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Medical device maker Medtronic has agreed to pay $40 million to settle civil allegations that it paid kickbacks to doctors.
The allegations centered around its Memphis, Tenn.-based subsidiary Medtronic Sofamor Danek, which makes implants used in back surgery to stabilize a patient's spine.
The government said that between 1998 and 2003, Medtronic paid kickbacks to doctors, including sham consulting fees, bogus royalty payments, and trips to tourist destinations.
Medtronic said it has entered a five-year agreement to strengthen employee training and compliance programs for its sales and marketing practices.
The federal investigation began with a whistleblower lawsuit. Two such lawsuits are pending. The first, filed in 2002, remains sealed, according to Memphis attorney Andrew R. Carr Jr.
His client, Jacqueline Kay Poteet, filed a second whistleblower lawsuit in 2004. Poteet, a former employee of Medtronic Sofamor Danek, made travel arrangements for doctors to company conferences.
Her lawsuit alleged that Medtronic paid millions of dollars to more than a dozen doctors nationwide, prompting them to perform unnecessary spinal surgeries and otherwise affecting their judgment. One surgeon was allegedly paid $400,000 for eight days of consulting per year.
Another received $1.39 million from 2001 through May 2005, according to the lawsuit.
She alleged the payments were used to induce doctors to use Medtronic products and to recruit other doctors to do the same.
Medtronic said the settlement called for the government to seek the dismissal of both lawsuits.
Carr said the whistleblower statute permits that, but he said he would oppose dismissal of his case because he doesn't believe its allegations are exactly the same as the first, sealed case. He said that case has been described to him but that he doesn't know its details.
Usually, whistleblowers are entitled to a portion (often 10 - 30%) of the money from a settlement. But in this case, Medtronic said the $40 million would be paid into an escrow account and eventually to the Department of Justice.
Carr has said he'll fight any federal effort to keep a portion of the settlement money from his client.