Medical Devices Present Opportunities for Fraud, but Whistleblowers Are Fighting Back

Medical devices can be big or small, ordinary or incredible. They include such disparate items as surgical face masks and cardiac defibrillators. In fiscal year 2020, Medicare paid $11.2 billion for durable (multiple use) medical equipment and $2.3 billion for non-durable (single use) medical equipment, a total of $13.5 billion for the two categories that include most medical devices. That amount of spending creates a big target for unscrupulous device manufacturers willing to resort to fraud. But where there’s fraud, there will be whistleblowers successfully fighting back.

One of the most common schemes medical device manufacturers use to get a piece of that $13.5 billion is enticing healthcare providers to order their products through the use of illegal kickbacks. For example, on July 28, 2022, Biotronik paid $12.95 million to settle allegations that it had paid kickbacks to cardiac physicians for implanting Biotronik’s cardiac rhythm management products. Biotronik’s scheme included paying physicians $400 per procedure to permit Biotronik employees to observe cardiac procedures, ostensibly for “training” purposes but really as a way to funnel kickbacks to doctors. Some physicians allegedly performed up to 10 procedures per day and received up to $4,000 per day in kickbacks from Biotronik.

In January 2017, Shire Pharmaceuticals LLC and its subsidiaries paid $350 million to settle allegations that it paid kickbacks to induce use of its bioengineered human skin substitute, Dermagraft. And in 2018, Abiomed paid $3.1 million to settle allegations that it had induced physicians to use its heart pumps by buying meals for physicians and their spouses at some of the most expensive restaurants in the country, spending as much as $450 per person.

Another type of fraudulent scheme related to medical devices involves what products the government will agree to reimburse. Medical devices are regulated by the Food and Drug Administration (FDA) and must comply with the Food Drug and Cosmetics Act. Typically the government will only purchase devices that have been approved by the FDA. When a manufacturer engages in fraud either in the process to obtain permission to sell the device, or marketing or selling the device for unapproved uses, it can result in FCA violations.

For instance, in 2016, Acclarent, Inc., a Johnson & Johnson subsidiary, paid $18 million to settle allegations that it fraudulently marketed a medical device outside of the uses approved by the FDA. Acclarent manufactured Relieva Stratus MicroFlow Spacer, a device the FDA approved to maintain sinus openings following surgery. The FDA rejected the company’s request to use Stratus to deliver drugs to a patient, only approving its use to deliver saline. Acclarent allegedly improperly marketed and sold Stratus as a drug delivery device nonetheless. In addition to the civil settlement, two former Acclarant executives were convicted of 10 misdemeanor counts of introducing adulterated and misbranded medical devices into interstate commerce.

Where money goes, fraud will follow. The all-too-common practices of kickbacks in the medical device industry, as well as selling devices for uses beyond their FDA approval, divert taxpayer resources that ought to be used to care for some of the most vulnerable members of our population. But they also create fertile ground for successful FCA cases brought by whistleblowers who have the courage to fight back.

Written by Regina Poserina of Cohen Milstein Sellers & Toll. Tony Munter of Price Benowitz. Fact checked by Julia-Jeane Lighten of Taxpayers Against Fraud.