Bribery on Two Continents: Olympus Corp. to Pay $646 million settlement

On March 1, the Department of Justice (DOJ) charged Olympus Corp. with paying millions of dollars in kickbacks to hospitals and doctors to buy its products. The company, which owns 85% of the U.S. endoscope market, has agreed to pay $646 million to resolve the criminal charges and civil charges brought against it. The sum is the largest total amount paid in U.S. history for violations involving the Anti-Kickback Statute by a medical device company.

“Olympus Corp. of the Americas’ and its subsidiaries’ greed-fueled kickback scheme threatened the impartiality of medical decision-making and the financial integrity of Medicare and Medicaid,” said Special Agent in Charge Scott J. Lampert of the U.S. Department of Health and Human Services in a statement.

The DOJ says that by using kickbacks, Olympus’ U.S. division (OCA) made over $600 million in sales and $230 million in profits. The company admits to the charges, which include:

• Holding up a $50,000 research grant until a hospital signed a deal to purchase Olympus equipment
• Giving a doctor with a major role in a New York medical center’s buying decisions free use of $400,000 in equipment for his private practice.
• Paying off doctors with hot air balloon rides, winery tours, spa treatments, lavish meals and rounds of golf at an Olympus sponsored forum.
• Paying for a trip for three doctors to travel to Japan in 2007 as a quid pro quo for their hospital’s decision to switch from a competitor to Olympus.
• Giving a hospital a $5,000 grant to facilitate a $750,000 sale.
• Giving a week-long, paid vacation in Japan to the physician president of a professional organization and his spouse for three years in a row. The president was also paid a $10,000 honorarium to give a single lecture during each trip.

“The Department of Justice has longstanding concerns about improper financial relationships between medical device manufacturers and the health care providers who prescribe or use their products,” said Principal Deputy Assistant Attorney General Mizer.  “Such relationships can improperly influence a provider’s judgment about a patient’s health care needs, result in the use of inferior or overpriced equipment, and drive up health care costs for everybody.”

The OCA division’s settlement is split between $312.4 million for criminal penalties and an additional $310.8 million to settle civil claims under the federal and various state False Claims Acts. Mizer said in addition to yielding a substantial recovery for taxpayers, the settlement will send a clear message that these types of abusive arrangements will not be tolerated.  

Charges for Olympus’ Latin American Division

It’s worth noting that $22.8 million of the fine is being paid by Olympus’ Latin American (OLA) division to resolve a separate criminal charge after paying providers at government-owned facilities to buy Olympus products.”

Between 2006 and 2011, OLA spent nearly $3 million in cash, money transfers, personal grants, personal travel and free or heavily discounted equipment to get providers at government-owned facilities to buy Olympus products. OLA admits it delivered this illicit kickbacks benefits to pre-selected practitioners at “training centers,” nominally set up to educate and train doctors. In total, OLA actions earned them $7.5 million in profits.

Olympus has come under fire in recent months by the Food and Drug Administration and the Senate after it was revealed that their duodenoscopes were linked to dozens of infection outbreaks and 21 deaths since 2012. A report  by the Washington Post found that the company knew its scopes had a flaw that prevented them from being disinfected properly, but concealed the dangers from hospitals for two years.

“OLA’s illegal tactics in Central and South America mirrored Olympus’s conduct in the United States.  The FCPA resolution announced today demonstrates the department’s commitment to ensuring the integrity of the health-care equipment market, regardless whether the illegal bribes occur in the U.S. or abroad,” said Principal Deputy Assistant Attorney General Bitkower. 

As part of the settlement Olympus has signed a new corporate integrity agreement with the Department of Health and Human Services. The program requirements include:

• Compliance responsibilities for OCA management and the board of directors
• A health care compliance code of conduct that includes certain standards
• Training and education that includes specified standards
• Requirements for consulting arrangements, grants and charitable contributions, management of field assets and review of travel expenses
• A risk assessment and mitigation process
• New review procedures for testing the compliance program

“For years, Olympus Corporation of the Americas (OCA) and Olympus Latin America (OLA) dropped the compliance ball and failed to have in place policies and practices that would have prevented the substantial kickbacks and bribes they paid,” said U.S. Attorney Paul Fishman. “It is appropriate that they be punished for that. At the same time, the deferred prosecution agreement takes into account the companies’ cooperation and commitment to fully functional corporate compliance.”