St. Jude Settles Charges it Paid Kickbacks to Sell Medical Devices

St. Jude Medical Inc. has agreed to pay $3.7 million in an agreement with the U.S. Justice Department to settle allegations it paid kickbacks to hospitals in Ohio and Kentucky to secure sales of <"">heart devices. The charges stemmed from a 2006 whistleblower lawsuit filed against St. Jude by a former sales manager.

According to a Justice Department press release, the kickbacks included alleged rebates that were “retroactive” and paid based on a hospital’s previous purchases of St. Jude heart-device equipment and rebates that St. Jude paid for purchases of heart-device equipment sold by its competitors to induce purchases of similar equipment from St. Jude in the future.

“Hospitals should base their purchasing decisions on what is in the best interests of their patients,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice said in a statement. “We will act aggressively to ensure that choices about health care are not tainted by illegal kickbacks.”

Under the terms of the settlement, St. Jude, headquartered in St. Paul, Minn., will pay $3,725,000. Parma Community General Hospital, located in Parma, Ohio, is paying $40,000, and Norton Healthcare in Louisville, Ky., is paying $133,300. The government asserted that Parma and Norton were recipients of improper rebates from St. Jude.

The action against St. Jude and the two hospitals was initiated by the filing of a whistleblower lawsuit under the False Claims Act by Jerry Hudson. The whistleblower provisions of the Act allow private citizens to bring lawsuits on behalf of the U.S. and share in any recovery. Hudson’s share of this settlement will be $640,050, the Justice Department said.

In agreeing to the settlement, St. Jude admitted no wrongdoing. In a statement, the company said it entered into the settlement agreement in order to avoid the potential costs and risks associated with litigation.

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