Medical device maker Merit Medical Systems (“MMS”) agreed to pay $18 million to resolve allegations that the company submitted false claims to Medicare, Medicaid and TRICARE by paying kickbacks to physicians and hospitals to induce increased use of MMS products.

MMS manufactures and markets disposable medical devices used in interventional and diagnostic procedures, including cardiology, radiology, oncology, critical care and endoscopy.

The anti-kickback statute prohibits offering or paying anything of value to induce the referral of items covered by Medicare, Medicaid and TRICARE.  The AKS statute is designed to preserve that medical providers use medical devices based on an objective determination free from financial incentives.

According to the whistleblower complaint, which was filed in 2016, MMS employed a kickback scheme to pay physicians, medical practices and hospitals to induce their use of MMS products.  Specifically, MMS implemented an internal program, Local Advertising Program, which provided health care providers millions of dollars in free advertising, practice development, practice support and unrestricted “educational” grants to induce the providers to purchase and use a number of MMS products, including EmboSphere devices, which were used for uterine fibroid embolization procedures, and QuadraSphere, which were used for other embolization procedures.

MMS selected health care providers for these payments based on prior sales, in order to induce future sales  and steer business away from MMS competitors.

MMS’ former chief compliance officer, Dr. Charles J. Wolf, was the whistleblower under the False Claims Act.  Dr. Wolf received $2.65 million of the federal share of the settlement. 

Dr. Charles J. Wolf, Merit’s former chief compliance officer, filed a whistleblower complaint against the firm in April 2016 following his resignation, in which he highlighted his repeated efforts to address violations that he said were deeply ingrained in Merit’s culture.

Dr. Wolf repeatedly advised MMS management that the Local Advertising Program would violate the AKS law and the False Claims Act.  Despite these clear and persistent warnings, MMS ignored these concerns and continued with the illegal payment system.

Along with the False Claims Act settlement, MMS agreed to a five-year Corporate Integrity Agreement (“CIA”) with the HHS-OIG, which requires MMS to hire a compliance expert and an independent review organization to analyze its systems and transactions.