped the compliance ball and failed to have in place policies and practices that would have prevented the substantial kickbacks and bribes they paid,” and that “It is appropriate that they be punished for that.” The complaint alleged that OCA lacked training and compliance programs and delayed in creating the compliance officer position and hiring an experienced compliance professional.
In addition to the record payments, OCA is subject to a deferred prosecution agreement (DPA) and corporate integrity agreement (CIA), and must retain a compliance monitor for three years.
The false claims lawsuit was filed by John Slowik, a former 18-year employee and chief compliance officer of OCA who alleged that he faced retaliation, harassment and severe resistance when he tried to stop the payments. The whistleblower will receive over $51 million as his share of the settlement amount.
OCA’s Latin American subsidiary agreed to pay $22.8 million to resolve criminal charges under the FCPA for paying healthcare practitioners in Latin America to increase sales. The payments included cash, money transfers, grants, personal travel and free or heavily discounted equipment, most of which were made through training centers as purported education and training expenses. Principal Deputy Assistant Attorney General Bitkower stated that “The FCPA resolution announced today demonstrates the department’s commitment to ensuring the integrity of the health-care equipment market, regardless whether the illegal bribes occur in the U.S. or abroad."
Why you need a culture of compliance
These settlements should be viewed as a warning of the need to establish a culture of compliance along with related compliance policies and practices. Recipients of questionable benefits should also take care to ensure that their financial and referral relationships comply with all applicable laws, regulations and standards, including the Stark Law, the Medicare/Medicaid anti-kickback statute, the FCPA and state laws and regulations.
As we have previously noted, regulators and DOJ officials have signaled that physicians and others who solicit or receive payments in exchange for referrals are responsible for accepting improper compensation tied to referrals.