ST. JUDE MEDICAL INC. PAYS $3.65 MILLION FOR ALLEGEDLY INFLATING CARDIAC DEVICE PRICES

FROM:  U.S. DEPARTMENT OF JUSTICE
Thursday, May 31, 2012
Minnesota-based St. Jude Medical Pays U.S. $3.65 Million to Settle Claims That It Overcharged for Implantable Cardiac Devices St. Jude Medical Inc. has agreed to pay the United States $3.65 million to resolve civil allegations under the False Claims Act that the company inflated the cost of replacement pacemakers and defibrillators purchased by the Departments of Defense and Veterans Affairs, the Justice Department announced today. St. Paul, Minn.-based St. Jude Medical develops, manufactures and distributes cardiovascular and implantable neurostimulation medical devices.
         
The settlement resolves allegations that St. Jude actively marketed its pacemakers and defibrillators by touting the generous credits available should a device need to be replaced while covered under warranty.   At the same time, St. Jude allegedly knew that it failed to grant appropriate credits to the purchasers of devices in a large number of cases where a product was replaced while still under warranty.   As a result, the United States contended that St. Jude submitted invoices to Department of Veterans Affairs hospitals and Department of Defense military treatment facilities that overstated the cost for replacement pacemakers or defibrillators.
“As medical device use becomes more prevalent, it is essential that device manufactures provide federal health care programs with the warranty discounts they are entitled to receive,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.   “If medical device manufacturers are actively concealing warranty credits from the government, the department will use all the tools at its disposal to hold them accountable.”

“Like any other customer, the government is entitled to get what it paid for,” said Carmen M. Ortiz, U.S. Attorney for the District of Massachusetts.   “Where a vendor warrants that its products will last a certain amount of time and then does not honor warranty claims when the products fail early, actions like this are appropriate.”
The civil settlement resolves allegations initially brought by two whistleblowers in federal court in the District of Massachusetts under the qui tam, or whistleblower, provisions of the False Claims Act, which allow for private citizens to bring civil actions on behalf of the United States and share in any recovery.   As part of today’s resolution, the whistleblowers will receive $730,000 from the settlement amount.

 “The Department of Veterans Affairs, Office of Inspector General continues with its partners at the U.S. Attorney’s Office and other federal investigative agencies to combat fraud, waste, and abuse within the health care industry,” said Jeffrey G. Hughes, Special Agent in Charge, Department of Veterans Affairs, Office of Inspector General.  “This civil settlement will return funds to VA to benefit our nation’s veterans.”

“The Defense Criminal Investigative Service is committed to working with the U.S. Department of Justice and the U.S. Department of Veterans Affairs, Office of Inspector General, to ensure that taxpayer dollars are properly spent and that the health care needs of our military members and their families are met,” said Edward Bradley, Special Agent-in-Charge, Defense Criminal Investigative Service, Northeast Field Office.   “Today’s settlement demonstrates the importance of this collaborative effort to hold companies accountable when they fail to honor warranty discounts to which the U.S. Department of Defense is entitled.”

The settlement was the result of an investigation by the U.S. Attorney’s Office for the District of Massachusetts, the Justice Department’s Civil Division, and the Offices of Inspector General at the U.S. Department of Defense and Veterans Affairs.   The claims settled by this agreement are allegations only, and there has been no determination of liability.