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Device-Maker Medtronic Weighed Down With Lawsuits

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Message Evelyn Pringle
On July 31, 2006, Jacqueline Kay Poteet, a whistleblower in a lawsuit against the giant medical device maker, Medtronic, filed a motion in a Memphis federal court to oppose the US Justice Department's plan to settle her case, along with another whistleblower's case, for $40 million.

Critics point out that the identity of the other whistleblower remains a secret and question why it has never been made public.

Ms Poteet's motion alleges that "this case has not been adequately investigated" by the government, and that the $40 million amount is "woefully inadequate."

Her attorney, Andrew Carr Jr, also claims that one of the lawyers involved in the case from the DOJ, had an undisclosed relationship with an attorney for one of the defendants.

On July 18, 2006, the Medtronic announced that it had reached a settlement agreement with the DOJ which requires the government to seek dismissal of the two qui tam civil suits. And on July 19, 2006, the DOJ issued a press release announcing the settlement in which the company agreed to pay $40 million to settle charges that it paid kickbacks to doctors to increase the sales of its products.

Medtronic was also required to sign a 5-year corporate integrity agreement which requires the company to file regular reports with the Inspector General and track all non-sales related customer transactions. The company must also set up an outside review organization, improve training and employee screening practices, and make a compliance officer a member of senior management who will report directly to the chief executive and have access to the company's board of directors

In discussing the terms of the settlement, the Assistant Attorney General for the Civil Division of the DOJ, Peter Keisler, stated in the press release, "Today's settlement reflects the progress we are making in the ongoing fight against abusive and illegal practices in the healthcare industry."

"Kickbacks to physicians are incompatible with a properly functioning health care system," he wrote. "They corrupt physicians' medical judgment and they cause overutilization and misallocation of vital health care resources."

The $40 million settlement agreement comes on the heels of a $1.35 billion settlement in 2005, to settle charges in a patent infringement action filed by Dr Gary Michelson, a Los Angeles inventor and surgeon.

According to Medtronic's latest SEC filings, the company first became aware of the DOJ's investigation on September 4, 2003, when it was informed that the government was investigating allegations that certain payments and other services provided to physicians constituted improper inducements under the Anti-Kickback Statute. The allegations were made as part of a civil qui tam complaint brought pursuant to the federal False Claims Act.

A year later, on September 2, 2004, Medtronic received a copy of Ms Poteet's qui tam complaint asserting similar allegations under the FCA. "The Company," the SEC filing states, "views the second complaint as having arisen out of essentially similar facts and circumstances as the first qui tam complaint."

The lawsuit allege that Medtronic violated the Anti-Kickback Statute between 1998 and 2003, by paying kickbacks through sham consulting and royalty agreements and sponsoring all-expense-paid trips for doctors to exotic locations.

Ms Poteet now contends that the government's motion to dismiss her lawsuit is an attempt to keep the terms of the settlement secret and to avoid having to pay her or any other whistleblower a percentage of the settlement, in the case titled United States of America, ex rel Jacqueline Kay Poteet v Medtronic, Inc, No 03-2979, WD Tenn, W Div.

Her lawsuit charges Medtronic with violating the FCA which prohibits the submission of false claims to the federal government, and imposes liability on any person who "knowingly presents, or causes to be presented, ... a false or fraudulent claim for payment or approval," or who "knowingly makes, uses, or causes to be made or used, a false record or statements to get a false or fraudulent claim paid or approved by the Government."

The fundamental element of a FCA violation, is the existence of an actual false claim that has been presented to the government. The FCA authorizes private individuals to bring qui tam actions on behalf of the US government.

FCA recoveries over the past two decades total more than $17 billion, with most of that amount coming from the pharmaceutical industry, according to the Washington DC based policy group, Taxpayers Against Fraud.

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Evelyn Pringle is a columnist for OpEd News and investigative journalist focused on exposing corruption in government and corporate America.
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