Illinois-based Life Spine, its CEO, and its VP will pay about $6 million to resolve illegal kickback allegations involving the company’s medical devices. According to the False Claims Act lawsuit that was recently settled, the defendants paid surgeons to recommend and promote Life Spine’s implants and other products.
The company has agreed to pay $5.5 million and the two executives will complete the payout; CEO Michael Butler will pay $375,000 and Vice President Richard Greiber $115,000. The settlement agreement was announced before a New York federal judge on October 23rd.
The alleged misconduct was brought to light in a whistleblower lawsuit filed in 2018 by four former Life Spine employees. The U.S. government decided to intervene last July.
According to the DOJ, the whistleblowers will receive 20 percent of the settlement payments. Based on that percentage, the tipsters are set to share a $1.20 million award.
The complaint states that Life Spine, with direct participation from Butler and Greiber, "aggressively recruited" physicians and offered them millions of dollars in fees for consulting, patents, and royalties "to induce them to use Life Spine's spinal implants, devices, and equipment." Prosecutors claim the misconduct took place between 2012 and 2018.
The company, which is registered in Delaware, promised to help surgeons bring products designed by them to market in exchange for their use of Life Spine products in their practices.
According to the DOJ’s press release, “LIFE SPINE and BUTLER expected surgeons to commit to using Life Spine Products at a certain level in exchange for the consulting fees, royalties, and intellectual property acquisition fees paid to them.”
Doctors were also paid substantial fees for educational and training services. Allegedly, another way Life Spine used to mask kickbacks was by paying surgeons to give feedback on certain products. “BUTLER informed LIFE SPINE staff that he expected surgeons who were paid for their consulting services to commit to using Life Spine Products,” the DOJ stated. In addition, when the company acquired patents from participating doctors, it paid exorbitant up-front acquisition fees.
Surgeons who did not provide a high return on investment were pressured “to use more Life Spine Products during [their] surgeries.”
As a result of Life Spine’s illegal incentives, the Department of Justice said the company steadily increased profits. "The kickback scheme was lucrative," accounting for nearly "half of Life Spine's total domestic sales of spinal products," DOJ said in a press release.
Because it constitutes an anti-kickback violation, the alleged misconduct resulted in false claims submitted to the government, defrauding both Medicaid and Medicare. While Life Spine announced it was pleased with the case’s outcome, the whistleblowers still have retaliation claims pending. A spokesperson for the whistleblowers said that “the government did an outstanding job in resolving the claims at the amounts that they did."
A spokesman for the FBI said in a statement that this type of misconduct causes patients to mistrust their doctors. "People seeking medical treatment are dependent on the advice they get, they don’t have the expertise to question the doctors. The FBI does all it can to stop those companies who overlook the patient who is just hoping to get better, and only sees the dollar signs,” he said.