South Jordan-based Merit Medical Systems has agreed to pay $18 million to resolve a lawsuit alleging the company paid illegal kickbacks to doctors and other medical providers to entice them to use the company’s devices.
Merit founder, chairman and CEO Fred Lampropoulos confirmed Tuesday an agreement had been reached with the U.S. Department of Justice in the whistleblower case and that details would be released in the coming weeks. The CEO declined further comment, except to reiterate a short statement Merit issued late last week — and to say the company denied all allegations in the 2016 complaint.
“Given the mounting costs and time demands associated with the investigation, we believe this resolution is in the best interest of the business,” Lampropoulos said in Merit Medical System’s brief July 15 statement regarding the settlement. “Merit will continue to focus on our core mission: to be the most customer-friendly company in health care.”
The federal lawsuit was filed in New Jersey by a former chief compliance officer for the company, Charles J. Wolf. The nonpracticing medical doctor and 20-year health care compliance specialist has alleged that Merit used fraudulent advertising “disguised as educational grants” as well as inflated writing and speaking fees and other cash as inducements to physicians and hospitals to use several of its specialty medical devices.
Merit Medical officials, Wolf claimed, also wined and dined doctors, sent them on trips to “extravagant locations,” paid them exorbitant consulting fees “for little or no work” in order to “gain market share at inflated prices” and to get them to buy more Merit products.
Wolf’s lawsuit, which also seeks a financial award on his behalf as a whistleblower, alleged Merit paid kickbacks to providers at a rate of $2 million or more per year, court documents say. Far more than that was involved, his suit says, in resulting claims those doctors and other providers billed to Medicare, Medicaid, the U.S Department of Veterans Affairs and other federal and state health care programs.
Wolf reported his concerns to higher-ups at Merit, the lawsuit says, “all to no avail,” leading him to resign and take the claims to the Department of Justice.
Court records indicate he filed his complaint in New Jersey in April 2016, at which point U.S. authorities became involved and the case was sealed. After what appears to be a four-year investigation, federal attorneys filed public notice on June 12 saying they were formally intervening in the case, which led to the matter being unsealed in court.
Twenty-eight U.S. states and the District of Columbia are included as parties in the suit, documents indicate — though the state of Utah is not among them.
In addition to federal statutes, Wolf is also claiming damages and awards under the false-claim or taxpayer protection laws of at least 29 states.
Documents indicate that U.S. District Judge Claire Cecchi in New Jersey signed an order July 10 giving federal authorities until Sept. 11 to file the settlement. Merit issued its news release July 15 announcing an agreement has been reached “in principle.”
And, notably, the settlement sum of $18 million, the release said, was what Merit “currently expects to pay.”
Federal and state law prohibit payments to physicians intended to influence their choice of medical devices, said Veronica Nannis, an attorney with the Greenbelt, Md.-based law firm Joseph Greenwald & Laake, which is representing Wolf in the case.
“When medical device companies pay something of value to induce physicians to use their devices to the exclusion of others, that can effect independent medical judgment and patient care,” Nannis said in a statement when U.S. lawyers announced they were joining the lawsuit.
“Prosecuting these cases protects patients,” she said.
Formed in 1987, Merit Medical Systems is a publicly traded company that makes proprietary disposable devices for use in a wide variety of medical settings. It has nearly 6,000 employees worldwide, approximately 2,000 of them located at the firm’s 8-acre campus at 1600 W. Merit Parkway in South Jordan.
Lampropoulos, its CEO, is a former Republican candidate for Utah governor and frequent donor to political campaigns, including most recently nearly $230,000 given to his brother-in-law, former state GOP Chairman Thomas Wright, in a failed GOP primary bid.