Federal whistleblower lawsuits alleging illegal kickbacks in the form of “free” and “discounted” services have been settled for nearly $17.5 million.

The U.S. Department of Justice announced on March 11 that Covidien LP, a company that manufactures and markets medical devices under the Medtronic brand, stood accused of violating the False Claims Act (FCA) by offering the free and discounted services to physicians, allegedly as an inducement to get them to purchase and use the company’s products.

In a press release, Assistant Attorney General Jody Hunt said the settlement is “an important reminder” that “unlawful kickbacks come in many forms” – not all of which involve cash payments. She points out that such “incentives” can drive up health care costs by leading to unnecessary tests and treatments.

Case Background

The federal whistleblower lawsuits were filed on behalf of the U.S. government by two former sales managers for Covidien and a former employee of a Covidien customer. They alleged that Covidien illegally provided physicians with free “practice development and market development” as an incentive to purchase and use the company’s “radiofrequency ablation catheters.” The device in question, known as the ClosureFast, is used in cardiovascular surgery as well as some cosmetic procedures.

Physicians were allegedly treated to meals in expensive restaurants and given free training sessions on how to grow their practices and attract more patients – during which the ClosureFast was promoted. Sales of ClosureFast units were then billed to the federal Medicare program as well as Medicaid programs in California and Florida, the DOJ says.

The whistleblowers in these cases, known technically as relators, will receive a substantial portion of the recovery in gratitude for their service to the government.

About Federal Whistleblower Lawsuits

Whistleblower laws are covered under qui tam provisions of the False Claim Act. The FCA, also known as the “Lincoln Law,” was passed during the U.S. Civil War at a time when fraud and illegal profiteering at the expense of the Union Army was rampant.

Although the FCA dates from 1863, the first successful common law qui tam action in the U.S. was filed less than a year after the Declaration of Independence was signed. In 1777, two naval officers reported their commander for illegally torturing a prisoner of war.

The term qui tam is an abbreviation for an old Latin expression translating as “They who sue in this matter for the King as well as themselves.” Unlike most civil litigation, a qui tam lawsuit is filed on behalf of the government by a private individual, known as the relator, who has cause to believe that some fraud is being perpetrated.

In exchange for bringing the case, the relator, or whistleblower, is entitled to protection against possible retaliation by the accused. If the U.S. Department of Justice proves its case, relators also receive a percentage of any fines and recoveries.

The recently settled Federal Whistleblower Lawsuits are Case No. C 14-1511-EDL and Case No. C 15-0559-EDL, U.S. District Court for the District of Northern California.