WASHINGTON – Guidant LLC, a wholly owned subsidiary of Boston Scientific Corp. of Natick, Mass., has agreed to pay the United States $9.25 million to resolve False Claims Act allegations, the Justice Department announced today. The government alleges that the company inflated the cost of replacement pacemakers and defibrillators to federal health care programs by knowingly failing to grant warranty credits and rebates to hospitals for pacemakers and defibrillators that were explanted while covered under a product warranty or another credit program.
The settlement resolves allegations that Guidant actively promoted the longevity and reliability of its pacemakers and defibrillators to physicians in an effort to convince them to purchase Guidant products over competing devices. Guidant reinforced these claims by touting the generous credits available should a device need to be replaced while covered under warranty.
At the same time, Guidant allegedly was fully aware that it failed to grant an appropriate credit to the purchaser of the device in a large number of cases where a product failed while still under warranty. As a result, the United States contends that Guidant submitted invoices to Department of Veterans Affairs hospitals and Department of Defense facilities that overstated the cost for a replacement pacemaker or defibrillator. In addition, Guidant’s alleged submission of inflated invoices for pacemakers and defibrillators to private hospitals caused these hospitals to overstate the cost of these devices on hospital cost reports, resulting in Medicare paying more for pacemakers and defibrillators than it otherwise should have.
“Overcharging for lifesaving medical devices wastes taxpayer dollars,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “As we all look for ways to reduce public expenditures, settlements like this one – which recapture funds that were spent due to fraud – help support important public health care programs that so many people depend on.”
“Protecting the taxpayers’ interest by vigorously enforcing the False Claims Act is a top priority for this office,” said Jerry E. Martin, U.S. Attorney for the Middle District of Tennessee. “Corporations and individuals who bill Medicare and Medicaid should know that the U.S. Attorneys’ Office for the Middle District of Tennessee now has one of largest units in the country devoted to litigating false claims cases, and we will aggressively pursue fraud and abuse.”
The civil settlement resolves allegations contained in a whistleblower lawsuit filed in federal court in the Middle District of Tennessee under the qui tam 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 whistleblower – Robert A. Fry – will receive payments totaling more than $2.3 million from the settlement amount.
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