St. Jude Medical (NYSE:STJ) has agreed to pay $3.65 million to settle a Department of Justice inquiry into the company’s alleged practice of overstating the price of its replacement defibrillators and pacemakers.
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The Justice Department announced Thursday that the settlement resolves allegations related to the company’s warranty discount program.
St. Jude marketed a discount along with its defibrillators and pacemakers that would be available if the devices failed within the warranty period. But when the devices failed, the government alleges that St. Jude didn’t grant the discounts and instead submitted invoices to Department of Veterans Affairs hospitals and Department of Defense military treatment centers that overstated the cost for replacement pacemakers or defibrillators.
“If medical device manufacturers are actively concealing warranty credits from the government, the department will use all the tools at its disposal to hold them accountable,” said Stuart Delery, acting assistant attorney general for the Justice Department’s Civil Division, in a DOJ news release.
The probe arose from a lawsuit brought by two whistle-blowers in federal court in Massachusetts; they will receive $730,000 as part of the St. Jude Medical settlement.
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In response to Thursday’s DOJ announcement, a St. Jude Medical spokeswoman issued the following statement:
We have reached a settlement agreement with the U.S. Department of Justice [DOJ] that fully resolves our previously disclosed investigation in Boston regarding implantable cardiac rhythm device warranty claims. We are pleased to have resolved this matter. The company maintains that its warranty practices were proper and did not admit liability or wrongdoing by entering into this agreement.
The federal government has been increasing its scrutiny of medical device companies of late.
Earlier this month, Abbott agreed to pay $1.5 billion for illegal off-label promotion if its antiseizure drug. The amount paid was the second-largest payment by a drug company and includes a “criminal fine and forfeiture totaling $700 million and civil settlements with the federal government and the states totaling $800 million,” according to the DOJ.
Last year, the federal government collected $1.45 billion in a settlement from pharmaceutical and medical device companies. That included a $23.5 million payment from Medtronic to resolve allegations of physician kickbacks.
However, Medtronic also won a reprieve in May when the DOJ closed an investigation of the company’s former blockbuster spinal fusion product Infuse without any charges. The government was investigating whether Medtronic had promoted its off-label use.
