Healthcare Fraud

Covidien to Pay $20M to Settle Kickback Allegations Related to ClosureFast

Posted on March 15, 2019 by Medtech[y] Staff

According to the Department of Justice, Covidien, now part of Medtronic, has agreed to pay approximately $20 million to resolve False Claim Act allegations related to Anti-Kickback violations while marketing ClosureFast vein ablation catheters.

Under the settlement agreement, Covidien will pay $17.4 million to the U.S. and an additional $1,4 million to California and $1 million to Florida to settle claims by these state Medicaid programs.

The allegations stem from a whistleblower lawsuit filed by two former Covidien sales managers who alleged that Covidien violated the Anti-Kickback Statute by providing market development support to healthcare providers located in Florida and California in an effort to induce customers to purchase ClosureFast.

What is the Covidien ClosureFast System?

The ClosureFast device is used in procedures that treat venous reflux disease and patients typically present with varicose veins.

Market development and practice development is used by many medical device companies to provide tips and expertise in growing a physician's practice. However, there are times when lines are crossed.

In this particular case, Covidien developed marketing plans for individual vein practices which included running "lunch and learn" meetings and physician dinners to drive referrals to their customers using ClosureFast. Covidien also provided significant assistance in promoting and conducting vein screen events in an effort to drive new patients to their customers.

The Department of Justice states that the Anti-Kickback Act prohibits the payment of remuneration to induce the use or referral of items or services paid for by federal healthcare programs. This can include offers or payments made "in kind." According to the former Covidien sales managers, Erin Hayes and Richard Ponder, from January 1, 2011 through September 30, 2014, these market development programs were used to induce providers to purchase ClosureFast that were billed to Medicare and to California and Florida's Medicaid programs.

“The government contended that Covidien provided discounted or free services to health providers – and so hoped to evade kickback charges,” said Steven J. Ryan, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “Companies seeking to buy clients through such arrangements can expect to pay a steep price.”

For their effort in the federal recovery, Mr. Hayes and Mr. Ponder will receive $3,146,030.