The year did not end on a high note for medical device company Coloplast (Minneapolis, MN), which has agreed to pay $3.16 million to settle a lawsuit alleging that it paid kickbacks to Liberator Medical Supply and a handful of other companies distributing its products. The federal whistleblower lawsuit was initiated by former Coloplast President Kimberly Herman and two insiders, who claimed that the company made illegal payments to Liberator Medical and other companies to entice them to refer individual users to Coloplast products, states a press release from the U.S. Attorney's Office, which pursued the lawsuit.
Coloplast, which has its international headquarters in Denmark, manufactures ostomy and continence care products along with an array of disposable medical devices. A report from the Boston Division of the Federal Bureau of Investigation notes that Coloplast and Liberator "acted with their own self-interests in mind, putting profits over patient care. The decision on which medical products to refer should be based on what is best for the patient, not on cash incentives or rebates," said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division.
"The settlement with Coloplast resolves allegations that it paid kickbacks to Byram Healthcare Centers, Inc.; CCS Medical, Inc.; Liberator; Liberty Medical, Inc.; and Handi Medical, Inc. in return for marketing promotions and conversion campaigns," notes a press release issued by the FBI. "In the case of Byram, Liberty, and Handi, Coloplast's promotional campaigns allegedly included kickbacks in the form of funding for cash incentives paid to the suppliers' sales personnel to induce them to refer patients to Coloplast products. In other instances, Coloplast allegedly gave rebates or price concessions as inducements for the promotional campaigns."
The Star Tribune reports that Coloplast account managers were told in 2011 that the company was willing to pay commissions or bonuses, known internally as "spiffs," to suppliers' sales personnel for so-called conversions, but that they needed to be "careful how much of the program they put in writing." In 2013, one distributor invoiced Coloplast with a bill for $8,598 for "Elastic Barrier Strip Spiff Q2 2013." The lawsuit alleges that whistleblower Amy Lestage was told to call the distributor and have them replace the word "spiff" with "marketing funds" on the invoice, and to delete all of her e-mails regarding it, according to the Star Tribune.
In agreeing to the $3.16 million settlement, Coloplast did not admit to any wrongdoing. Liberator Medical has agreed to pay $500,000 for its alleged participation in the scheme.
Herman and the other two whistleblowers will receive a share of the settlement; the amount has not been disclosed.