Orthofix Settlement Rejected By Court

In June this year, Lewisville, Texas-based Orthofix International N.V. agreed to pay $42 million to settle charges of bribery and kickbacks to promote the sale of its bone growth stimulators. Part of the settlement also was for defrauding Medicare—the company was accused of improperly waiving patient co-pays, thereby misrepresenting their true costs, which resulted in overpayments from such federal programs as Medicare.

The bone growth stimulators involved in the case are Spinal-Stim, Cervical-Stim and Physio-Stim.

The settlement included a $7.8 million criminal fine for obstructing a government audit, but this portion of the settlement charge has been rejected by U.S. District Judge William G. Young in Boston, Mass. He said accepting the offer would unduly restrict future sentencing, Bloomberg reports. “I have extreme unease of treating corporate criminal conduct like a civil case,” Young told prosecutors.

The remainder of the settlement money does indeed address a civil case, as the company’s illegal practices were brought to light by a whistle-blower. However, it is unclear whether the remainder of the settlement still stands.

Orthofix was ready to pay the fine, but after Young’s ruling Orthofix doesn’t know how much its final penalties will total. It had allocated approximately $43 million for the settlement, but now must reassess the move.

“The company and the government stand behind their agreements and continue to discuss a resolution of the matter following the court’s rejection of the plea,” said Orthofix President and CEO Robert Vaters. “We remain confident that this matter will be resolved amicably and in a manner that is in the best interests of our shareholders.”

The case is U.S. ex rel. Bierman v. Orthofix International N.V., 05-10557, U.S. District Court, District of Massachusetts (Boston).