Coloplast Corp, an ostomy and continence care product manufacturer, has agreed to pay $3,160,000 to settle allegations it paid illegal kickbacks to a number of medical suppliers. Liberator Medical Supply Inc., one of five companies named in the kickback scheme, has agreed to pay $500,000 for their part, the U.S. Attorney’s Office announced through a statement released Dec. 22 by the Boston Division of the FBI.
According to the FBI and U.S. Attorney’s office, Coloplast illegally paid kickbacks to five different companies: Byram Healthcare Centers, Inc., CCS Medical, Inc., Liberator Medical Supply Inc., Liberty Medical, Inc. and Handi Medical, Inc. in return for “marketing promotions and conversion campaigns.”
In the specific cases of Handi, Liberty and Byram, Coloplast funded cash incentives, also called “spiffs,” for their sales personnel to push patients toward Coloplast products. The FBI said Coloplast also offered rebates or price concessions to spur promotional campaigns.
“The payment of kickbacks to induce purchases of medical supplies undermines our federal healthcare programs, ultimately distorting consumer purchasing decisions, and increasing healthcare costs,” said United States Attorney Carmen M. Ortiz. “Investigating claims of misguided business practices, at the expense of patient health, will continue to be a top priority in our healthcare enforcement efforts.”
Liberator Medical Supply Inc.’s settlement resolves allegations that the company received kickbacks from Coloplast, through price concessions, in exchange for running two promotional campaigns promoting Coloplast products to their customers.
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“Both of these companies acted with their own self-interests in mind, putting profits over patient care,” said Harold H. Shaw, special agent in charge of the FBI, Boston Field Division. “The decision on which medical products to refer should be based on what is best for the patient, not on cash incentives or rebates.”
The settlements stem from allegations brought in a whistleblower lawsuit filed by two former Coloplast employees and one current Coloplast employee. Under the whistleblower, or qui tam, provision of the False Claims act, private parties can sue on behalf of the government and then share in any subsequent recovery.
The whistleblowers’ shares in this case haven’t been determined, and claims against other defendants in this case have yet to be settled.