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Leading Medical Device Company, Olympus Corporation of the Americas, Settles Kickback Charges For An Historic $646 Million Dollars

The biggest settlement in U.S. history under the Anti-Kickback Statute was recently entered into by Olympus Corporation of the Americas (“Olympus”), a medical device company headquartered in Center Valley, Pennsylvania. Olympus settled related civil and criminal charges for a substantial $646 million dollars. The complaints allege that the company engaged in various kickback schemes to bribe healthcare facilities and providers to purchase and use their products in an effort to maintain their dominance in certain sectors of the U.S. healthcare market.

The company’s violations of the Anti-Kickback Statute first came to the government’s attention when Jon Slowick, a former employee of the company, filed a qui tam lawsuit under the False Claims Act. Slowick worked in various executive positions over an 18-year span, including as the company’s first Chief Compliance Officer. While fulfilling the duties of this role, Slowick claims that he attempted to take action to eradicate the deceptive sales and marketing schemes that were extensively being executed by the company, but that he was consistently met with strong resistance, and even harassment.

Slowick filed his qui tam action in the U.S. District Court for the District of New Jersey. Within the Second Amended Complaint of this action, which was filed on February 4th, 2016, Slowick alleges that, from 2000 to the present-day, Olympus has participated in fraudulent activities that are in direct violation of the False Claims Act.  More specifically, Slowick asserts that Olympus engaged in multiple kickback schemes, including funding lavish all-expense paid vacations to exotic locations for physicians, in an effort to entice these providers to purchase and use Olympus endoscopes and related equipment. The Complaint alleges that these led to the purchase and use of Olympus equipment being paid for by government-funded healthcare plans, such as Medicare and Medicaid.

The Second Amended Complaint highlights other deceptive practices that were employed by the company, including giving free and discounted medical equipment to providers and healthcare facilities, providing sales representatives with stipends to fund entertainment activities for physicians and their spouses, and paying physicians thousands of dollars in “speaker” fees to compensate them for presenting at formal events. Additionally, according to Slowick’s allegations, in 2007, one of the company’s vice presidents suggested that a hospital foundation receive a $100,000 research grant from the company in an effort to maintain their business relationship. Ultimately, the company generated over $600 million in sales and made $230 million in gross profits from these healthcare fraud schemes. Slowick is set to receive close to $50 million dollars as his reward (called a “relator’s share”) for having brought the qui tam lawsuit under the False Claims Act.

This is not the first time that Olympus has found itself in hot water. In January of this year, the Senate issued a report that charges that, for two years, Olympus failed to notify the public that one of their most popular products, the duodenoscope, which is used in multiple gastrointestinal procedures, was causing infections due to a design flaw within the device. Additionally, in 2011, another whistleblower incident occurred within the company, in which the former President and CEO of the Tokyo-based Olympus Corporation, Michael Woodford, publically released information related to the company’s illegal activities when performing acquisitions. The scandal led to the arrest of many senior executives, as well as the resignation of multiple board members. Woodford was recognized as the Businessperson of the Year in 2011 by multiple publications for his involvement as a high-profile whistleblower.

Unfortunately, businesses take advantage of government-sponsored healthcare programs each and every day by engaging in kickback schemes and submitting other types of false and fraudulent claims to the U.S. government for payment.

© 2019 by Tycko & Zavareei LLP

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About this Author

Jonathan K. Tycko, Civil Litigation Attorney, Tycko Zavareei Law firm
Partner

Mr. Tycko has represented clients in numerous qui tam whistleblowing cases, in areas including Medicare fraud, government contracts fraud, and tax fraud. In addition, with the 2010 passage of the Dodd-Frank Act, Mr. Tycko’s practice has expanded into representation of whistleblowers in the areas of securities and commodities, and violations of the Foreign Corrupt Practices Act.

Mr. Tycko focuses his practice on civil litigation, with special concentrations in whistleblower cases, consumer class actions, unfair competition litigation, employment litigation and housing litigation. He...

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