Olympus Corp. of America, which is the largest distributor of endoscopes and related devices in the United States, agreed on Tuesday to pay $623.2 million to resolve criminal charges and civil claims in connection with kickbacks that were paid to doctors and hospitals. In addition, an Olympus subsidiary will pay $22.8 million to settle criminal charges for bribing health providers and officials in Latin America.
The settlement is the largest total amount paid in US history for violating the federal antikickback statute and is also the largest ever paid by a device maker, according to the US Department of Justice. The settlement includes a $312.4 million to resolve the criminal charges and $310.8 million for causing false billings claims to be paid by federal health care programs, including Medicaid and Medicare.
The agreements resolve a long-running investigation that was triggered by a whistleblower lawsuit filed by a former Olympus executive. John Slowik had worked at the device maker for nearly 18 years before becoming its first chief compliance officer in 2009. However, he was fired the following year after protesting kickbacks and attempting to implement reforms, according to his attorney, Tavy Deming.
The court documents paint a picture of troubling practices.
These included: making cash payments of as much as $100,000 annually to reward key physicians for ostensible consulting services in the hopes that they would purchase Olympus devices; providing free equipment and hundreds of thousands of dollars in grants to entice physicians to buy Olympus products; and paying for luxury vacations for doctors and their spouses who traveled to exotic destinations.
More specifically, the feds said that Olympus gave a $5,000 grant to one hospital in order to facilitate a $750,000 sale; the company delayed a $50,000 research grant until a second hospital signed a deal to purchase Olympus equipment; and a doctor, who had a “major role” in purchasing decisions at a New York medical center, was given free use of $400,000 in equipment for his private practice.
These and other kickbacks helped Olympus generate more than $600 million in sales and realize gross profits of more than $230 million, according to the Justice Department.
In South and Central America, Olympus tried to increase sales by paying health care providers at government-owned health care facilities. The payment included cash, money transfers, personal grants, personal travel, and free or heavily discounted equipment, according to court documents. These bribes violated the Foreign Corrupt Practices Act.
“This is exactly why we need whistleblowers,” said Patrick Burns, who heads Taxpayers Against Fraud, a nonprofit that advocates for stiffer penalties against drug makers and is partially funded by attorneys. “Companies can’t be relied on to put patients before profits.”
In a statement, the device maker said its “leadership acknowledges the company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees.”
Olympus, however, came under scrutiny several weeks ago after a report that the device maker continued to sell duodenoscopes to US hospitals, despite warnings from a 2012 superbug outbreak in the Netherlands. One congressman, Ted Lieu (D-Calif.) called for the US Securities and Exchange Commission to investigate the company. In January, Olympus issued a recall.
As part of the settlement, Olympus signed a corporate integrity agreement that requires executive commitment to beefing up and overseeing compliance practices. The company also entered into a deferred prosecution agreement, which precludes further criminal penalties if the reforms are properly implemented.
As for Slowik, he will receive $51.1 million from the civil settlement, before paying attorneys fees.