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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.

Norbert Sparrow

March 2, 2016

4 Min Read
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:

  • providing key accounts with "permanent loans" of Olympus medical equipment virtually whenever requested by Olympus sales and marketing personnel to maintain customer loyalty to the Olympus brand and to secure purchases of Olympus products;

  • funneling cash payments of as much as $100,000 annually  to reward "VIP" physicians for ostensible "consulting services"  at the discretion of Olympus sales and marketing representatives, with the knowledge and endorsement of senior management, based on sales potential;

  • making annual cash payments of hundreds of thousands of dollars masquerading as "grants" to fund educational or research programs made at the discretion of a grant committee comprised solely of Olympus sales and marketing personnel, based on sales potential; and

  • funding luxury, all-expense paid vacations to Japan and other exotic international destinations for "VIP physicians," and sometimes their spouses, in exchange for purchases and promotion of Olympus medical products.

 Olympus

A button on the Olympus website
invites users to report compliance
concerns.

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.

briber-FrameAngel-300.jpg

Image courtesy FrameAngel/freedigitalphotos.net.

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."

About the Author(s)

Norbert Sparrow

Editor in chief of PlasticsToday since 2015, Norbert Sparrow has more than 30 years of editorial experience in business-to-business media. He studied journalism at the Centre Universitaire d'Etudes du Journalisme in Strasbourg, France, where he earned a master's degree.

www.linkedin.com/in/norbertsparrow

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