Department of Justice

U.S. Attorney’s Office

District of Massachusetts

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FOR IMMEDIATE RELEASE

Friday, April 29, 2016

Byram Healthcare and Hollister, Inc. to Pay $20 Million to Resolve Kickback Allegations

BOSTON – United States Attorney Carmen M. Ortiz announced today that Hollister, Inc., a manufacturer of disposable health care products, and Byram Healthcare Centers, Inc., a supplier of medical products, have agreed to pay $11.44 million and $9.3 million, respectively, to resolve allegations that they engaged in a kickback scheme designed to increase sales and profits.

 “We are committed to rooting out commercial bribery, especially in the healthcare industry where the payment of kickbacks erodes patients’ trust in the quality of their medical care,” said U.S. Attorney Ortiz.  “These unlawful cash incentives also threaten the integrity of the health care system, and siphon taxpayer dollars from our nation’s health care programs.” 

“This settlement demonstrates the Justice Department’s continuing determination to prevent manufacturers and suppliers of medical devices covered by federal health care programs from paying or receiving kickbacks,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will not permit such illegal payments to taint the decision-making of those who serve the beneficiaries of these important programs.”

“The FBI will aggressively investigate companies that engage in kickback schemes at the expense of both patients and taxpayers,” said Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division.  “Those who seek to exploit the nation’s health care system through bribes or other fraudulent conduct will be held accountable for their actions.”

“Health care product manufacturers that financially reward suppliers in exchange for the referral of business can improperly direct patients to certain products over others,” said Special Agent in Charge Phillip M. Coyne, U.S. Department of Health and Human Services, Office of Inspector General.  “We will continue to investigate such wasteful business arrangements.”

The settlement with Hollister resolves allegations that, from 2007 through 2014, it paid kickbacks to Byram in return for marketing promotions, conversion campaigns, and other referrals of patients to Hollister’s ostomy and continence care products.  On seven occasions from 2007 to 2012, Hollister allegedly agreed to pay Byram the costs of its bonus commissions paid to sales personnel for each new patient order for a Hollister product.  In addition, from 2009 to 2014, Hollister allegedly agreed to pay Byram $200,000 annually, purportedly for “catalog funding,” to induce Byram’s recommendation of Hollister products to patients.  

The settlement with Byram resolves allegations that, in 2012 and 2013, Byram received numerous kickbacks from Hollister and three other manufacturers of ostomy and continence care products, namely Coloplast Corp., Montreal Ostomy, and Safe N’ Simple, in return for Byram’s agreement to conduct promotional campaigns and to refer patients to the manufacturers’ products.  The settlement also resolves allegations by the United States and the State of California that Byram submitted inflated claims to the California Medi-Cal program in violation of the state’s regulation which limits the amount a provider can bill for certain products.  The United States and California allege that, when Byram billed Medi-Cal for Coloplast urology products that Byram sold to Medi-Cal beneficiaries, it failed to account for substantial discounts that Byram knew, at the time it billed the Medi-Cal program, reduced the prices it paid for the products. 

In connection with the False Claims Act settlement, Byram has agreed to pay $127,117 to California and has entered into a corporate integrity agreement with the U.S. Department of Health and Human Services, Office of Inspector General.

The settlements resolve allegations 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 settlements has not been determined.  Claims against two other defendants in the lawsuit, Coloplast Corp., and Liberator Medical Supply, Inc., were resolved in December 2015 for a total of $3,660,000.  The settlements announced today bring the total recovery in the case to $24.6 million. 

The investigation was conducted by the Federal Bureau of Investigation and the U.S. Department of Health and Human Services, Office of Inspector General.  The case was handled by Assistant U.S. Attorneys George Henderson and Kriss Basil of the District of Massachusetts with assistance from the Justice Department’s Civil Division.

The claims resolved by the settlements are allegations only, and there has been no determination of liability.