Johnson & Johnson Subsidiary Agrees to Pay $9.75M to Resolve Allegations of Providing Illegal Kickbacks to Surgeon

Johnson & Johnson, DePuy Synthes, Inc. and DePuy Synthes Sales, Inc. (collectively, DePuy) have agreed to pay approximately $9.75 million to resolve allegations that DePuy violated the Anti-Kickback Statute and the False Claims Act by providing free products to a Massachusetts-based surgeon (Surgeon) to induce the Surgeon to use DePuy products in his procedures.

DePuy manufactures and distributes medical devices, including spinal implants, and is headquartered in Raynham, Mass.

According to the settlement agreement, DePuy admits, acknowledges and accepts its responsibility for the facts underlying the government’s allegations. From at least July 2013 through February 2018, DePuy gave the Surgeon DePuy products, including implants and instruments, such as cages, rods, screws, plates and modular access and retraction systems. The Surgeon performed more than 20 surgeries over the course of multiple trips to six countries, specifically, Bahrain, Kingdom of Saudi Arabia, Kuwait, Lebanon, the United Arab Emirates and Qatar. In many of these surgeries, the Surgeon used DePuy products, worth thousands of dollars, that DePuy sales representatives had provided to him. The DePuy products that DePuy gave to the Surgeon were sometimes not available at the hospitals and/or with the third-party sales distributors in the countries where the Surgeon operated overseas. DePuy did not request or receive payment from the Surgeon, the hospitals, or the third-party sales distributors in the countries where the Surgeon operated overseas; nor did the Surgeon, the overseas hospitals, the third-party sales distributors, or anyone else, pay DePuy for the products that it gave to the Surgeon and the Surgeon used abroad.

The Anti-Kickback Statute (AKS) prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare and other federally funded programs. The statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients. The United States contends that DePuy knowingly and willfully provided free DePuy products, worth over $100,000, to the Surgeon for his overseas surgeries, to induce him to use DePuy’s products in spine surgeries he performed on Medicare and Medicaid patients in Massachusetts in violation of the AKS.

“Today the United States resolves allegations that DePuy provided over $100,000 worth of free product to a surgeon in order to secure and reward that physician’s continued business,” said United States Attorney Rachael S. Rollins. “Unlawful kickbacks can severely distort medical judgment as well as the market for medical devices. The millions of patients that depend on our health care system deserve untainted medical decisions. This settlement reflects our commitment to stamping out illegal kickbacks.”

“Medical device manufacturers are prohibited from providing free items to induce a physician to use their devices,” said Principal Deputy Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “When medical devices are used in surgical procedures, patients deserve to know that their device was selected based on quality of care considerations and not on improper benefits from manufacturers.”

“The American people, as both taxpayers and consumers, expect medical device manufacturers like DePuy to abide by relevant laws and regulations. When such health care companies provide illegal kickbacks in order to boost profits, their actions erode public confidence in the health care system, can compromise the patient-physician relationship, and waste government health program funding,” said Phillip M. Coyne, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General. “In close cooperation with our law enforcement partners, we will continue to thoroughly investigate allegations of fraud to protect both federal health care programs and those served by them.”

“Today’s settlement makes it crystal clear that it is illegal for medical device companies to provide physicians with free medical products to win business and boost their bottom line through illegal kickback schemes,” said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigations, Boston Division. “Every year, health care fraud costs taxpayers billions of dollars. It is not a victimless crime and this unscrupulous scheme orchestrated by DePuy is just one example of how the FBI and our partners are working hard every day to protect both patients and taxpayers.”

The allegations resolved by the settlement agreement were originally brought in a case filed under the whistleblower, or qui tam, provisions of the False Claims Act. The case is captioned United States et al. ex rel. John Doe v. Johnson & Johnson, et al., (D. Mass. 2017). The whistleblower will receive approximately $1,852,500 from the recovery.

U.S. Attorney Rollins, HHS-OIG SAC Coyne and FBI SAC Bonavolonta made the announcement today. The VA OIG and FDA-OCI also provided assistance. Assistant U.S. Attorneys Jessica J. Weber, Andrew A. Caffrey, III and Abraham R. George of Rollins’s Affirmative Civil Enforcement Unit, and Senior Trial Counsel Benjamin C. Wei of the Department of Justice’s Civil Division handled this matter. The Commonwealth of Massachusetts was represented by Assistant Attorney General Kevin Lownds.