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Medical implant makers settle probe

September 28, 2007|From Reuters

Four medical device implant makers will pay about $310 million and agree to federal monitoring and other reforms to settle a government probe into improper consulting contracts with surgeons, prosecutors said Thursday.

Zimmer Holdings, Johnson & Johnson unit DePuy Orthopaedics Inc., Smith & Nephew and Biomet Inc. will pay civil settlements and avoid criminal prosecution by agreeing to reforms, said U.S. Atty. Christopher Christie in New Jersey.

A fifth company, Stryker Corp., will pay no civil settlement, but it has entered into a nonprosecution agreement with the government and agreed to the reforms, including the federal monitoring. Stryker voluntarily cooperated with prosecutors before any of the other companies, Christie said.

Zimmer will pay $169.5 million, DePuy will pay $84.7 million, Smith & Nephew about $28.9 million and Biomet $26.9 million.

Together, the five companies account for nearly 95% of the market for hip and knee surgical implants, prosecutors said.

Zimmer, DePuy, Biomet and Smith & Nephew have entered into deferred prosecution agreements with the government that will expire in 18 months if the reforms are carried out. Criminal complaints were filed against the four companies, accusing them of conspiring to violate federal antikickback laws.

Prosecutors accused the four companies of using consulting deals with orthopedic surgeons as inducements to use their products.

This was common practice from at least 2002 through 2006, with surgeons paid tens of thousands to hundreds of thousands of dollars a year for consulting contracts, including trips and other perks, the government contends.

"Prior to our investigation, many orthopedic surgeons . . . made decisions predicated on how much money they could make -- choosing which device to implant by going to the highest bidder," Christie said.

"With these agreements in place, we expect doctors to make decisions based on what is in the best interests of their patients, not the best interests of their bank accounts."

Under the agreement with the government, physicians who serve as consultants must disclose the arrangements to their patients. The companies also must disclose on their websites the name of each consultant and what they have been paid.

Separately, Medtronic Inc. said Thursday that Sen. Charles E. Grassley (R-Iowa) had raised questions about payments the medical device maker made to spine surgeons. The inquiry comes after a $40-million settlement that the company reached with the U.S. government last year to settle allegations that it made improper payments to doctors.

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