A Johnson & Johnson (JNJ) subsidiary has agreed to pay $18 million to resolve charges of causing health care providers to submit false claims to Medicare and other federal health care programs, which then paid for a device that was illegally marketed.
The settlement with the US Department of Justice, which was disclosed on Friday, comes just two days after a pair of former executives at the J&J subsidiary, which is known as Acclarent, were found guilty of several misdemeanor charges of distributing a misbranded and adulterated device. A federal court jury in Boston found the executives marketed the Stratus device for a use that was not approved by the US Food and Drug Administration.
Here’s the back story: In 2006, Acclarent won FDA approval to market its Stratus device to be used only with saline to maintain sinus openings following surgery. But the feds alleged the company intended to market Stratus as a drug-delivery device for prescription corticosteroids and maintained the device was specifically designed and engineered for this use, according to court documents.
Moreover, the feds maintained Acclarent marketed the device for that purpose even after the FDA rejected a request in 2007 to promote it for additional uses. The former executives, William Facteau and Patrick Fabian, had been accused of seeking to quickly develop and market Stratus in order to generate sales and make Acclarent a desirable target for either an acquisition or an initial stock offering.
Between 2008 and 2011, the men allegedly concealed a scheme to illegally distribute and promote a device they planned to market for delivering steroids to sinuses. The feds charged, however, they deceived the FDA by falsely claiming the intended use was to maintain an opening to the sinus, and that the device was supposed to be used with saline.
Acclarent, where Facteau was the chief executive and Fabian was the vice president of sales, was eventually sold to Johnson & Johnson in January 2010 for $785 million. Following the acquisition, Acclarent management was told to stop marketing the device for unapproved uses, but they continued to do so anyway, court documents stated. As a result, doctors and other providers billed Medicare and other federal health care programs for the device for the unapproved uses.
By May 2013, Acclarent discontinued the product.
The episode stems from a whistleblower lawsuit that was filed three years ago by Melayna Lokosky, a former Acclarent sales rep who worked for the device maker from 2007 to 2011. Her lawsuit described the steps that Acclarent had taken to promote the device and allegedly deceive physicians about its efficacy. She is expected to receive about $3.5 million from the settlement.