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Press Release

Texas-based Medical Device Manufacturer Pays U.S. $34 Million
to Settle False Claims Act Allegations

For Immediate Release
Office of Public Affairs

Orthofix Inc., a Texas-based manufacturer of medical devices, has agreed to pay the United States $34,234,263 to settle allegations under the civil False Claims Act relating to the company’s sale of bone growth stimulator devices, the Justice Department announced today. The company has also agreed to plead guilty to a felony of obstruction of a federal audit, and to pay a $7,765,737 criminal fine.


The civil settlement announced today resolves a whistleblower lawsuit that was filed by Jeffrey Bierman. That lawsuit alleged that the McKinney, Texas-based company improperly waived patient co-payments, thus misstating their true cost and resulting in overpayments by federal programs; paid kickbacks to physicians and their staffs in the form of “fitter fees,” referral fees and other comparable fees, to induce the use of Orthofix products; caused the submission of falsified certificates of medical necessity; and failed to advise patients of their right to rent rather than purchase Orthofix products.


“The Justice Department has longstanding concerns about kickbacks and the routine waiver of co-payments, because they can impose significant costs on federal health programs that are not medically justified,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division. “The resolution of this matter yielded a substantial recovery for taxpayers, and should deter other companies from engaging in such conduct in the future.”


The company’s criminal guilty plea involved its failure to disclose information concerning its practices regarding certificates of medical necessity to a Medicare contractor during a June 2008 audit. Five individual Orthofix employees had previously pleaded guilty to criminal charges in connection with this matter.


“This resolution, and the entire investigation, which has involved prosecution of a number of individuals, including a high level executive, demonstrates the government's unflagging commitment to prosecuting corporate and individual medical device fraud, and particularly to protecting Medicare from those who prey on it by fraudulent means," said Carmen M. Ortiz, U.S. Attorney for the District of Massachusetts.


As part of the settlement, Orthofix also agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services, which provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.


“Criminals intent on placing profits from federal health programs over and above compliance should expect to tangle with authorities,” said Susan J. Waddell, Special Agent in Charge of the Office of Inspector General of the U.S. Department of Health and Human Services New England region. “Orthofix blatantly ordered sales staff to disregard Medicare rules, and conveniently looked away when medical records were altered and even forged.”  


Under the False Claims Act, private citizens can bring suit on behalf of the government and share in any amounts that are obtained through that legal action. Mr. Bierman will receive $9,243,251 as his share of the civil settlement amount.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $7.5 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $11.1 billion.


The case was handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Massachusetts and the Office of Inspector General of the Department of Health and Human Services. The claims settled by this agreement are allegations only, and there has been no determination of liability.

Updated September 15, 2014

Press Release Number: 12-724