Olympus settles largest kickback lawsuit for a medical device company in U.S. history

Still reeling from the contaminated medical scopes scandal, Olympus Corp. (Tokyo) is making headlines for another unseemly bit of business. Its U.S. subsidiary, Olympus Corp. of the Americas (Center Valley, PA), has agreed to pay $623 million to resolve a civil whistleblower lawsuit and criminal charges for violating the U.S. Anti-Kickback Statute (AKS). The settlement is the largest total amount paid in U.S. history for violations of the AKS and the largest amount ever paid by a medical device company, according to Kenney & McCafferty, P.C., the law firm representing the whistleblower.

The court filings, which were unsealed yesterday, revealed a rampant "corporate culture of fraud and herd mentality," said Kenney & McCafferty. The medical device company engaged in an "elaborate international kick-back scheme" to sell its medical equipment, using tactics such as:

When he discovered these practices, the whistleblower—Olympus' first compliance officer, who was hired in 2009—immediately put the company's top brass on notice that it was in non-compliance with the AKS and set about to develop a comprehensive compliance program, according to Kenney & McCafferty. He was fired in 2010. The next year, the company ousted President and CEO Michael Woodford after he refused to go along with a cover up of the accounting scheme. "Our client offered Olympus the chance for redemption by reporting internally first," noted a news release from the firm. "Unfortunately, Olympus chose to elevate profits above corporate responsibility."

"Olympus is not unique in putting profits before people's lives," says Diana Zuckerman, PhD, president of the National Center for Health Research (Washington, D.C.), as reported by sister brand Qmed. "But, we can hope that when companies get caught and fined, that has a chilling effect on other companies that are behaving similarly or considering doing so."

The New Jersey U.S. Attorney's Office, in collaboration with the Department of Justice, led the federal investigation that corroborated the whistleblower's allegations.

Commenting on the agreements, Olympus Corp. of the Americas' President and CEO Nacho Abia said, "Olympus leadership acknowledges the company's responsibility for the past conduct, which does not represent the values of Olympus or its employees. Olympus is committed to complying with all laws and regulations and to adhering to our own rigorous Code of Conduct which guides our business processes, decisions and behavior. The company has implemented and will continue to enhance its robust compliance program." It also has a button on the home page of its website allowing users to report compliance concerns.

Earlier this year, Olympus and FDA came under U.S. Senate scrutiny for the company's duodenoscopes, a type of endoscope used in certain medical procedures, which are difficult to clean and, as a result, sickened hundreds of patients in the United States and Europe. The contaminated scopes were linked to more than two dozen outbreaks of antibiotic-resistant infections and are associated with the deaths of more than a dozen people. Olympus initially denied that the design of the scope was connected to these outbreaks and blamed improper cleaning procedures at the hospitals. The Senate health committee report also places responsibility on regulatory oversight, noting that "FDA's current system to monitor medical device safety is unable to effectively identify device problems when they occur." For more on this, read "Lax FDA oversight allowed dirty medical scopes scandal to spread, says Senate report."