DOJ Catch of the Week -- Olympus Corp.
By the C|C Whistleblower Lawyer Team
This week’s Department of Justice “Catch of the Week” goes to Olympus Corp. of America, the country’s largest distributor of endoscopes and related equipment. On Tuesday, the company agreed to pay $623.2 million to resolve criminal charges and civil claims for the company’s violations of the False Claims Act and Anti-Kickback Statute through a scheme to pay kickbacks to doctors and hospitals. It is the largest payout ever by a medical device company for violations of the Anti-Kickback Statute. In addition, Olympus subsidiary Olympus Latin America Inc. also agreed to pay $22.8 million to resolve separate criminal charges relating to violations of the Foreign Corrupt Practices Act. See DOJ Press Release.
In connection with the False Claims Act criminal settlement, Olympus admitted violating the Anti-Kickback Statute, which prohibits payments to induce purchases paid for by federal health care programs. It did so by securing business by rewarding doctors and hospitals with consulting payments, foreign travel, lavish meals, millions of dollars in grants and free endoscopes. Among the specific examples the government pointed to were a $5,000 grant to a hospital to facilitate a $750,000 sale; a $50,000 research grant which was tied to a deal to purchase Olympus equipment; a trip for three doctors to travel to Japan in exchange for their hospital’s decision to switch to Olympus as a supplier; and a doctor’s free use of $400,000 in equipment for his private practice. These and other kickbacks helped Olympus obtain more than $600 million in sales and realize gross profits of more than $230 million.
In addition to the large monetary payout, the settlement requires Olympus to adopt several compliance measures to remedy its problems. These include vastly improving its compliance training and enforcement; maintaining a confidential hotline and website for employees and customers to report wrongdoing; and adopting a financial recoupment program requiring executives who engage in misconduct or fail to promote compliance to forfeit up to three years of performance pay. A former federal prosecutor will serve as an independent monitor to oversee these mandated compliance efforts.
The allegations originated in a whistleblower lawsuit filed by John Slowik, Olympus’ former chief compliance officer, under the qui tam provisions of the federal and various state False Claims Acts. He will receive a whistleblower award of roughly $51 million from the proceeds of the government’s recovery.
With respect to the separate FCPA settlement, the government charged Olympus Latin American with providing payments to health care practitioners at government-owned health care facilities in Central and South America. These payments included cash, money transfers, personal grants, personal travel and free or heavily discounted equipment, all delivered through “training centers” set up to purportedly educate and train doctors. According to the government, nearly $3 million in payments were made through this scheme resulting in more than $7.5 million in profits.
In announcing the settlements, DOJ officials stressed the agency’s “longstanding concerns” about improper financial relationships and the undue influence it can have in the healthcare decision making process. They “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.” This settlement is “a clear message that we will not tolerate these types of abusive arrangements, and the pernicious effects they can have on our health care system.” The agency is committed “to ensuring the integrity of the healthcare equipment market, regardless of whether the illegal bribes occur in the U.S. or abroad.”