Olympus: A Research Grant That Waited for a Purchase

In the Olympus False Claims Act settlement, Olympus Corporation of the Americas agreed to pay $306 million to settle civil allegations that purchasing kickbacks caused false claims to Medicare, Medicaid and TRICARE. In the criminal complaint Olympus agreed was true, those kickbacks generated more than $600 million in sales and more than $230 million in gross profits.

The alleged benefits reached physicians and hospital employees who could influence equipment purchases. For someone inside medical-device sales, grants or equipment placement, the question is concrete: what did the customer have to buy to get the benefit?

Olympus sells medical optics and imaging equipment, including endoscopes, ultrasound systems and clinical microscopes. It is the U.S. subsidiary of Japan-based Olympus Corporation. The government alleged that, from January 2006 through December 2011, the company used grants, fellowships, consulting payments, trips and free equipment to induce purchases. Its former chief compliance officer brought the whistleblower case that led to the civil settlement.

Grants That Waited for an Equipment Order

Olympus agreed that the criminal complaint describing its grants-for-sales practices was true, according to the Justice Department’s March 1, 2016 announcement. The examples show how a benefit presented as support for a hospital could serve the sales department.

In that criminal account, Olympus gave one hospital a $5,000 grant to facilitate a $750,000 sale. At another hospital, it held back a $50,000 research grant until the hospital signed a deal to buy Olympus equipment. The timing made the bargain visible. The grant waited for the order.

We find that a revealing use of the word research. The purchase was the condition for releasing the money. For an insider, the connection could sit across a grant approval and a sales agreement: a benefit described one way in the grant file and treated another way in the effort to close the account.

The criminal complaint also described a trip to Japan for three doctors in exchange for their hospital switching from a competitor to Olympus. The benefits purchased access to equipment decisions that were worth much more than the benefits themselves.

The competing supplier lost the account to a trip for the people choosing the equipment.

Free Equipment for the Person Choosing the Vendor

In the civil agreement, the government alleged that Olympus provided a physician approximately $400,000 in endoscopes and other equipment to use free in his private practice. The government alleged that the same physician played a major role in a hospital’s decision to purchase millions of dollars of Olympus products. In that account, the benefit went to the doctor’s practice, while the purchasing influence reached a hospital.

The government’s allegations also included no-charge equipment loans, fellowships, consulting payments and recreation. It alleged that physicians took week-long trips to Japan with sightseeing and lavish entertainment.

An equipment-placement employee might see where a device went and whether anyone paid for its use. A salesperson might know who influenced the hospital’s order. Those perspectives meet in this allegation: the free equipment and the institutional purchase involved the same decision-maker, even though they benefited different businesses.

We look for that connection in the evidence inside the business. Who approved the placement, who received the equipment, and which account stood to gain are questions with different answers. The physician’s influence over a larger customer is what made the alleged private-practice benefit important to this case.

From a Device Purchase to a Government Claim

The civil False Claims Act case concerned government-funded healthcare claims caused by the alleged kickbacks. In the settlement, the United States contended that Olympus submitted or caused claims to Medicare, Medicaid and TRICARE.

In the government’s account, purchasing inducements connected the supplier’s conduct to the provider’s billing. We trace the benefit through the purchasing decision to the treatment, item or service and the resulting claim. The government payment can sit beyond the distributor’s own invoice.

The Congressional Research Service’s 2009 report, Qui Tam: The False Claims Act and Related Federal Statutes, explains that a claim can reach federal money through someone other than the government. In the Olympus case, the alleged purchasing benefits led to claims through the providers using the equipment.

Another device case shows the importance of the supplier’s influence over later billing. In the Medtronic settlement announced in February 2015, the government alleged that promotion and training caused providers to submit claims for investigational SubQ stimulation procedures that were not reimbursable. Olympus concerned purchasing benefits. Medtronic concerned promotion and training. Both cases followed a device company’s commercial conduct into claims submitted for health care.

What the Compliance Function Could See

The criminal complaint, as described by the Justice Department, alleged that Olympus made improper payments while it lacked training and compliance programs. The company did not create a compliance officer position until 2009 and did not hire an experienced compliance professional until August 2010. That account puts a concrete organizational failure beside the sales practices.

The corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General addressed the same business activities that appeared in the allegations. The Justice Department’s announcement described requirements for consulting arrangements, grants and charitable contributions, equipment used in the field, and travel-expense review. It also described management and board responsibilities, training, risk assessment and procedures to test the compliance program.

Those categories matter because the alleged benefits traveled through ordinary business functions. A grant needed approval. Equipment had a destination. A trip had expenses. The sales organization had an account it wanted to win. Looking at each item alone could miss the relationship between them.

For us, the useful question is what the decision-makers could see when they approved a benefit. A grant linked to an unsigned equipment order tells a different story from the grant’s description by itself. Equipment records become more revealing when connected to the recipient’s role in hospital purchasing. Consulting and travel records belong beside the commercial decisions they were intended to influence.

This is how we approach what the company knew and why the payment mattered with an insider. We connect the approval, the benefit, the purchasing decision and the government claim so the case reflects how the business actually operated.

The Compliance Officer’s View Became a Whistleblower Case

Olympus’s former chief compliance officer brought the civil case under the federal and state False Claims Acts in the District of New Jersey. The civil settlement resolved that lawsuit. The whistleblower’s role matters here because compliance work can bring otherwise separate parts of a sales arrangement into view.

The FBI and HHS-OIG investigated, and the Justice Department reached the civil settlement. The insider’s case and the government’s investigation converged on the company’s purchasing practices.

A person in grants, equipment placement or sales may see the relationship from another position. What we need to understand is what your work allowed you to see: the benefit, the customer decision, or the approval that connected them. Your knowledge of why an order depended on a grant can make commercial paperwork intelligible in a way the paperwork alone is not.

The Civil Settlement and Whistleblower Reward

The signed agreement divided the civil settlement between $263,160,000 for the United States and $42,840,000 for participating Medicaid states. That federal-and-state allocation is the civil settlement behind the purchasing allegations.

The agreement also allocated about $43.4 million from the federal recovery to the whistleblower. The Justice Department’s announcement said he would also receive $7 million from the state share of the civil settlement.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In a purchasing-inducement case, the insider’s contribution is the connection between the benefit, the buying decision and the government-funded claim. Olympus shows how much can turn on understanding what a grant or a free piece of equipment was really buying.

You Know What the Customer Was Promised

If you saw a grant, trip or equipment placement used to secure a medical-device purchase, speak with our whistleblower experts about the deal behind the benefit. We build your strongest case with you and bring in medical-device fraud whistleblower lawyers who understand purchasing kickbacks and government healthcare claims. We stay beside you through the case, turning your knowledge of the sales relationship into a clear account of who benefited and how the government paid.