Hollister: The Manufacturer Behind the Supplier’s Sales Bonus

In the Hollister kickback settlement, the manufacturer agreed to pay $11.44 million to resolve allegations that it funded supplier sales bonuses and catalog promotions to steer patients to its ostomy and continence care products. The government alleged that Hollister financed bonuses Byram Healthcare Centers paid its salespeople for new Hollister patient orders. Patients’ product choices and taxpayer money were at stake. The sales commission on one company’s books allegedly came from another company’s budget.

The Department of Justice announced the combined $20.9 million settlement on April 29, 2016. Byram, the supplier, agreed to a smaller payment: $9,372,883 to the federal government and $127,118 to California. Its resolution covered receiving manufacturer payments and a separate allegation that it inflated bills to Medi-Cal, California’s Medicaid program.

How Distributor Spiffs Worked

Hollister allegedly agreed to reimburse Byram for bonus commissions, sometimes called spiffs, that Byram paid its sales personnel for each new patient order for a Hollister product. The government identified seven occasions from 2007 through 2012. The wider Hollister allegations covered marketing promotions, conversion campaigns and patient referrals from 2007 through 2014.

Under the alleged arrangement, Byram paid its own salespeople and Hollister covered the cost. Someone reviewing only the distributor’s compensation plan would see the immediate payment, while the agreement between the companies would explain who financed it.

The catalog arrangement operated at the company level. Each year from 2009 through 2014, Hollister allegedly agreed to pay Byram $200,000 in catalog funding intended to induce recommendations of Hollister products. The allegation concerned what the payment bought: the supplier’s influence over which brand reached the patient.

A 2020 analysis in the Journal of Forensic and Investigative Accounting, A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud, describes how kickbacks can run through indirect payments and noncash benefits. Here, the alleged funding reached the salesperson through the employer.

How Product Promotion Reached the Supplier Claim

The alleged chain ran from manufacturer funding to supplier promotion, then to a patient’s product order and the supplier’s government-program business. Hollister manufactured disposable health care products. Byram was a healthcare supplier serving patients. The government alleged that Hollister paid Byram to conduct campaigns designed to refer patients to its products.

Ostomy supplies and urinary catheters appear in Medicare’s supplier-claims data. That part of the device business puts the supplier between the manufacturer and the patient, with a government health program paying for covered products. In this case, the supplier’s relationship with patients was the commercial asset the manufacturer allegedly sought to influence.

Two former Coloplast employees and one current employee brought the False Claims Act qui tam case in Massachusetts. Their complaint covered manufacturers and suppliers, including Hollister, Byram, Coloplast and CCS.

For an insider, the important connection is between the promotion and the business it was designed to generate. A commission arrangement shows what the salesperson was paid to accomplish. Patient-order and billing records show where that incentive led. We examine those connections together when assessing a medical device kickback case.

Byram’s Separate Medi-Cal Billing Allegations

Byram’s settlement covered both the catalog-funding allegations and allegations that it accepted payments from manufacturers in exchange for promotions and patient referrals. The government identified payments in 2012 and 2013 from Hollister, Coloplast, Montreal Ostomy and Safe N’ Simple.

The Medi-Cal allegation concerned a different decision: how Byram accounted for discounts when billing the state for Coloplast urology products. The United States and California alleged that Byram knew substantial discounts reduced what it paid for those products but failed to account for the discounts in its claims. The California upper billing limit at issue restricted how much a provider could bill for certain products. The government alleged that Byram’s claims exceeded that limit.

The commercial price after discounts and the amount billed to Medi-Cal were therefore central to this part of the case. The alleged kickbacks concerned buying influence over product selection. The alleged overbilling concerned leaving known price reductions out of the billing calculation.

A person working on manufacturer promotions may understand what a catalog payment was intended to secure. A person working with purchase prices, discounts or claims may understand why the amount billed failed to reflect the price actually paid. Each view can connect a business decision to the government’s money.

Byram also entered into a corporate integrity agreement with the Department of Health and Human Services Office of Inspector General as part of its resolution.

What the Complaint Alleged About Patient Conversion

The whistleblowers alleged that Hollister presented Secure Start to health professionals as a source of samples, information and patient assistance while misleading them about the program. Their complaint’s description of the pitch puts the patient relationship at the center:

The alleged pitch began with help for a patient adjusting to life after discharge. The description given to health professionals shaped why they would enroll patients.

The Whistleblower Case Behind the Settlements

The Justice Department reported a cumulative recovery of $24.6 million in the case when it announced the Hollister and Byram settlements. That figure included $3.66 million from the earlier Coloplast and Liberator Medical Supply resolutions in December 2015.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

What Kind of Proof Is Needed to Be a Whistleblower?

For a supplier-incentive case, useful evidence connects who financed the sales push, what triggered the bonus, which products patients ordered and what the supplier billed. We work with insiders to understand those connections, including the business purpose behind a payment labeled as catalog support or another marketing expense.

The manufacturer-side view concerns the funding agreement and its intended result. The distributor-side view concerns the incentive, the recommendation and the patient order. The Medi-Cal allegations add a separate connection between the supplier’s actual acquisition price and its claim.

You Know What the Sales Incentive Bought

If you know who funded a supplier’s bonus or what a patient-conversion campaign was meant to deliver, speak with our whistleblower experts. We build the case with you around the payments, product decisions and government claims, and bring in medical device whistleblower lawyers who understand manufacturer and supplier relationships. We stay beside you from the first discussion of the sales arrangement through the pursuit of your whistleblower case.