Medical device company Covidien has agreed to pay $17.5 million for violations of the False Claims Act by providing free or discounted practice development and market development support to physicians in California and Florida to induce purchases of Covidien products, the Department of Justice announced on March 11.

The United States alleged that Covidien violated the Anti-Kickback Statute and, correspondingly, the False Claims Act by providing practice development and market development support to healthcare providers located in California and Florida from Jan. 1, 2011, through Sept. 30, 2014, to induce those providers to purchase ClosureFAST radiofrequency ablation catheters that were billed to Medicare and to the California and Florida Medicaid programs. 

According to the Department of Justice, the practice and market development support Covidien provided included “customized marketing plans for specific vein practices; scheduling and conducting ‘lunch and learn’ meetings and dinners with other physicians to drive referrals to specific vein practices; and providing substantial assistance to specific vein practices in connection with planning, promoting, and conducting vein screening events to cultivate new patients for those practices.”

The Anti-Kickback Act prohibits the payment of remuneration to induce the referral or use of items or services paid for by federal healthcare programs. Remuneration includes not only cash payments but also offers or payments made “in kind.” 

Under the settlement agreement, Covidien will pay an additional $1.5 million to California and $1 million to Florida for claims settled by these state Medicaid programs.  The Medicaid program is a jointly funded federal and state program. 

The settlement resolves allegations contained in lawsuits filed by Erin Hayes and Richard Ponder, former sales managers for Covidien, and Shawnea Howerton, former employee of one of Covidien’s customers. Those lawsuits are pending in federal court in California. 

The lawsuits were filed under the whistleblower provisions of the FCA, which permit private individuals to sue on behalf of the United States for false claims and to share in any recovery. Hayes and Ponder will receive $3.1 million as their share of the federal recovery.