Health Law

Medical Device Company Settles with Feds over Alleged Kickbacks to Physicians

By Todd A. Rodriguez

As yet another warning to physicians and the medical device industry, the Department of Justice has entered into a Deferred Prosecution Agreement with medical device maker Neuromtrix in connection with an alleged kickback arrangement with referring physicians.  

According to a press release by the US Attorney's Office for the District of Massachusetts, the settlement has to do with a medical device used in physicians' offices to assist in the diagnosis of neuropathies in peripheral nerves.  Physicians using the device are required to purchase disposable biosensors.  Accordingly to the press release, Neurometrix allegedly paid physicians in the form of free boxes of disposable biosensors to induce them to recommend purchase of the device to their colleagues. 

Under the Deferred Prosecution Agreement, Neurometrix has agreed to pay a criminal penalty of $1.2 million.  Neurometrix also agreed to pay $2,498,337 in civil damages and penalties for allegedly causing physicians to bill nerve conduction studies to Medicare using a higher code than was actually performed by the physicians.  The press release does not mention whether any action is being taken against the physicians in question.

It is apparent from this latest case that physician and device manufacturers are still willing to enter into questionable financial arrangements despite the numerous high-profile cases over the last few years.  Physicians considering entering into these relationships must be aware that where the devices in question are reimbursed by the Medicare or any other federal program or involve the submission of claims for services to those programs, any payment, in cash or anything else of value, may implicate the federal anti-kickback statute.  Violations of the anti-kickback statute are punishable by a fines of up to $25,000 per violation, up to five years in jail, or both, as well as civil money penalties of $50,000 for each violation.

Even where the arrangements do not involve federal payor programs, comparable state kickback laws may apply.  It is critical therefore that physicians carefully evaluate these arrangements and consult with experienced health care counsel before entering into them.

Full post as published by Physician Law on March 10, 2009 (boomark / email).