The federal government said the device maker didn't pay appropriate warranty credits.
St. Jude Medical Inc. said Thursday that it has paid $3.65 million to the U.S. Department of Justice to settle claims that the company inflated the cost of pacemakers and defibrillators it sold the government.
The Little Canada-based company said it was "pleased to have resolved this matter," while adding that it continues to believe its practices were proper. The company said it did not admit liability or wrongdoing.
The Justice Department had alleged that St. Jude actively marketed its pacemakers and defibrillators by touting the generous credits available should a device need to be replaced while covered under warranty.
At the same time, St. Jude allegedly knew that it failed to give appropriate credits to device buyers in a number of cases where a product was replaced while still under warranty, according to federal officials.
As a result, the government accused St. Jude of submitting invoices to Department of Veterans Affairs and Department of Defense hospitals that overcharged for replacement pacemakers or defibrillators.
"As medical device use becomes more prevalent, it is essential that device manufactures provide federal health care programs with the warranty discounts they are entitled to receive," said Stuart Delery, acting assistant attorney general for the Justice Department's Civil Division.
The settlement resolves allegations brought by two whistleblowers in federal court in Massachusetts under the False Claims Act, which allows private citizens to bring civil actions on behalf of the United States. The whistleblowers will receive $730,000 from the settlement.
It is the second time St. Jude has reached a settlement with the Justice Department. In January 2011, the medical device manufacturer agreed to pay the United States $16 million to resolve allegations that it paid kickbacks to physicians for using its pacemakers and defibrillators.
James Walsh • 612-673-7428