The U.S. Department of Justice announced last week that medical device company Dfine has agreed to pay the United States $2.39 million to resolve allegations that it paid kickbacks to induce physicians to use its devices for treating spinal fractures.
The United States contends that San Jose, Calif.-based DFine used customer surveys known as User Preference Evaluations (UPEs) as vehicles to illegally pay participating physicians to induce them to use the company’s vertebral augmentation devices.
Although DFine ostensibly collected product information from participating physicians, each UPE survey required use of a new DFine device in a patient, the majority of whom were Medicare beneficiaries. In each case, DFine paid physicians up to $500 per patient to participate in the survey. The government alleges that DFine provided improper remuneration in the form of travel expenses, lavish dinners, entertainment and promotional speaker fees to doctors located in Chicago and Little Rock, Ark.
The United States further alleges that DFine solicited physicians to convert their business from a competitor’s product and/or persuade the physicians to continue using DFine products.
According to the federal government, DFine’s alleged conduct violated the Anti-Kickback Statute. Among other things, that law prohibits offering or paying remuneration to induce referrals of items or services covered by Medicare, Medicaid or other federally funded programs.
“Decisions about devices used to treat serious spinal conditions should be based on the best interests of the patient, not on whether the manufacturer is going to pay a kickback,” said Tony West, assistant attorney general for the Justice Department’s Civil Division, in a statement. “These sorts of improper financial incentives not only undermine the integrity of medical decisions, they also waste taxpayer funds and are unfair to competitors who are trying to play by the rules.”
Also as part of the settlement, DFine has agreed to enter into an expansive corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services. That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which allegedly gave rise to this matter.
This action was initiated by the filing of a qui tam, or whistleblower, action under the False Claims Act by Brian Eberhard. The act permits a whistleblower file a lawsuit on behalf of the United States and share in any recovery. In this case Eberhard will receive approximately $250,000.
[See also: Fraud costs healthcare industry up to $600M a year]