MEDTRONIC’S $9.9 MILLION SETTLEMENT REINFORCES THE IMPORTANCE OF THE QUI TAM RELATOR

Handling Whistleblower Cases Nationwide from Newport News, Virginia

Medtronic, a Minnesota-based medical device manufacturer, agreed last week to pay a $9.9 million to settle a False Claims Act suit filed by a former employee of the company. The suit (United States ex rel. Schroeder v. Medtronic, Inc., No. 2:09-cv-0279 WBS EJB (E.D. Cal.)) alleged that Medtronic was providing kickbacks and monetary bonuses to physicians who used the company’s pacemakers and defibrillators.

Relator Adolfo Schroeder, a former manager for the company, will receive $1.73 million from the settlement. Schroeder came forward in 2009 with allegations that the company was offering illegal incentives such as direct monetary payments, trips, and gifts to encourage physicians to use Medtronic devices, a violation of the FCA Kickback statute. Schroeder also alleged that the company offered grant money to physicians to encourage them to support the use of Medtronic pacemakers for patients with mild heart failure symptoms, a non-FDA approved use. This “off-label” use led to large and unnecessary Medicare and Medicaid payouts, violating the False Claims Act. The recently unsealed suit also includes information about other violations observed by Schroeder, such as sales representatives being given access to patient files in order to identify candidates for their products.

Last year, healthcare industry-based FCA settlements totaled $13 billion, more than double that of all other types of FCA claims combined. While Medtronic chose to settle out of court and maintains that the payout is not an admission of guilt, this suit is a clear indicator that FCA enforcement in the healthcare field is not slowing down any time soon. The Department of Justice’s choice to join Schroeder’s original suit suggests that enforcement of these types of FCA violations may be of high concern for the DOJ, and will continue to be a source for further qui tam suits.

Representatives from a number of federal agencies made statements regarding the settlement and the government’s continued dedication to stopping healthcare-based FCA violations. However, this case highlights the importance of the qui tam whistleblower to the government’s mission. Lacking the resources to discover all instances of healthcare fraud on their own, the government continues to rely on individuals with insight inside these companies to submit claims of fraudulent action.