BOSTON - The government announced today that St. Jude Medical, Inc., of St. Paul, Minnesota, has agreed to pay the United States $3.65 million to resolve civil allegations under the False Claims Act. The allegations are that St. Jude inflated the cost of replacement pacemakers and defibrillators purchased by the Departments of Defense and Veterans Affairs by knowingly failing to apply pricing credits for devices that were explanted while covered under a product warranty.

The settlement resolves allegations that St. Jude actively promoted the longevity of its pacemakers and defibrillators to physicians in an effort to convince them to implant St. Jude devices over those marketed by a competitor. St. Jude reinforced these claims by touting the generous credits available should a device need to be replaced while covered under warranty.

At the same time, St. Jude allegedly knew that it failed to grant appropriate credits to the purchasers of devices in a large number of cases where a product failed while still under warranty. As a result, the United States contends, St. Jude submitted invoices to Department of Veterans Affairs hospitals and Department of Defense military treatment facilities that overstated the cost for replacement pacemakers and defibrillators.

“Like any other customer, the government is entitled to get what it paid for,” said United States Attorney Carmen M. Ortiz. “Where a vendor warrants that its products will last a certain amount of time and then does not honor warranty claims when the products fail early, actions like this are appropriate.”

“As medical device use becomes more prevalent, the Justice Department will continue to investigate cases where device manufacturers are actively preventing federal health care programs from receiving the warranty discounts they are entitled to receive,” said Stuart Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “If medical device manufacturers are actively concealing warranty credits from the government, the Department will use all the tools at its disposal to hold them accountable.”

Edward Bradley, Special Agent-in-Charge of the Defense Criminal Investigative Service, Northeast Field Office said, “The Defense Criminal Investigative Service is committed to working with the U.S. Department of Justice and the U.S. Department of Veterans Affairs OIG, to ensure that taxpayer dollars are properly spent and that the health care needs of our military members and their families are met. Today’s settlement demonstrates the importance of this collaborative effort to hold companies accountable when they fail to honor warranty discounts to which the U.S. Department of Defense is entitled.”

VA OIG Special Agent in Charge Jeffrey G. Hughes said, “The Department of Veterans Affairs, Office of Inspector General continues with its partners at the U.S. Attorney’s Office and other federal investigative agencies to combat fraud, waste, and abuse within the health care industry. This civil settlement will return funds to VA to benefit our nation’s veterans.”

The civil settlement resolves allegations contained in a whistleblower lawsuit filed in federal court in the District of Massachusetts under the qui tam provisions of the False Claims Act, which allow for private citizens to bring civil actions on behalf of the United States and share in any recovery. The lawsuit alleged that St. Jude sales representatives took steps to prevent the return of failed pacemakers and defibrillators, even though the representatives knew that return of the devices was a condition to obtaining warranty credits. As part of today’s resolution, the whistleblowers will receive payments of $730,000 from the settlement amount.

The matter was handled by Gregg Shapiro in Ortiz’s Civil Division and Adam Schwartz in the Civil Division of the Department of Justice.

 

 

 

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