Medtronic’s new Ev3 unit pays $1.3m in whistleblower suit

The Ev3 subsidiary Medtronic (NYSE:MDT) acquired along with Covidien yesterday delivered good news and bad: FDA clearance for a new aneurysm treatment and a $1.25 million hit in a whistleblower lawsuit.

The U.S. Justice Dept. said Medtronic agreed to the settlement without admitting any wrongdoing. The qui tam lawsuit, filed by former sales rep Amanda Cashi, alleged that Ev3 acquisition FoxHollow Technologies urged hospitals to bill Medicare for inpatient procedures in atherectomies performed using its Silver Fox device.

Ev3 bought FoxHollow for $780 million in 2007; Covidien acquired Ev3 for $2.3 billion in 2010. Medtronic, in turn, paid $50 billion for Covidien last month.

"The United States alleged that throughout 2006 and 2007, to increase hospital purchases of the Silver Hawk device, FoxHollow advised hospitals that they should bill Silver Hawk atherectomy procedures as more expensive inpatient claims, as opposed to less costly outpatient claims," the DoJ said in a press release. "As a result, certain hospitals allegedly claimed greater reimbursement than they were entitled to for treating Medicare beneficiaries who underwent Silver Hawk atherectomy procedures.”

Cashi, an ex-FoxHollow sales rep, is slated to receive $250,000 from the settlement, according to the release.

Medtronic, noting that the alleged misdeeds occurred in 2006 and 2007, years before its involvement with FoxHollow and its successors, said it’s "pleased to have the matter resolved."

"Medtronic is committed to the highest standards of ethical conduct, and we take responsibility for delivering outstanding results to our partners, patients and colleagues," the company said in a statement, according to the Minneapolis Star Tribune.

Yesterday Medtronic said the FDA cleared the Pipeline Flex embolization device developed by Ev3, revealing plans for a limited U.S. release of the brain aneurysm treatment.