Medical Equipment Company, Olympus Corp., Agrees to Pay Record Settlement to Resolve Illegal Kickback Allegations of Payments to Doctors and Hospitals Under the False Claims Act

Written March 3, 2016 by Janine Arno

On March 1, 2016, the Department of Justice (DOJ) announced that Olympus Corp. of the Americas (OCA), the United States’ largest distributor of endoscopes and related equipment, will pay $623.2 million to resolve criminal charges and civil claims under the False Claims Act relating to a scheme to pay kickbacks to doctors and hospitals.  The DOJ also announced that a subsidiary of the distributor will pay $22.8 million to resolve criminal charges relating to the Foreign Corrupt Practices Act in Latin America.

According to the DOJ, this settlement is the largest total amount paid in U.S. history by a medical device company for violations of the Anti-Kickback Statute (AKS), which prohibits payments to induce purchases paid for by federal health care programs. Those kickbacks included OCA giving a hospital a $5,000 grant to set up a $750,000 sale, refusing to give a $50,000 research grant until a hospital agreed to buy their medical equipment, paying for three doctors to go to Japan in exchange for switching to OCA, and giving a doctor with buying power in a New York medical center $400,000 in free equipment.   These and other kickbacks helped OCA obtain more than $600 million in sales and realize gross profits of more than $230 million.

“The Department of Justice has longstanding concerns about improper financial relationships between medical device manufacturers and the health care providers who prescribe or use their products,” said Principal Deputy Assistant Attorney General Benjamin Mizer of the DOJ’s Civil Division.  “Such relationships can improperly influence a provider’s judgment about a patient’s health care needs, result in the use of inferior or overpriced equipment, and drive up health care costs for everybody.  In addition to yielding a substantial recovery for taxpayers, this settlement should send a clear message that we will not tolerate these types of abusive arrangements, and the pernicious effects they can have on our health care system.”

Details of OCA’s kickback scheme were brought to the government’s attention by John Slowik, OCA’s former chief compliance officer, who brought a lawsuit in federal court in New Jersey under the qui tam provisions of the federal and various state False Claims Acts.  Under the False Claims Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.   As a result of Mr. Slowik’s whistleblower efforts, he will receive $44.1 million from the federal share and $7 million from the state share of the civil settlement amount.

The case is captioned as United States ex rel. John Slowik et al. v. Olympus Corporation of the Americas, et al., Civ. No. 10-cv-5994 (D.N.J.)

For additional information about the False Claims Act, and the Firm’s services and resources for whistleblowers in general, please visit the Robbins Geller Rudman & Dowd LLP whistleblower site.