“Free Services” And False Claims Act

When does a “free service” violate the False Claims Act?

A recent Pennsylvania case involving Medtronic plc put some parameters around that question.

In a whistleblower suit filed by a Medtronic district manager, the company was accused of offering surgical support and other free services as kickbacks to induce surgeons and hospitals into buying the company’s implants. The whistleblower, who worked for the company’s cardiovascular group, alleged that the company pulled in clients by providing free surgical support, implant device follow-up, and free staff to clinics that purchased their medical devices.

Permissible Services and Illegal Intent

U.S. Federal District Judge Edward Smith ruled on June 19, 2017 that Medtronic is allowed under federal law to provide support services that are “specifically tied to support of the purchased product” so long as they don’t exceed ““substantial independent value to the purchaser.”

Smith, according to Law360, said a whistleblower, “must describe with sufficient specificity how Medtronic’s free services crossed the line separating permissible product support from illegal remuneration with independent value to the purchaser. [The accuser] must also demonstrate that any independent value to the purchaser was substantial.”

Law360 reported on June 20 that while the whistleblower alleged that Medtronic touted its free services and that it used these services to pull in new clients, Judge Smith agreed with Medtronic’s argument that the relator showed no evidence that the services provided by the medical device maker were motivated by an illegal intent.

“While [the whistleblower] alleges that the effect of the scheme was to induce physicians to refer Medtronic’s products to their patients, [the whistleblower] has not alleged that its subjective purpose was to do so,” Judge Smith said.

By Walter Eisner | Orthopedics This Week

Image Credit: U.S. Air Force / Airman 1st Class William Johnson

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About Peter Coffaro 1136 Articles

A growth-driven and strategic executive, Peter Coffaro commands more than 20 years of progressive management success within the medical device industry. As a District Sales Manager for Stryker Orthopaedics, Peter was responsible for managing and directing a regional sales force to achieve sales and profit goals within the Rocky Mountain region. Previously, he was the Director of Sales & Marketing for Amp Orthopedics. In this role, Peter was responsible for planning, developing, and leading all sales and marketing initiatives. Peter is a former orthopedic distributor in the Pacific Northwest. He has also worked with DePuy Orthopaedics as well as Zimmer, and held positions in sales, sales training, and sales management. Peter has an extensive background in organizational development, business development, sales management, negotiating and P&L management. Peter holds a B.S. degree in Biology from Northern Illinois University.

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