The Long Path to a Whistleblower Recovery: Former CCO Vindicated by Merit Medical Systems False Claims Act Settlement (Part II of II)
Dr. Charles Wolf was the Chief Compliance Officer at Merit Medical Systems, Inc. (“MMS”), who ultimately became the federal whistleblower against MMS alleging violations of the Anti-Kickback Statute. Dr. Wolf’s concerns were ultimately vindicated when the Justice Department intervened in support of his complaint.
MMS settled the case with DOJ and agreed to pay $18 million. Dr. Wolf received $2.65 million from the settlement under the qui tam provisions of the False Claims Act.
Dr. Wolf worked for MMS from 2011 to 2015. He is a non-practicing attorney and involved in compliance since 1999.
Dr. Wolf raised concerns internally in MMS about the legality of the program under the AKS law. He eventually raised the issue with MMS’ CEO and Chairman, and to the MMS board. MMS leadership and management ignored Dr. Wolf’s warnings and objections. Eventually, Dr. Wolf resigned and filed his whistleblower complaint.
Wolf objected to MMS’ Local Advertising Program under which MMS provided physicians and hospitals 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.
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. According to Dr. Wolf, MMS gave doctors and health care systems free advertising, consulting fees and all-expense-paid trips in return for the use and marketing of its products.
Dr. Wolf’s complaint claimed that Merit paid the kickbacks to hospitals and doctors as “educational grants” when in fact “internal communications confirm that these funds are not educational by any means.” Instead, Dr. Wolf stated the “grants” were “intentionally meant to effect and induce providers to use Merit devices and to steer providers to use Merit devices exclusively.”
As part of the scheme, Merit sponsored lunches and dinners to influence doctors’ decisions and also paid speaker fees when physicians discussed Merit and its devices. Kickback payments also included “lavish, all-expenses-paid trips to desirable destinations like Paris, Ireland and Hawaii.”
Merit allegedly paid one doctor $5,000 to give a speech at a prestigious industry event in order to “buy his loyalty and influence his remarks,” Dr. Wolf alleged. MMS paid $1,600 for a radio ad for a health care provider, and also paid for 15 Russian doctors to tour Galway, Ireland.
A company that ignores a CCO’s determination that a company program violates the law faces significant risks. MMS leadership ignored Dr. Wolf’s determination. Companies that do so are providing the government with a strong piece of evidence that can be used against the company.
Prosecutors face significant challenges in proving that a company acted with the requisite intent to violate a law. When a company learns from a CCO that a specific course of conduct is probably illegal, the company cannot ignore such a determination.
MMS sealed its own fate by ignoring Dr. Wolf. In frustration, Dr. Wolf decided to become a whistleblower. He would have preferred that MMS discontinued its Local Advertising Program.
Dr. Wolf sought to bring about change from within but was unsuccessful in doing so. MMS’ culture, by definition, was deficient. Senior leadership repeatedly ignored Dr. Wolf’s determination that its Local Advertising Program was illegal. In the end, Dr. Wolf was vindicated by an independent determination by the Justice Department that Dr. Wolf’s conclusion was correct.