On Thursday, July 30, 2015 the Department of Justice (DOJ) announced that medical device manufacturer NuVasive Inc. had agreed to pay the United States $13.5 million to resolve allegations the Company was involved in causing healthcare providers, including physicians, to submit false claims to Medicare and other federal health care programs (see United States ex rel. Kevin Ryan v. NuVasive, Inc. (D. Md.)). The Government’s allegations focused on the Company’s marketing of a device used in spinal surgery (Device). The core allegation against NuVasive related to the “Off-Label” marketing of the Device. Off-Label refers to the use of a drug or device for a purpose for which it has not approved by the U.S. Food and Drug Administration (FDA). The settlement also included allegations that NuVasive paid kickbacks to physicians to induce them to use the Company’s products by paying the physicians promotional speaker fees, honoraria and expenses relating to physicians’ attendance at events sponsored by a group that was created, funded and operated solely by NuVasive, under the guise of an independent entity.
The underlying investigation was prompted by a lawsuit filed under the whistleblower provision of the False Claims Act (FCA), known as a “Qui Tam” action, by a former NuVasive sales representative. The FCA permits private parties to file lawsuits on behalf of the United States for false claims and obtain a portion of the government’s recovery. The Qui Tam Relator in this matter will receive approximately $2.2 million.
This settlement is instructive to all healthcare providers, including physicians, pharmacies, and manufacturers, as it demonstrates a variety of areas where providers are well advised to remain compliant with federal law. The key take away messages from this settlement are:
- Entities not directly involved in billing Federal healthcare programs may still be subject to prosecution under the FCA;
- Marketing for “Off-Label” uses is taboo;
- Participants in financial arrangement between physician in a position to refer patients or influence purchasing decisions, and entities that manufacture or sell applicable products, should be carefully reviewed by competent legal counsel, and contracts must be diligently crafted to avoid regulatory pitfalls. It is prudent to have any proposed arrangement fit within a regulatory “Safe Harbor.” The touchstone of most safe harbors is that any compensation be fair market value and commercially reasonable; and current and former employees can be the source of Qui Tam actions.
