Orthopedic Firms Settle with U.S. Justice Department 4399

BUSINESS NEWS

For more than two years, leading orthopedic manufacturers have been living under a cloud of intense scrutiny by the U.S. Department of Justice (DOJ), which has been focusing its attention on sales and promotional practices in the orthopedics sector. At the end of September, DOJ announced that it had induced the five companies under investigation to enter into a settlement agreement. In return for shelving the government's probe of alleged industry violations of the Federal Healthcare Antikickback Act and the False Claims Act, the companies accepted the imposition of corporate integrity agreements, deferred-prosecution agreements, and fines totaling $311 million.

Stryker Corp. (Kalamazoo, MI) was not required to pay a fine. But the company signed a deferred-prosecution agreement and promised to adhere to the same reforms as those imposed on the other companies during an 18-month monitoring period.

Each of the other firms—Biomet Corp. (Warsaw, IN); DePuy Orthopaedics Inc. (Warsaw, IN), a Johnson & Johnson company; Smith & Nephew plc (London); and Zimmer Holdings Inc. (Warsaw, IN)—was required to pay a fine. The amounts of the respective fines were: Biomet, $26.9 million; DePuy, $84.7 million; Smith & Nephew, $28.9 million; and Zimmer, $169.5 million.

Despite the settlement, companies in the orthopedics sector may have little time to catch their breath, as yet another investigation of the industry is under way. This time, Medtronic Inc. (Minneapolis) joins Biomet, Smith & Nephew, Stryker, and Zimmer in an apparent probe of potential violations of the Foreign Corrupt Practices Act.

Just days after the DOJ settlement was announced, the five orthopedic firms reported that they had received formal notice of an investigation by the U.S. Securities and Exchange Commission. DePuy was not included.

Industry analysts generally see the commission's inquiry as a continuation or extension of the original DOJ investigation. And it will likely take just as long to come to a resolution.