Whistleblower, doctors decry medical industry kickbacks.

A former employee of Medtronic Sofamor Danek (MSD), a spinal implant division of Medtronic, Inc., has sued the company as well as numerous physicians and their employers under the False Claims Act, alleging that MSD pays--and the doctors accept--improper financial incentives to use its products. (U.S. ex rel. Poteet v. Medtronic, Inc., No. 03-2979 (W.D. Tenn. third amended complaint filed Feb. 10, 2005).)

The plaintiff, Jacqueline Kay Poteet, claims that the company in effect bribes doctors, by paying for meeting attendees' meals and entertainment, for example, and through written consulting agreements, in which doctors agree to advise MSD. In exchange, the doctors use Medtronic products, regardless of whether they are the best choice for the procedure, and encourage colleagues to do so. Poteet says the defendants submitted fraudulent and ineligible claims to Medicare for reimbursement, in violation of the AntiKickback Statute.

"These bribes and kickbacks distorted and continue to distort the defendants' medical decision-making, cause unnecessary back and neck surgeries, cause over-utilization of MSD products, increase costs, and result in unfair competition by freezing out competitors who are unwilling to pay kickbacks," the complaint says.

Such allegations have raised concern--among the general public and within the medical industry--that doctors' decisions may be driven by profit rather than patients' best interests. "Public confidence in the medical industry is undermined by these kickbacks," said Thomas Grande, a Honolulu lawyer and cochair of ATLA's Qui Tam Litigation Group.

Poteet originally filed suit on behalf of the U.S. government in 2003 and filed a third amended complaint in February 2005. The court unsealed the case in January. As a travel services manager for MSD, Poteet administered a $10 million annual budget for employee and physician travel and arranged meetings and activities for attendees and their families. Some of those activities included nonmedical outings such as golfing, snorkeling, sailing, and taking helicopter rides.

According to the complaint, MSD legal staff acknowledged that the company's spending on travel and entertainment for doctors constituted illegal inducements. In an e-mail to Poteet, MSD senior legal counsel said amounts spent on activities for physicians exceeded the company's self-imposed limits and proposed asking doctors to pay a surcharge for expensive activities. The e-mail said, "When we are sending scores of doctors to a nice resort like this under the guise of training and education on our products, I think we need to be more careful and stick to the limits of our rules as best we can."

Poteet said MSD targeted the individual defendant doctors based on their prominence, persuasive abilities, and "willingness to accept money as bribes to promote MSD products." Consulting contracts provide monetary rewards for doctors who agree to "(a) purchase all products to be used in their spinal surgeries solely from MSD and from no competitor and (b) conspire with MSD to recommend to other physicians that they should do the same," the complaint alleges.

In one example that has attracted media attention, defendant orthopedic surgeon Thomas Zdeblick was paid $400,000 for eight days of consulting per year, according to a copy of his contract that was submitted as part of the lawsuit. The contract also provided that if Zdeblick's consulting resulted in an invention MSD wanted to sell, it would pay him an annual royalty.

A supplement to the complaint, filed in October 2005, alleges that MSD limited its consulting payments temporarily after learning in early 2004 that the government was investigating. But after the company began settlement negotiations with the government and was "evidently satisfied that the qui tam action pending against it would likely be settled" and the government would look no further into its documents, the payments resumed in early 2005, according to the supplement.

At press time, the Justice Department had not yet indicated whether it would intervene in the case, said Andrew Carr, a Memphis, Tennessee, lawyer representing Poteet.

Whistleblower lawsuits like Poteet's are the only way to stop such fraudulent activity, Grande said, because "the government lacks the resources to take care of these problems."

Medtronic spokesman Robert Clark said the company could not comment on the specifics of the case, but he noted that "Medtronic has and will continue to cooperate fully with the government for a resolution in this case."

Asked about the company's consulting arrangements with doctors in general, Clark said, "Research and consulting relationships between physicians and industry are critical to the delivery of state-of-the-art health care in this country and are perfectly legal. The mere fact that amounts are large does not imply that the payments are inappropriate."

Some physicians have expressed concern about kickbacks in the medical industry. In late January, a group of doctors proposed guidelines to avoid conflicts of interest between doctors and drug and medical device manufacturers, published in the Journal of the American Medical Association. (Troyen A. Brennan et al., Health Industry Practices That Create Conflicts of Interest, 295 JAMA 429 (2006).)

"Recent congressional investigations, federal prosecutions, and class action lawsuits have brought to light documents demonstrating how company practices frequently cross the line between patient welfare and profit-seeking behavior," the doctors wrote. They urged academic medical centers to take the lead in implementing more stringent guidelines, which call for a ban on gifts from drug and device manufacturers to doctors--including free meals, payment for travel and time spent at meetings, and free pharmaceutical samples.

In February, the Yale University School of Medicine announced it had adopted similar guidelines, noting that Medicare's new prescription drug plan "has raised the federal government's stake in the cost and use of medications" and that "no gift is worth threatening the public's trust."