DuPuy Pays Millions to Settle, But This Kickback Lesson is Free For You

January 30, 2023

On January 20, 2023, the U.S. Department of Justice announced a $9.75 million civil settlement with DePuy Synthes, Inc. (“DePuy”), a subsidiary of Johnson & Johnson, involving alleged kickbacks to a surgeon in the form of free spinal implants and tools for use in surgeries that the surgeon performed overseas.

Although it’s unlikely that you’re doing cases in Bahrain, Saudi Arabia, or the several other Middle Eastern countries listed in the settlement agreement, as did the unnamed surgeon, the settlement contains a lesson completely applicable to U.S.-based practice.

In the settlement, DuPuy admitted, among other things that:

  • From at least July 2013 through February 2018 (the “Relevant Period”), it, through sales representatives, gave, in the U.S., implants and instruments, including cages, rods, screws, plates, and a modular access and retraction system (“products”) to a surgeon who used some of the products to conduct spinal surgeries overseas, including in Bahrain, the Kingdom of Saudi Arabia, Kuwait, Lebanon, the United Arab Emirates, and Qatar, for certain patients in the Middle East who were not Medicare or Medicaid beneficiaries.
  • Those products were sometimes not available at the hospitals and/or with the third-party sales distributors in the countries where the surgeon operated overseas.
  • The surgeon typically traveled with the DePuy products that DePuy, acting through sales representatives, gave to him. Neither the surgeon, nor the hospitals he operated at overseas, nor the third-party sales distributors, nor anyone else, paid DePuy for those products that the surgeon implanted into patients or otherwise used in surgery.
  • During the Relevant Period, and continuing for at least a year, the surgeon used DePuy products in his spinal surgeries in Boston, Massachusetts, including surgeries for Medicare and Medicaid beneficiaries for which Medicare and Medicaid paid claims.

Although DuPuy admitted to the above facts and took responsibility for them, it must be noted that it did not admit to all of the allegations levied against it in the civil proceedings.

How This Relates to You Even if You Don’t Know the Middle East from the Midwest

The facts alleged in the DuPuy case are analogous to a rather common fact pattern and a common federal Anti-Kickback Statue (“AKS”) mistake.

The AKS prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare and other federally funded programs.

Note that nothing in the statute says that the remuneration has to be within the direct context of a referral of Medicare or other federally funded program patients. Rather, the remuneration, wherever it is, must simply be an inducement for the referral of those patients.

The mistake commonly made is that parties attempt to carve out Medicare or other federally funded program patients from their remuneration scheme. Examples might be:

  1. A group of surgeons controlling an ASC demand that the contracted anesthesia group provide nursing support at the ASC to help “care for the anesthesiologists’ non-Medicare or other federally funded patients.”
  2. A DME supplier offers free supplies to an orthopedic surgeon’s office, with the proviso that they cannot be dispensed to Medicare or other federally funded patients.

The remuneration is illegal, whether or not the channel of providing that inducement is within or without the context of providing services to Medicare or other federal health care program patients, if the remuneration is intended to induce the referral of those patients.

Of course, it goes without saying that other laws may be triggered by inducements of any kind, whether or not they relate to any third party payer of any sort, private or governmental.

As I often say, just like in carpentry, measure twice, cut once; that is, vet the deal at least twice before embarking in any healthcare related business arrangement, even with a giant multinational corporation.

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