The 3rd try appeared to have the charms needed for Orthofix (NSDQ:OFIX) to mollify a federal judge in Boston last week, winning the green light for a $43 million settlement of civil and criminal charges in a kickbacks case.
Judge William Young of the U.S. District Court for Massachusetts twice put the kaibosh on proposed settlements between the medical device company and federal prosecutors.
Young 1st nixed the deal back in September because it didn’t then give him enough leeway to impose further penalties. Last week he shot down a 2nd proposal, saying it didn’t do enough to protect the public interest.
But a day later Young OK’d a deal that included 5 years of probation for Orthofix, $7.6 million in criminal penalties and $32.3 million plus interest to settle the civil portion of the case. CEO Robert Vaters said the company will still sell the bone growth stimulators at the heart of the accusations.
The qui tam whistleblower lawsuit alleged that Orthofix sales reps falsified the certificates of medical necessity required for Medicare reimbursement for its Spinal-Stim, Cervical-Stim and Physio-Stim bone-growth stimulators. The company agreed to plead guilty to concealing the scheme during a 2008 Medicare audit. The whistleblower, Jeffrey Bierman, could pull down as much as ⅓ of the settlement.
"I am very pleased with the final resolution of these matters. Over the last few years, we have made significant investments in compliance and have made many organizational changes to enhance the ethical culture of the company. Through this transformation we have established an ethical tone at the company where integrity and commitment to compliance are paramount. Looking forward, I am eager to maintain our leadership position with our regenerative stimulation product offering based on providing superior patient outcomes and driving value in the healthcare system," Vaters said in prepared remarks.
It’s the 3rd legal imbroglio Orthofix has put in the rearview mirror this year. In July, it settled a years-long investigation into self-reported incidents of bribery stemming from a former Mexican distributor, paying a total of more than $7.4 million in disgorged profits and fines. In October, Orthofix put to rest another federal kickbacks case against its Blackstone Medical subsidiary for $32 million
"I would like to thank our senior vice president, general counsel, corporate secretary, Jeffrey Schumm, for his tireless efforts in navigating the company to the conclusion of each of these difficult investigations," Vaters said. "We emerge from these resolutions as a company deeply committed to the highest levels of integrity and ethics which, along with our unique value proposition for bone repair and regeneration, we believe will position us for continued long term growth.