Stryker Avoids Prosecution

September 28, 2007
| By Pete Daly |
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NEWARK, N.J. — Stryker Corp. and four other companies that market hip and knee surgical implants have reached a resolution with the U.S. Attorney's office in Newark to avoid criminal prosecution over "financial inducements" given to surgeons to use their products, according to U.S. Attorney Christopher J. Christie.

Four of the five companies — but not Stryker — have agreed to pay a total of $311 million to settle government claims under the anti-kickback statute and the civil federal False Claims Act, according to a news release Thursday from Christie's office.

Criminal complaints were also filed Thursday against the four companies — Zimmer Inc., Depuy Orthopaedics Inc., Biomet Inc., and Smith & Nephew Inc. — charging them with conspiring to violate the federal anti-kickback statute. The complaints will be dismissed at the conclusion of Deferred Prosecution Agreements the four companies made with the government.

All five companies agreed to "new corporate compliance procedures and federal monitoring" by the Department of Justice for 18 months, according to the release.

"The fifth company, Stryker Orthopedics Inc., voluntarily cooperated with the U.S. Attorney's Office before any other company. Due to its cooperation, Stryker executed a Non-Prosecution Agreement (NPA) with the government, under which Stryker is required to implement all the reforms imposed on the other companies under the DPAs, including 18 months of federal monitoring," according to the news release.

Zimmer, Depuy, Biomet and Smith & Nephew have executed Deferred Prosecution Agreements (DPAs) with the government, which will expire in 18 months if they meet all of their respective reform requirements, according to the release.

The criminal complaints charge that the four companies had "consulting agreements" with orthopedic surgeons that were inducements to use particular products. Surgeons "were typically paid tens to hundreds of thousands of dollars per year for consulting contracts and were often lavished with trips and other expensive perquisites," according to the release.

The financial settlements by the other four companies release them from any civil liability and prevent them from being excluded from the Medicare reimbursement program by the U.S. Department of Health and Human Services.

"Stryker did not enter into any civil settlement with the Department of Justice or HHS. The company has not been given any release from civil liability nor any release from HHS," states the release.

A spokesman for the U.S. Attorney's Office in New Jersey said Thursday that no lawsuit has been filed against Stryker by the Department of Justice.

Stryker also issued an announcement about the resolution Thursday, "related to (the) March 2005 U.S. Department of Justice subpoena." The subpoena had requested documents relating to consulting contracts, professional service agreements, or remuneration agreements Stryker may have had with any orthopedic surgeons.

Dean H. Bergy, vice president and CFO of Stryker, said there was no other legal action pending against Stryker from the Department of Justice.

According to Christie's announcement, the Department of Health and Human Services reports that more than 700,000 total hip and knee replacement surgeries are performed in the U.S. each year. The investigation revealed that approximately two-thirds are performed on patients who are covered by Medicare."    

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