Biomet Settles Charges it Bribed Foreign Government Physicians

Biomet Inc. has agreed to settle bribery charges as part of a settlement that will enable the medical device maker to avoid prosecution. Biomet will pay $22.7 million to settle U.S. criminal and civil allegations, said Bloomberg Businessweek. According to the allegations, Biomet bribed government-employed physicians in Argentina, Brazil, and China for over eight years as a way in which to secure hospital business.

The Justice Department (DOJ) and the Securities and Exchange Commission (SEC) made the announcement yesterday and said Biomet will pay a $17.3 million criminal penalty and $5.4 million in restitution to resolve the SEC’s civil charges, said Businessweek. If Biomet institutes strict company controls to prevent bribery and if it hires an expert to oversee it’s compliance for 18 months, the firm will avoid DOJ prosecution. Biomet operates in about 90 countries.

Biomet isn’t the only medical device company that has paid a criminal penalty and signed a so-called “deferred-prosecution agreement” as part of the government’s investigation into bribery allegations involving medical device makers and oversees government-employed physicians, said Businessweek. According to the government agencies, the investigation is ongoing.

Last April, Johnson & Johnson agreed to pay $70 million to settle criminal and civil charges that it was bribing doctors in Europe and paying kickbacks to the Iraqi government in exchange for business. Smith & Nephew, an orthopedics maker in Britain also agreed to pay $22.2 million last month to settle allegations that it bribed Greek government-employed doctors, said Businessweek.

Biomet is best known for its manufacture of products utilized by orthopedic surgeons for hip or knee implants surgeries. The U.S. government accused the device maker of violating the Foreign Corrupt Practices Act in Argentina, Brazil, and China from 2000 to August 2008, said Businessweek. It is against the law to bribe foreign government officials or company executives to obtain or keep business, Businessweek explained.

Biomet staff and management at all levels were involved at the parent company and its four subsidiaries, as were distributors who sold Biomet products, according to the government, wrote Businessweek. Also, the government said Biomet’s internal watchdog employees never stopped the illegal bribes despite knowing about the transactions. “A company’s compliance and internal audit should be the first line of defense against corruption, not part of the problem,” said Kara Brockmeyer, head of the SEC enforcement division’s unit that deals with foreign bribery cases, according to Businessweek.
Jeffrey Binder, Biomet President and CEO, said the company has “significantly enhanced” compliance procedures and financial controls, wrote Businessweek.

We’ve been following issues with Biomet Inc. for years. In 2009, according to an SEC filing, the U.S. Attorneys Office in West Virginia was investigating the “sales and marketing practices” of Biomet’s EBI unit. The U.S. Attorney in Massachusetts also launched a probe into alleged improprieties in the sale and leasing of EBI devices.
The West Virginia probe stemmed from a whistle blower lawsuit claiming Biomet touted its spine-surgery devices through “an elaborate and clandestine promotion of illegal and off-label uses,” such as implanting devices in clinical research without obtaining patient consent and allowing a drug maker representative in the operating room when the spinal products were used in off-label procedures.

Biomet’s EBI unit was also named in 38 medical negligence claims in the state. And, in its SEC filing, Biomet said it believed a subpoena it received from the Boston U.S. attorney’s office is related to another whistle blower lawsuit involving the owner of a
Missouri medical billing company that claimed that several spine companies, including
Biomet, were improperly billing bone-growth stimulators as devices that must be purchased, rather than rented, at a price 10 times greater than the rental price. Biomet and the other companies named in the suit are alleged to have misled physicians and their clerical staff into filing paperwork indicating the devices were medically necessary.

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