WASHINGTON – Medtronic PLC will pay $2.8 million to the U.S. Justice Department to settle a false-claims case that alleged that the Minnesota devicemaker made illegal payments to doctors to recommend a medical procedure that was neither safe nor effective.

"Today's settlement demonstrates our commitment to ensure that beneficiaries of federal health care plans, including Medicare recipients and military families, receive medical treatments that have been proven safe and effective," said Acting Assistant Attorney General Joyce R. Branda of the Justice Department's Civil Division. "Targeting chronic pain patients with a medical procedure that lacks evidence of clinical efficacy wastes the country's health care resources."

The Justice Department made the allegations against Medtronic, Little Canada-based St. Jude Medical Inc. and Boston Scientific Corp., which has a major Twin Cities presence, in the case.

Complaints against St. Jude and Boston Scientific were dismissed, but can be refiled.

In a statement, Medtronic denied it did anything wrong.

The case surrounds allegations of corporate promotion of uses of a neurostimulation device that were not approved by the U.S. Food and Drug Administration. The Justice Department said Medtronic paid doctors in 20 states "tens of thousands of dollars" to encourage health providers to use the device off-label.

This "created a new, rapidly expanding market for their devices and a potentially huge source of profit for themselves at the expense of the federal Treasury," the government said in a federal lawsuit.

The $2.8 million payment by Medtronic leads to dismissal of charges in the case with no admission of liability by the devicemaker.

The government filed the suit on behalf of Jason Nickell of Austin, Texas. Nickell is a former Medtronic salesman who, according to the suit, "made as much as $600,000 per year selling Medtronic neuromodulation devices to physicians and hospitals. He quit his job over concerns about the way that Medtronic devices were being promoted for an investigational procedure known as subcutaneous stimulation, Sub-Q or subcutaneous peripheral nerve field stimulation."

The suit charges that Medtronic sales staff was directed to promote the off-label procedure by selling the neuromodulation device at steep discounts to pain management doctors and by promising those physicians that they could "make upward of $10,000 profit on each patient, while adding only minutes to the procedure." The company also allegedly told hospitals to charge Medicare for the unapproved procedure using a billing code meant for the FDA-approved use.

Some physicians questioned the procedure, according to the suit, with one calling it "fraud."

But "Medtronic's scheme," as the government described it, turned many doctors "from dispassionate medical professionals … into retail salesmen pushing 'snake oil' because of … large profits."

Medtronic also allegedly paid a physician $1,500 a day to let doctors watch him perform the off-label procedure so they could learn how to do it.

The company issued a statement Friday denying wrongdoing, saying, "Medtronic is committed to following appropriate marketing and reimbursement practices at all times, and for many years has had in place a comprehensive and robust employee compliance program."

Jim Spencer • 202-383-6123