St. Jude Pays Gov’t $16M to Settle Kickbacks Suit

The medical device giant, which allegedly paid physicians kickbacks in a masked attempt to drive its sales, said that it admits no wrongdoing and that settling was a way to avoid potentially costly litigation.

St. Jude Medical, Inc., has agreed to pay $16 million to the U.S. Department of Justice to settle allegations that it paid kickbacks to physicians who enrolled patients in post-market studies-studies that were used as a way to entice doctors to use the company's devices.

Post-market studies are intended to assess the clinical performance of a medical device or drug after it has been approved by the U.S. Food and Drug Administration. The Department of Justice contends that Little Canada-based St. Jude intentionally used the studies as vehicles to increase sales of its devices by paying physicians to implant its pacemakers and implantable cardioverter defibrillators in patients.

St. Jude allegedly paid participating physicians up to $2,000 per patient and solicited them to enroll patients in the studies in order to retain their business or win their business from a competitor.

In a news release issued late Thursday, St. Jude said that it “maintains that its post-market studies and registries are legitimate clinical studies designed to gather important scientific data” and that it “does not admit liability or wrongdoing” by entering into the settlement agreement. The company said it settled “to avoid the potential costs and risks associated with litigation.”

According to St. Jude, the settlement will have no material impact on its financial position or its operations.

“When companies pay kickbacks to health care providers in order to pad their bottom line, it taints the information patients rely on to make informed choices about their health,” Tony West, assistant attorney general for the Justice Department's civil division, said in a statement.”It is critical that physicians base their decisions on which medical device to implant on the best interest of the patient, not on whether a device manufacturer will pay an extra fee or honoraria for the implant.”

The actions taken by the Department of Justice resulted from a whistleblower lawsuit that former St. Jude employee Charles Donigan filed in Massachusetts under the federal False Claims Act. Court documents indicate that Donigan-who the company hired in 2004 as a technical service specialist-was fired in 2007 after he questioned the legality of the payments being made to physicians.

The False Claims Act permits a whistleblower to recover a share of settlement-and in this case, Donigan will recover $2.64 million.

St. Jude is among Minnesota's 20-largest companies based on revenue, which totaled $4.68 billion for the fiscal year that ended January 2, 2010. Financial results for the most recently completed fiscal year have not yet been released.