Medical Device Maker Agrees to Pay $495,000 to Settle Allegations it Improperly Rewarded Military Physicians for Choosing Company Devices

            MED-EL USA, based in Durham, NC, has settled claims that it improperly sought to influence military physicians to surgically implant MED-EL hearing devices in patients with hearing loss, Acting United States Attorney Annette L. Hayes announced today.  MED-EL USA, a subsidiary of Austrian-based MED-EL, manufactures and sells cochlear implants and other hearing devices.  The company agreed to pay the U.S. Army and U.S. Navy a total of $494,951 to settle allegations that it improperly provided meals and trips to an Army and a Navy Ear, Nose and Throat (ENT) specialist.  The physicians were stationed at Madigan Army Medical Center in Tacoma, Washington and at the San Diego Naval Medical Center in San Diego, California.

            “Patients need to be confident that their physician is selecting the best and most appropriate medical devices for their medical conditions – not the device that will result in free travel and/or a free meal for their doctor,” said Acting United States Attorney Annette L. Hayes.  “That is why the Anti-Kickback Statute and False Claims Act generally prohibit payments to physicians, in cash or in-kind, in the hopes of influencing their medical decision-making and inducing them to order particular procedures, treatments and/or medical devices.  Enforcement of these laws is particularly important in the military context given our obligation to provide quality healthcare to our servicemen and women and their families.”

            According to today’s settlement, between 2010 and 2013, MED-EL USA embarked upon a deliberate campaign to increase the use of its products in Defense Department medical facilities.  The government’s investigation revealed that MED-EL USA targeted the above-referenced Army and Navy ENTs and attempted to influence their choice of hearing devices by providing them free meals, overseas travel opportunities and honoraria requiring little to no actual work by the physicians.  MED-EL USA sales to the military jumped from none to $400,000 during the period the two military physicians were the recipients of the company’s largesse.

            In resolving the allegations involved in today’s settlement, MED-EL USA admits to no wrongdoing.  Further, the company has dismissed its former Chief Operating Officer and terminated its relationship with the external sales consultant who orchestrated the alleged improper payments scheme. 

The case was investigated by the Seattle Office of the Defense Criminal Investigative Service and the Army Criminal Investigation Command, Major Procurement Fraud Unit.

            The case was handled by Assistant United States Attorney Harold Malkin.  Mr. Malkin heads the Affirmative Civil Enforcement (ACE) Unit for the U.S. Attorney’s Office.