An association of 177 health insurance companies and medical providers in Brazil sued Boston Scientific Corporation, Arthrex, Inc. and Zimmer Biomet Holdings, Inc. in US federal court, charging that the companies paid millions in kickbacks to doctors so they would use their medical products — regardless of the need or cost of the products.
Abramge (short for Associação Brasileira De Medicina De Grupo) is an organization that represents the health insurers and medical service providers in a complaint filed in US District Court in Delaware, Case. No. Case 1:16-cv-01184-GMS.
Brazil has the second-largest private health insurance market by population in the world after the US. The doctors were paid a 20% to 40% commission for using the companies’ medical devices, according to the complaint. The corrupt doctors induced Brazilian the medical providers to (1) buy medically unnecessary amounts of Defendants’ devices; (2) conduct unnecessary medical procedures, in order to use more of Defendants’ products; and (3) overbill insurers for Defendants’ products and medical procedures.
The “Prosthetic Mafia”
The Brazilian television news program Fantastico (similar to 60 Minutes) featured a series of reports in January 2015, showing Brazilian medical device distributors offering secret cash commissions to an undercover reporter posing as a Brazilian surgeon. This caused the National Congress of Brazil to conduct hearings investigating the corruption by the “Prosthetic Mafia.”
The final report issued by the Brazilian congress found that the improper payments have “grown alarmingly” and that the fraudulent scheme was “endangering the lives of patients in favor of the companies’ profit.”
The defendants are:
- Boston Scientific Corporation is a Delaware corporation headquartered in Massachusetts. It manufactures a vast array of products used in a range of interventional medical specialties, including interventional radiology, interventional cardiology, peripheral interventions, neuromodulation, neurovascular intervention, electrophysiology, cardiac surgery, vascular surgery, endoscopy, oncology, urology and gynecology. Boston Scientific is a known for its stents, implantable cardioverter defibrillators, pacemakers, stents and spinal cord stimulator systems.
- Arthrex, Inc. is a Delaware corporation headquartered in Florida. Arthrex manufactures implants for sports medicine and joint prosthetics. It also develops and manufactures orthobiologics, which are substances many orthopaedic surgeons use to assist in the healing process of injuries.
- Zimmer Biomet Holdings, Inc. is a Delaware corporation headquartered in Indiana. It manufactures and markets orthopedic products, including knee, hip, shoulder, elbow, foot and ankle artificial joints and dental prostheses.
Phony consulting agreements
The Brazilian Federal Police investigated the kickback scheme, launched in 2006, leading to the indictment of distributors and doctors in Brazil. A prominent São Paulo hospital studied the difference in certain medical procedures before and after the public disclosure of the medical device scandal and found a 30% reduction in those procedures.
According to the complaint, sales representatives working for Boston Scientific would approach doctors and offer to pay a fee for every Boston Scientific device or product the doctor used. The doctors signed phony consulting agreements to legitimize the bribery.
In one example Signus, on behalf of Boston Scientific, approached three doctors and paid them $27,000 per month for using its products. During six months from June to December 2012, the kickbacks totaled $189,000.
Back in the US in 2009, Boston Scientific agreed to pay $22 million to settle allegations brought by the Department of Justice that it paid kickbacks to doctors to participate in post-market studies, in order to boost sales of Boston Scientific pacemakers and defibrillators. Further, in 2011, two former employees of Boston Scientific filed a lawsuit in the District of New Jersey alleging that Boston Scientific paid kickbacks to doctors to encourage use of Boston Scientific’s spine products.
“Both of these instances are strikingly similar to what Plaintiff has discovered Boston Scientific has been doing in Brazil,” the complaint says. Arthrex and Zimmer Biomet are accused of similar acts.
In fact, on March 26, 2012, Biomet entered into a Deferred Prosecution Agreement with the DOJ and a Consent to Final Judgment with the U.S. Securities and Exchange Commission to end investigations into Biomet’s violations of the Foreign Corrupt Practices Act. Biomet was bribing doctors in Brazil as part of its marketing and sales strategy in that country.
The complaint, filed by attorney Karen B. Skomorucha Owens of Ashby & Geddes in Wilmington, Delaware, seeks damages for fraud, conspiracy, tortious interference, negligent misrepresentation and unjust enrichment.