St. Jude pays $3.7M in kickback settlement

St. Jude Medical Inc. has paid about $3.7 million to settle allegations that it gave illegal kickbacks to hospitals to get them to buy more heart devices, the government said Friday.

The Justice Department, along with other government offices, investigated the Little Canada company after a former regional sales manager alleged his job was wrongfully terminated after he brought up concerns about the ethics of sales tactics.

Among his allegations was that St. Jude, a top medical devicemaker, offered research incentives and illegal rebates to get physicians and hospitals to buy or use its products. The former manager sued the company in 2006 under a whistleblower law that enables individuals to file suits on behalf of the government and share in any recovered damages.

The alleged kickbacks included "retroactive" payments that hospitals in Ohio and Kentucky received based on past purchases, as well as rebates St. Jude paid on purchases of competitors' products to induce customers to buy similar equipment from St. Jude in the future, according to the Justice Department.

"Hospitals should base their purchasing decisions on what is in the best interests of their patients," Assistant Attorney General Tony West said. "We will act aggressively to ensure that choices about health care are not tainted by illegal kickbacks."

No wrongdoing admitted

St. Jude said Friday that the settlement does not admit liability or wrongdoing by the company.

While St. Jude operates in a number of areas, some devices brought up in the lawsuit fall under its cardiac rhythm management business, which brings in about 60 percent of the company's overall sales. Last year St. Jude reported $4.7 billion in revenue.

Two hospitals involved in the lawsuit also agreed to pay a monetary settlement. Parma Community General Hospital in Parma, Ohio, will pay $40,000 and Norton Healthcare in Louisville, Ky., will pay $133,300, the Justice Department said.

The allegations were initially raised by whistleblower Jerry Hudson, a former Ohio-based regional sales manager for St. Jude. Hudson will receive $640,050 of the settlement.

Among several allegations, Hudson's lawsuit said St. Jude Medical offered Parma Community General Hospital a rebate on a product purchase if the items were implanted within 60 days of receipt and the hospital committed to putting in another order before the end of the quarter.

A statement from Parma Community Hospital said on Friday that it believed it was in compliance with all federal regulations and never knowingly violated any law or regulation.

The investigation was conducted by the Justice Department's civil division, the U.S. Attorney's Office for the Northern District of Ohio, the Office of Inspector General at the U.S. Department of Health and Human Services and the FBI.