If you’ll skirt the rules at home, you’ll probably try it on the road.
That’s how a New York-based analyst on Tuesday described federal investigations of orthopedics companies’ relationships with surgeons in the U.S. and overseas.
Biomet Inc. announced Monday that it has agreed to pay almost $22.9 million in penalties and profits to resolve an international bribery investigation of payments made to doctors in Argentina, Brazil and China from 2000 to August 2008.
But in September 2007, Biomet was one of five orthopedics firms that settled with the Justice Department for hundreds of millions of dollars in fines related to a domestic fraud probe of similar accusations.
Despite the overlapping dates, the cases are unrelated, said Tracy Price, assistant director of the Security and Exchange Commission’s Foreign Corrupt Practices Act Unit. They involve different evidence and laws broken, Price said Tuesday.
Warsaw’s orthopedic Big Three in 2007 agreed to pay a combined $281 million in penalties related to allegations they paid kickbacks from about January 2002 to about December 2006 to doctors who implanted their devices in patients. Zimmer Holdings Inc., DePuy Orthopaedics Inc. and Biomet are all based in the Kosciusko County city.
The 2007 settlement was related to Medicare fraud rules, which bar doctors from receiving kickbacks from firms to use their products. This week’s settlement is related to the Foreign Corrupt Practices Act, which forbids U.S. companies from paying bribes to foreign officials.
Michael Matson, a senior equities research analyst with Mizuho Securities USA, said it made sense for federal authorities to examine orthopedic device manufacturers’ overseas dealings after they were suspected of breaking U.S. rules.
“They didn’t really admit to wrongdoing, but at the end of the day, they were paying doctors a lot of money,” he said of the 2007 pact.
The SEC and Justice Department’s ongoing probe of other medical device makers concerns bribes paid overseas to government officials or – in most cases – to doctors in government-run hospitals.
With the settlement announced Monday, the Justice Department found that Biomet and its subsidiaries covered up bribery payments by officially recording them as “consulting fees” or “commissions.” Federal officials allege that Biomet also paid for some doctors’ vacations.
“Executives and internal auditors at Biomet’s Indiana headquarters were aware of the payments as early as 2000, but failed to stop it,” the SEC said in a written statement.
Kara Novaco Brockmeyer, chief of the SEC’s Foreign Corrupt Practices Act Unit, singled out that piece of the investigation’s findings.
“A company’s compliance and internal audit should be the first line of defense against corruption, not part of the problem,” she said.
