Medtronic Inc. said Monday that it has agreed to pay $23.5 million to resolve allegations that it paid physicians illegal kickbacks to induce them to implant the company's pacemakers and defibrillators.

The settlement with the U.S. Department of Justice comes after an investigation into payments of $1,000 to $2,000 per patient to doctors who participated in studies of devices that were already on the market.

Federal officials contend that Fridley-based Medtronic solicited physicians for the studies to get them to switch from a competitor's product -- or to convince them to keep using Medtronic products. Officials also allege that Medtronic submitted false claims to Medicare and Medicaid.

"Kickbacks, like those alleged here, distort sound medical judgments with financial incentives paid for by the taxpayers," said Tony West, assistant attorney general for the DOJ's Civil Division.

Medtronic said in a statement that it "makes no admission that any studies were improper or unlawful." The company said it had set aside a reserve earlier this year in anticipation of a financial settlement.

"Medtronic is happy to have this investigation behind us," said Dr. Marshall Stanton, vice president of clinical research and reimbursement for the Cardiac and Vascular Group at Medtronic.

Company spokesman Chris Garland said the government's investigation did not question the design of the Medtronic studies. He said they were legitimate studies, intended to provide important scientific and medical data. According to Garland, the settlement closes an industrywide investigation that began in 2005.

In January, the Justice Department announced a $16 million settlement with St. Jude Medical of Little Canada regarding similar physician kickback allegations involving its pacemakers and defibrillators.

In December 2009, Boston Scientific Corp. paid $22 million to resolve allegations that its subsidiary, Guidant Corp., also used post-market studies to pay kickbacks to physicians to implant Guidant pacemakers and defibrillators. The government alleged that Guidant designed and used four post-market studies as a means of increasing device sales.

At Medtronic, the Department of Justice alleged that the company violated the False Claims Act using physician payments related to post-market studies and device registries. Post-market studies are used to assess the clinical performance of a medical device or drug after approval by the U.S. Food and Drug Administration (FDA). Registries are collections of data a manufacturer maintains on products that have been sold and implanted in patients.

Although Medtronic collected data and information from participating physicians, each of the studies and registries required the implantation of a Medtronic device in each patient. In each case, Medtronic paid participating physicians a fee ranging from approximately $1,000 to $2,000 per patient, the Justice Department said.

"Medicare and Medicaid beneficiaries depend on their physicians to make decisions based on sound medical judgment, especially when they are choosing which pacemaker or defibrillator to implant," said B. Todd Jones, U.S. Attorney for the District of Minnesota. "Medical device manufacturers must not be permitted to use improper payments to cloud that judgment."

According to the Justice Department, the settlement resolves allegations contained in two whistleblower lawsuits. As part of Monday's resolution, the whistleblowers will receive payments totaling more than $3.96 million.

James Walsh • 612-673-7428