St. Jude Medical Inc. (NYSE:STJ) and the U.S. Justice Dept. are in settlement talks over the St. Paul, Minn.-based company’s alleged kick-back scheme.
The Justice Dept. intervened in a whistleblower lawsuit against St. Jude earlier this month. The parties asked the U.S. District Court for Massachusetts this week for an extension "to determine whether the parties can reach a proposed settlement." Judge Douglas Woodlock agreed to the extension, which expires Sept. 30, although the DOJ said in its filing that more time may be needed to formalize any settlement.
Whistleblower Charles Donigian, a technical service specialist 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.
In a motion to intervene filed August 5, the U.S. claimed it has “good cause” to accuse the 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.
“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.”