Coloplast (CPH:COLO B) and Liberator Medical (NYSE:LBMH) agreed to pay a collective $3.6 million to settle allegations that they ran a kickbacks scheme to fuel sales of the Danish ostomy device maker’s products, federal prosecutors said yesterday.
Coloplast agreed to pay $3.16 million and Liberator $500,000 to settle the case, although they admitted no liability in the settlement. Prosecutors accused Coloplast of paying kickbacks to Byram Healthcare Centers, CCS Medical, Liberty Medical, Handi Medical and Liberator in return for marketing promotions and conversion campaigns – including in some cases so-called “spliffs,” or payments to sales personnel in return for referrals to Coloplast products.
The deal with Liberator settles charges that it received price concessions from Coloplast in return for a pair of promotional campaigns, the prosecutors said. The settlements are part of a qui tam lawsuit brought by a trio of whistleblowers from Coloplast, they said. The whistleblowers’ share of the settlements hasn’t been determined and claims against other defendants are still being prosecuted, they said. Hollister, 180 Medical, Byram Healthcare Centers, CCS Medical, RGH Enterprises (dba Edgepark Medical Supplies) and Shield California Health Care Center are also named in the whistleblower lawsuit, according to court documents.
“The payment of kickbacks to induce purchases of medical supplies undermines our federal health care programs, ultimately distorting consumer purchasing decisions, and increasing health care costs,” Massachusetts U.S. Attorney Carmen Ortiz said in prepared remarks. “Investigating claims of misguided business practices, at the expense of patient health, will continue to be a top priority in our healthcare enforcement efforts.”