Published 11/1/2007

Money and monitors: What the settlements mean

The settlements announced by Christopher J. Christie, US Attorney for New Jersey, on Sept. 27, 2007 were in response to criminal complaints filed against several orthopaedic hip and knee implant manufacturers. The complaints allege that the companies used lucrative consulting arrangements with orthopaedic surgeons as inducements for the surgeons to use a particular company’s implants.

Under the terms of the Deferred Prosecution Agreements entered into with four implant manufacturers, these complaints will be dismissed in 18 months, if the manufacturers comply with the agreed-upon reform requirements. The four manufacturers also reached civil settlements with the Department of Justice and the Department of Health and Human Services, Office of Inspector General, which included both fines and a 5-year Corporate Integrity Agreement, mandating additional reforms and monitoring.

A fifth implant manufacturer was ultimately not charged and was allowed to enter a Non-Prosecution Agreement. It will be monitored, however, and must implement the same reforms as the other companies. Four of the five manufacturers paid monetary fines and all five accepted the appointment of federal monitors to review compliance with the corporate reforms required of each of them.

$311 million in fines
A total of $311 million in fines was assessed among the four implant manufacturers. Half of the payments will go to Medicare, and the rest will be used to cover the settlement costs and to fund government healthcare fraud investigation programs. The payments settle claims under the antikickback statute of the Medicare and Medicaid Patient Protection Act of 1987 and the civil federal False Claims Act.

Reforming the process
Under the terms of the agreements, the five implant manufacturers will be required to conduct needs assessments to determine reasonable needs for consulting services in clinical, medical, training, research, education, and development areas. All new consulting arrangements will require physicians to disclose their financial engagements with any implant manufacturer to their patients and affiliated hospitals.

The agreements establish a cap of $500 per hour for consultants, based on certified time actually spent in performing the services. A higher hourly rate requires an independent analysis to determine the fair market value of the work and approval by the independent monitor assigned to the implant manufacturer.

The agreements include extraordinarily broad definitions of “consultant,” “consulting agreement,” and “payment.” For example, all contracts for services to be performed on behalf of the implant manufacturer are considered “consulting agreements,” including agreements for compensation, honoraria, fellowships, professional meetings, teaching, publications, clinical studies, fee-for-service consulting, product development and license agreements, research, and professional services agreements, as well as agreements to provide grants, donations, sponsorships, and other forms of payment to medical educational organizations, medical societies, and training institutions.

“Payment” includes “any and all compensation or remuneration” paid to consultants. The agreements specify that “payment” includes “meals, entertainment, travel, gifts, grants, honoraria, charitable contributions, donations, sponsorships, research grants, clinical studies, professional meetings, product training, medical education, research funding, product development services, in-kind services (eg, use of aircraft), advertising, promotion and marketing expenses or support, and royalties or other payments for transfer of documented intellectual property.”

Each of the implant manufacturers pledged to work with the independent monitors and to institute and review compliance practices and procedures.