In addition to its new $12 million facility in Bartlett, Olympus is facing a much steeper cost — a $646 million settlement on claims it gave doctors kickbacks.
Of that, $623.2 million will resolve criminal charges and civil claims relating to a scheme to give doctors and hospitals kickbacks, according to two legal authorities. They are U.S. Attorney Paul J. Fishman of the District of New Jersey and Principal Deputy Assistant Attorney General C. Mizer of the Justic Department’s Civil Division.
An Olympus subsidiary will pay $22.8 million to resolve criminal charges related to the Foreign Corrupt Practices Act (FCPA) in Latin America.
The company is the United States’ largest distributor of endoscopes and related equipment.
Charges and the settlement
Olympus Corp. of the Americas (OCA) was charged in a criminal complaint filed March 1 in Newark, N.J., federal court with conspiracy to violate the Anti-Kickback Statute (AKS), which prohibits payments to induce purchases paid for by federal health care programs. OCA entered into a three-year deferred prosecution agreement (DPA) that will allow it to avoid conviction if it complies with reform and compliance requirements.
OCA’s agreed-upon settlement of $623.2 million includes a $312.4 million criminal penalty and an additional $310.8 million to settle civil claims under the federal and various state False Claims Acts, the largest total amount paid in U.S. history for violations involving the AKS by a medical device company.
“The Department of Justice has longstanding concerns about improper financial relationships between medical device manufacturers and the health care providers who prescribe or use their products,” said Principal Deputy Assistant Attorney General Mizer. “Such relationships can improperly influence a provider’s judgment about a patient’s health care needs, result in the use of inferior or overpriced equipment, and drive up health care costs for everybody.”
In a separate DPA, Olympus Latin America Inc. (OLA), a subsidiary of OCA, will pay a $22.8 million criminal penalty for violations of the FCPA.
OCA admitted to criminal charges that it won new business and rewarded sales by giving doctors and hospitals kickbacks, including consulting payments, foreign travel, lavish meals, millions of dollars in grants and free endoscopes. For example:
- OCA gave a hospital a $5,000 grant to facilitate a $750,000 sale;
- OCA held up a $50,000 research grant until a second hospital signed a deal to purchase Olympus equipment;
- OCA paid for a trip for three doctors to travel to Japan in 2007 as a quid pro quo for their hospital’s decision to switch from a competitor to Olympus; and
- A doctor with a major role in a New York medical center’s buying decisions received free use of $400,000 in equipment for his private practice.
These and other kickbacks helped OCA obtain more than $600 million in sales and realize gross profits of more than $230 million.
The criminal complaint alleges that the improper payments happened while Olympus lacked training and compliance programs. Olympus did not create the position of compliance officer until 2009 and did not hire an experienced compliance professional until August 2010. The DPA requires OCA to adopt several compliance measures.
In the civil settlement, Olympus agrees to pay $310.8 million to the federal government and the states to resolve claims that Olympus’s payment of kickbacks caused false claims to be submitted to federal health care programs Medicare, Medicaid and TRICARE, and thus violated not only the AKS but also the federal and various state False Claims Acts. The federal share of the civil settlement is $267,288,323, and Olympus will pay $43,512,053 to participating states that contributed to the falsely claimed Medicaid payments at issue.
The civil settlement resolves a lawsuit filed by John Slowik, the former chief compliance officer of OCA, in the District of New Jersey, under the federal and various state False Claims Acts. The acts permit whistleblowers to file suit for false claims against the government entities and to share in any recovery. Slowik will receive $44,102, 573 from the federal share and $7 million from the state share of the civil settlement amount.
In a separate criminal complaint filed March 1 in Newark federal court, OCA’s Miami-based subsidiary OLA was charged with FCPA violations in connection with improper payments to health officials in Central and South America, and OLA entered into a separate three-year DPA. According to court documents, from 2006 until August 2011, OLA implemented a plan to increase medical equipment sales in Central and South America by providing payments to health care practitioners at government-owned health care facilities. These payments included cash, money transfers, personal grants, personal travel and free or heavily discounted equipment.
The primary method to deliver these illicit benefits was through “training centers,” nominally set up to educate and train doctors, but which OLA used to provide benefits to pre-selected practitioners. OLA and its conspirators paid nearly $3 million to practitioners to induce the purchase of Olympus products and saw more than $7.5 million in profits as a result.
The agreement requires OLA to pay a criminal penalty of $22.8 million, retain a compliance monitor for three years and implement a number of compliance measures.
In addition to the criminal and civil resolutions, Olympus executed a corporate integrity agreement (CIA) with the Department of Health and Human Services-Office of Inspector General (HHS-OIG).
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