FBI Boston Division #News Release:

Coloplast Corp. and Liberator Medical Agree to Pay $3.6 Million to Resolve Kickback Allegations

U.S. Attorney’s OfficeDecember 22, 2015

District of Massachusetts(617) 748-3100

BOSTON—The U.S. Attorney’s Office announced today that Coloplast Corp., a manufacturer of ostomy and continence care products, and Liberator Medical Supply, Inc., a medical products supplier, have agreed to pay $3,160,000 and $500,000, respectively, to resolve allegations that Coloplast paid unlawful kickbacks to several medical suppliers, including Liberator, to induce them to conduct promotional campaigns designed to refer individual users to Coloplast products.

“The payment of kickbacks to induce purchases of medical supplies undermines our federal health care programs, ultimately distorting consumer purchasing decisions, and increasing health care costs,” said United States Attorney Carmen M. Ortiz. “Investigating claims of misguided business practices, at the expense of patient health, will continue to be a top priority in our healthcare enforcement efforts.”

The Justice Department’s Principal Deputy Assistant Attorney General Benjamin C. Mizer stated that “this settlement displays the commitment of the Justice Department to protect vulnerable patients in federal health care programs from corporate marketing practices that are not in those patients’ best interests.”

“Both of these companies acted with their own self-interests in mind, putting profits over patient care,” said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “The decision on which medical products to refer should be based on what is best for the patient, not on cash incentives or rebates.”

The settlement with Coloplast resolves allegations that it paid kickbacks to Byram Healthcare Centers, Inc.; CCS Medical, Inc.; Liberator; Liberty Medical, Inc.; and Handi Medical, Inc. in return for marketing promotions and conversion campaigns. In the case of Byram, Liberty, and Handi, Coloplast’s promotional campaigns allegedly included kickbacks in the form of funding for cash incentives—sometimes known as “spiffs”—paid to the suppliers’ sales personnel to induce them to refer patients to Coloplast products. In other instances, Coloplast allegedly gave rebates or price concessions as inducements for the promotional campaigns.

The settlement with Liberator resolves allegations that Liberator received kickbacks from Coloplast, in the form of price concessions, in return for Liberator’s agreement to conduct two campaigns promoting Coloplast ostomy products to Liberator’s customers.

The settlements resolve allegations brought forth in a whistleblower lawsuit filed by two former employees and one current employee of Coloplast under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery. The whistleblowers’ share of the Coloplast and Liberator settlements has not been determined. Claims against other defendants in the case remain outstanding.

The investigation was conducted by the Federal Bureau of Investigation and the Department of Health and Human Services Office of Inspector General. The case is being handled by Assistant U.S. Attorneys George Henderson and Kriss Basil in Ortiz’s Civil Division and Trial Attorney Jay Majors in the Justice Department’s Civil Division, Commercial Litigation Branch.

The case is captioned United States ex rel. Herman, et al. v. Coloplast Corp., et al. Case No. 11-cv-12131-RWZ (D. Mass.).

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