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 5. Byram Healthcare and Hollister, Inc. To Pay $20.9 Million To Resolve
    Kickback Allegations




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Press Release


BYRAM HEALTHCARE AND HOLLISTER, INC. TO PAY $20.9 MILLION TO RESOLVE KICKBACK
ALLEGATIONS

Friday, April 29, 2016
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For Immediate Release
Office of Public Affairs

The Department of Justice announced today that Hollister Inc. (Hollister), a
manufacturer of disposable health care products, and Byram Healthcare Centers
Inc. (Byram), a supplier of medical products, have agreed to pay $11.44 million
and $9,372,882.50, respectively, to resolve allegations that Hollister paid
unlawful kickbacks to Byram and that Byram received unlawful kickbacks from
Hollister and several other manufacturers, with the intent to induce Byram to
conduct promotional campaigns designed to refer patients to the manufacturers’
products.  The settlement with Byram also calls for the company to pay
$127,117.50 to the state of California to resolve allegations that Byram
submitted falsely inflated claims to that state’s Medicaid program, Medi-Cal, in
violation of California regulations.

“This settlement demonstrates the Justice Department’s continuing determination
to prevent manufacturers and suppliers of medical devices covered by federal
health care programs from paying or receiving kickbacks,” said Principal Deputy
Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s
Civil Division.  “We will not permit such illegal payments to taint the
decision-making of those who serve the beneficiaries of these important
programs.”

“We are committed to rooting out commercial bribery, especially in the
healthcare industry where the payment of kickbacks erodes patients’ trust in the
quality of their medical care,” said U.S. Attorney Carmen M. Ortiz for the
District of Massachusetts.  “These unlawful cash incentives also threaten the
integrity of the health care system and siphon taxpayer dollars from our
nation’s health care programs.” 

“The FBI will aggressively investigate companies that engage in kickback schemes
at the expense of both patients and taxpayers,” said Special Agent in Charge
Harold H. Shaw of the FBI’s Boston Field Division.  “Those who seek to exploit
the nation’s health care system through bribes or other fraudulent conduct will
be held accountable for their actions.”

The settlement with Hollister resolves allegations that, from 2007 through 2014,
it paid kickbacks to Byram in return for marketing promotions, conversion
campaigns and other referrals of patients to Hollister’s ostomy and continence
care products.  On seven occasions from 2007 through 2012, Hollister allegedly
agreed to pay Byram the costs of bonus commissions (sometimes called spiffs)
that Byram paid to its sales personnel for each new patient order for a
Hollister product.  In addition, each year from 2009 to 2014, Hollister
allegedly agreed to pay Byram $200,000, for “catalog funding” that was actually
intended to induce Byram’s recommendation of Hollister products to patients.  

The settlement with Byram resolves the same catalog funding claims, as well as
allegations that, in 2012 and 2013, Byram received numerous kickbacks from
Hollister and three other manufacturers of ostomy and continence care products,
namely Coloplast Corp., Montreal Ostomy and Safe N’ Simple, in return for
Byram’s agreement to conduct promotional campaigns and to refer patients to the
manufacturers’ products.  The settlement with Byram also resolves allegations by
the United States and the state of California that Byram submitted falsely
inflated claims to the California Medi-Cal program in violation of California’s
upper billing limit regulation, Cal. Code Regs., tit. 22, § 51008.1, which
limits the amount a provider can bill for certain products.  The United States
and the state of California allege that, when Byram billed Medi-Cal for
Coloplast urology products that Byram sold to Medi-Cal beneficiaries, Byram
knowingly failed to account for substantial discounts that Byram knew, at the
time it billed the Medi-Cal program, materially reduced the prices it paid for
the products. 

In connection with the False Claims Act settlement, Byram has also entered into
a corporate integrity agreement with the U.S. Department of Health and Human
Services Office of Inspector General (HHS-OIG).

“Health care product manufacturers that financially reward suppliers in exchange
for the referral of business can improperly direct patients to certain products
over others,” said Special Agent in Charge Phillip M. Coyne of HHS-OIG.  “We
will continue to investigate such wasteful business arrangements.”

The settlements resolve allegations in a whistleblower lawsuit filed by two
former employees and one current employee of Coloplast under the qui tam
provisions of the False Claims Act, which allow private parties to bring suit on
behalf of the government and to share in any recovery.  The whistleblowers’
share of the Hollister and Byram settlements has not been determined.  Claims
against two other defendants in the lawsuit, Coloplast Corp. and Liberator
Medical Supply Inc., were resolved in December 2015 for a total of $3.66
million.  The settlements announced today bring the total recovery in the case
to $24.6 million.  The whistleblowers are pursuing certain additional claims in
the case. 

The investigation was conducted by the FBI and HHS-OIG.  The case was handled by
the U.S. Attorney’s Office for the District of Massachusetts with assistance
from the Civil Division’s Commercial Litigation Branch.

The case is captioned United States ex rel. Herman, et al. v. Coloplast Corp.,
et al. Case No. 11-cv-12131-RWZ (D. Mass.).  The claims resolved by the
settlements are allegations only, and there has been no determination of
liability.

Updated April 27, 2017

--------------------------------------------------------------------------------

Topic
False Claims Act
Component
Civil Division
Press Release Number: 16-511



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