Utah’s Merit Medical agrees to pay $18M to settle doctor kickbacks lawsuit

SALT LAKE CITY — Merit Medical Systems has agreed to pay $18 million to settle a whistleblower lawsuit alleging fraud schemes involving illegal kickbacks to doctors to use the company’s devices.

The lawsuit filed in New Jersey by Merit’s former chief compliance officer and 29 states became public last month when the U.S. Department of Justice filed a notice to intervene in the case after a four-year investigation. Utah was not among the states suing the company.

“Given the mounting costs and time demands associated with the investigation, we believe this resolution is in the best interests of the business,” Fred Lampropoulos, Merit chairman and CEO, said in a statement. “Merit will continue to focus on our core mission: to be the most customer-focused company in health care.”

In reaching the agreement with the Department of Justice, Merit denies the allegations in the lawsuit.

Merit, based in South Jordan, makes disposable medical devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care and endoscopy.

The whistleblower, Charles Wolf, a nonpracticing medical doctor and an accredited health care compliance professional, claimed Merit induced doctors with marketing and advertising dollars, consulting fees, writing fees, dinners, trips and cash to use its medical devices.

Wolf reported his concerns about the alleged fraud to Merit’s management during his tenure as its chief compliance officer to no avail, according to the complaint. Wolf resigned and reported his concerns to the DOJ.

The lawsuit alleges that Merit “paid for advertising for high-volume users of its medical devices and continues to pay consulting fees to high-use providers for little to no work.” Disguised as educational in nature, the suit claims that instead, the money paid to physicians was meant to affect and “induce hospitals and physicians to purchase additional equipment, supplies and/or products from Merit.”

Merit management often joked about compliance, and came up with a numeric system to discuss how risky a proposal would be, according to the lawsuit. They rated proposals on a “chili pepper” scale of 1 to 3 in terms of how much “heartburn” a particular action would give the company in terms of compliance and ethics, the suit says.

Federal and state laws prohibit payments of any kind to physicians, including marketing dollars and consulting fees, to influence physician choice of medical devices, according to Joseph, Greenwald and Laake, the Maryland law firm representing Wolf.

“Prosecuting these cases protects patients. When medical device companies pay something of value to induce physicians to use their devices to the exclusion of others, that can affect independent medical judgment and patient care,” Veronica Nannis, an attorney for Wolf said in a statement last month when the DOJ intervened in the case.

Merit employs about 6,000 people worldwide with facilities in six states and a dozen countries.

Lampropoulos, who founded the company in 1987, is a former Republican candidate for Utah governor. The Salt Lake Chamber named him a Giant in our City last year.