Whistleblower and former Merit chief compliance officer Dr. Charles Wolf alleged in a civil suit that the Salt Lake City-based company paid doctors and hospitals to use more of its Embosphere and QuadraSphere microspheres for embolization and occlusion, as well as off-label uses. The practice ran up expenditures for Medicare, Medicaid and TRICARE healthcare payers, according to the U.S. Department of Justice, which joined the whistleblower case in June.
In announcing the settlement, DOJ said that Merit engaged in the scheme for six years, using an internal program known as the “local advertising program” to give healthcare providers millions of dollars in free advertising, practice development and support, and purported unrestricted “educational” grants to induce them to buy its embolization devices. Of the $18 million settlement, Merit will return $15.21 million to the federal government, and a total of $2.79 million to individual states, which jointly funded claims involving Merit devices that were submitted to state Medicaid programs, according to federal officials.
Wolf, who claimed he warned Merit numerous times that it might be violating federal kickback law, will receive $2.65 million from the federal share of the settlement.
“Unlawful kickbacks like these distort the market for medical devices upon which our healthcare system depends,” said U.S. attorney Rachael Honig in a news release. “For years, Merit Medical ignored internal warnings and refused to abide by the rules that apply to every other medical device company. With today’s settlement, they are paying the price for that refusal.”
Merit Medical “denies the DOJ’s allegations, but has determined that avoiding protracted litigation and its associated costs will enable it to focus on its mission of being the most customer-focused company in healthcare,” the company said in a statement to investors. “This settlement is neither an admission of fault or liability on the part of the Company nor a concession by the DOJ that its claims are unfounded.”
Along with the civil settlement, Merit entered into a five-year corporate integrity agreement with the Department of Health and Human Services Office of Inspector General, requiring the company to hire a compliance expert and an independent review organization to analyze its systems and transactions. The agreement also imposes compliance, monitoring, reporting, certification, oversight and training obligations on Merit, which said it has already implemented some of these.