Feds weigh in on St. Jude kickbacks case

The federal government is intervening in a whistleblower lawsuit accusing St. Jude Medical Inc. (NYSE:STJ) of using four post-market clinical trials as "kickback vehicles."

In a motion to intervene filed August 5 in the U.S. District Court for Massachusetts, the U.S. claimed it has "good cause" to accuse the St. Paul, Minn.-based company of using its Aware, Assist, Housecall Plus and Act registry trials as fronts to deliver kickbacks to doctors in return for their use of its pacemakers and defibrillators.

Charles Donigian, a technical service specialist for the company hired in 2004, sued St. Jude in July 2006, alleging that the company’s corporate accounts division offered special deals to hospitals that purchased minimum amounts of STJ products, according to court documents.

"For instance, if a hospital contracts to purchase a certain amount of devices, e.g., $1 ,million per quarter, in return, SJM gives the hospital an EnSite System worth about $250,000. SJM makes the gifting of the EnSite System look like a rebate," according to the lawsuit. "Corporate Accounts also gives away electrophysiology catheters and patches for the EnSite System, in exchange for a client’s commitment to purchase ten ICDs each quarter. The ten ICDs are valued at a total cost of about $200,000, and the free EP catheters and EnSite patches cost approximately $30,000 to $50,000 each."

The EnSite system, a computerized method of mapping cardiac arrhythmias, isn’t the only boondoggle St. Jude allegedly used in the scheme, according to court documents. The company also allegedly gave away 10 free Navex patches ($950 each) for each purchase of five MADIT II ICDs at $15,000 each. St. Jude also allegedly offered rebates of "20% if the purchaser meets a 90% quota," according to the documents, which further alleges that such rebates are "never reported in hospital cost reports."

The lawsuit alleges that St. Jude also used the clinical trials to set up a structure to pay doctors for implanting its devices. In the Aware trial, for example, the lawsuit claims STJ paid $700 per implantation of its Identity pacemakers and $100 per follow-up visit.

"The trial is a sham, designed to induce physicians to prescribe the above pacemakers," according to the lawsuit. "The inclusion plan … is not adhered to. About 30% of the patients had no history of Atrial Tach or Atrial Fib. … Similarly, the exclusion criteria is not adhered to. Patients having terminal cancer and who were expected to live only a few months at best were implanted with pacemakers and put into the trial."

All told, St. Jude paid out "at least" $1.5 million to physicians for the trial, according to the documents.

With the Act registry study, the documents allege, docs got $2,000 ($500 for each enrollment and $375 for each follow-up) for each patient they registered for the study of ICD and cardiac rhythm therapy defibrillators.

"SJM funded this kickback program with at least $10 million in payments to physicians," according to the lawsuit, and augment the cash payments with "lavish" spending on entertainment including "payment of airline tickets, conference fees, baseball tickets, gourmet wine, lavish meals, payment for seating and the Lake Regional Ball, and fishing trips."

It’s not the only legal trouble St. Jude has to contend with. In June the company agreed to pay $3.7 million to settle another federal kickbacks beef also accusing it of providing illegal rebates to the healthcare providers.

In May, the DOJ demanded documents about its implantable cardiac defibrillator business, according to a regulatory filing. The “civil investigative demand” sought documents and “sets forth interrogatories” about “various indications for ICDs and a National Coverage Decision issued by Centers for Medicare and Medicaid Services,” according to the filing. St. Jude said at the time that it believed its major competitors were served with similar demands and that it’s cooperating with the investigation.

The Food & Drug Administration warned the company in May, citing the device maker for improperly promoting its Epicor cardiac ablation catheter system.

And a California lawsuit alleges that St. Jude, Dr. Michael Burnam and his salesman son Brad Burnam conspired to prescribe patients with St. Jude’s defibrillators in an illegal bid to boost sales in southern California.