Wright Medical settles federal beef for $8 million

October 1, 2010 by MassDevice staff

Wright Medical Group Inc. pays $7.9 million to settle federal charges that it used consulting arrangements with physicians as a kickbacks scheme.

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Wright Medical Group Inc. (NSDQ:WMGI) will pay $7.9 million to settle federal charges that it operated a kickbacks scheme to drive sales of its hip and knee implants.

The Arlington, Tenn.-based company said the deferred prosecution agreement with the New Jersey U.S. attorney's office, in which it does not admit to any of the charges, includes a five-year corporate integrity agreement with the U.S. Dept. of Health & Human Services, according to a press release.

The feds charged Wright with using consulting gigs with physicians to funnel alleged kickbacks to the docs. The settlement (PDF) also includes a year-long probation of sorts, during which the AG agrees not to prosecute as long as Wright "satisfies its obligations," according to the release. Those obligations include making changes to its consulting arrangements with doctors. An independent monitor will keep tabs on the company during its 12-month probation.

It's not the first concession that New Jersey feds have wrung from orthopedic device makers. Last year, four orthopedic device makers cleared federal criminal charges and a fifth "satisfactorily completed" its non-prosecution agreement with the U.S. Attorney's office in Newark.

Criminal charges were dismissed against DePuy, Smith & Nephew, Zimmer Holdings Inc. and Biomet Inc. after they satisfied DPAs reached in 2007 that saw them agree to pony up $311 million in civil settlements.

Stryker Corp., which voluntarily cooperated with the investigation, "satisfactorily completed" the terms of its non-prosecution agreement but didn't take part in the civil settlement.

Wright said it set aside $8 million to cover the cost of the settlement, so it expects no material financial impact during the third quarter. WMGI stock was down 1.5 percent to $14.19 in mid-day trading.