Wright Medical Accused of Breaching Agreement

The federal prosecutor for New Jersey has accused Wright Medical Technology Inc. of breaking a deferred prosecution agreement (DPA) drafted last year to settle charges relating to an illegal kickbacks scheme.

In October 2010, Wright agreed to pay approximately $8 million to resolve accusations that the Arlington, Tenn.-based company orchestrated a kickbacks scheme to increase sales of the its hip and knee implants. Authorities with the U.S. Attorney’s Office for the District of New Jersey accused Wright of using consulting services with physicians to deliver kickbacks.

An internal investigation Wright conducted in conjunction with an outside counsel found “credible evidence of serious wrongdoing.” The day after this claim, law enforcement officials accused Wright of “knowingly and willfully” committing at least two breaches of material provisions of the DPA.

Company executives doubt any action will be taken against the firm until corporate attorneys craft a defense. Wright has three weeks to mount a case.

If the government successfully proves that a breach occurred, Wright potentially could be excluded from federal health programs (one of the more harsh penalties). Such a punishment would particularly be damaging because replacement joint patients often are older and covered by Medicare. The government also could impose fines, prosecute Wright, and extend the DPA up to six months (the agreement currently expires at the end of September, after one year).

“They have a whole host of things they can do, including nothing,” David Stevens, Wright’s interim chief executive, said of the government’s potential course of action.