St. Jude’s Medical, Inc. Under Investigation by DOJ for Possible False Claims Act Violations

Costly fraud against the U.S. government can occur in virtually any sector; however, it is being discovered within the medical and healthcare sector with increasing consistency. In a recent filing with the Securities and Exchange Commission, St. Jude’s Medical, Inc., a global medical device manufacturer, has revealed it is under investigation for possible False Claims Act violations and may face the maximum treble damages penalty if found liable.

Moreover, St. Jude’s is still recovering from several FCA settlements in its recent history, including those alleging unlawful kickback schemes and improper financial relationships between the organization and other entities.

Details of Investigation

As a public company, St. Jude’s is required by law to file quarterly reports with the Securities and Exchange Commission. These reports contain, among many other details, information as to possible liabilities or claims that could affect the company’s market value. In its most recent filing submitted earlier this month, St. Jude’s has revealed its receipt of a Civil Investigative Demand (CID) from the Department of Justice in April, 2014.

St. Jude’s, along with several competitors, are under investigation for allegedly paying doctors and medical entities for using their brand of cardiac devices. The subsequent submission by those doctors for reimbursement from federal healthcare programs (e.g., Medicare or Medicaid) would amount to a false claim if it is found that a doctor was induced to use the product pursuant to a kickback scheme.

At this time, the identification of a whistleblower in the case has not been disclosed.

Prior History of Fraud

The current investigation against St. Jude’s is its third since 2010, making it no stranger to False Claims Act liability. In 2010, St. Jude’s and several competitors were investigated for improper inter-company communications concerning the promotion of its portable defibrillator devices (pacemakers), resulting in a public coverage decision by the Centers for Medicare and Medicaid Services.

In 2011, the company settled a $16 million whistleblower lawsuit alleging unlawful use of post-market studies as “vehicles” to pay physicians to implant its brand of pacemakers and implantable cardioverter defibrillators. In 2012, the company received additional CID’s issued due to possible unlawful kickback payments issued to doctors in several states. St. Jude’s insists it is complying with all investigative requests but cannot predict the outcome or impact of the inquiry.

Fraud Can Occur Anywhere

Companies with a lengthy history of fraud against the government run the risk of removal from eligibility in working with Medicare and Medicaid patients. Repeat offenders are also often required to enter into lengthy corporate integrity agreements requiring government and independent oversight for a certain number of years.

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