On September 27, 2008 Stryker announced a resolution with the US Attorney’s office in Newark, New Jersey over concerns that companies may have paid kickbacks to orthopedic surgeons in return for favoring their product. The U.S. Department of Justice had issued a subpoena in March 2005, requesting documents for the period January 2002 through the present relating to "any and all consulting contracts, professional service agreements, or remuneration agreements between Stryker Corporation and any orthopedic surgeon, orthopedic surgeon in training, or medical school graduate using or considering the surgical use of hip or knee joint replacement/reconstruction products manufactured or sold by Stryker Corporation."
Christopher Christie, US attorney in Newark, oversaw the settlement and concluded that Stryker and four other companies – who together account for nearly 95% of the market in hip and knee implants – violated federal anti-kickback laws by paying doctors “to exclusively use their products.” Doctors often did “little or no work for the financial inducements but did agree to exclusively use the paying company’s products.”
Christie stated that surgeons typically received "tens to hundreds of thousands of dollars per year for consulting contracts and were often lavished with trips and other expensive perquisites," failing to disclose the payments to their hospitals or patients.
Gary Heuer, special agent in charge of the U.S. Department of Health and Human Services' Office of Inspector General's New York office, stated that patients “deserve the best available treatment from physicians and surgeons without the corrupting influence of kickbacks from the medical device companies.”
Michael Drewniak, public affairs officer for US Attorney Christie, stated the payments were contrary to ethical standards, federal law and health care trends demanding transparency and accountability by businesses.
Stryker, along with four other makers of medical device implants – who together account for nearly 95% of the market in hip and knee implants -- made agreements with the U.S. government to resolve fraud concerns over industry practices. Because Stryker voluntarily cooperated with the US Attorney’s Office, the company was exempted from paying fines to settle the case, but agreed to be monitored for 18 months. Stryker hired former U.S. Attorney General John Ashcroft to supervise corporate reforms mandated by the settlement. Biomet will pay $26.9 million; DePuy, $84.7 million; Smith & Nephew, $28.9 million; and Zimmer will pay $169.5 million.
The resolution required the companies to publish the names and sums paid to consultants and the terms of the settlement on their websites and to comply with certain standards and procedures in connection with the retention and payment of orthopedic surgeon consultants related to reconstructive products and the provision of certain benefits to such surgeons. The settlements released the companies from civil liabilities and prevented them from being banned from Medicare reimbursements.
While the American Academy of Orthopaedic Surgeons supports financial disclosures to patients about industry relationships, the organization took issue with the U.S. Attorney's Office not to separate compensation into royalties and other categories.
Did your orthopedic surgeon receive payments from Stryker in 2007? Go to http://www.stryker.com/meetourconsultants/consultants/consultants_location.php to find out.
On October 12, 2007, Stryker disclosed that the United States Securities and Exchange Commission had made an informal inquiry regarding possible violations of the Foreign Corrupt Practices Act in connection with the sale of medical devices in certain foreign countries. The Company indicated that it was fully cooperating with the U.S. Securities and Exchange Commission regarding the informal investigation.
On November 14, 2007, Stryker agreed to pay $16.6 million to settle charges that a former outpatient therapy subsidiary – Physiotherapy Associates -- fraudulently billed Medicare, Medicaid, and a Department of Defense health care program for services not covered by the programs. Stryker had recently announced the sale of Physiotherapy Associates to a pair of private equity firms, including Water Street Healthcare Partners. The case stems from two whistleblower lawsuits by former Physiotherapy employees who will receive nearly $3 million from the settlement.