Olympus Corporation of the Americas: A Research Grant That Waited for the Order

In the Olympus Corporation Americas kickback settlement, Olympus agreed to pay $310.8 million to resolve civil allegations that its kickbacks caused false claims to Medicare, Medicaid and TRICARE. Olympus’s criminal admissions show the sales purpose behind grants, consulting payments, trips and free equipment. A hospital’s research grant could wait for its purchase agreement. A doctor’s private practice could receive equipment because of the doctor’s influence over a hospital’s buying decisions.

The Justice Department announced the resolution on March 1, 2016, describing Olympus as the country’s largest distributor of endoscopes and related equipment. The Justice Department’s civil settlement resolved a qui tam case brought by Olympus’s former chief compliance officer. His account reaches into the sales organization: who approved the benefits, how employees justified them, and what happened when compliance challenged the arrangements.

A physician can influence the product choice while a hospital buys the equipment and bills for the procedure. Olympus admitted in the statement of facts attached to its criminal deferred prosecution agreement that providers used its equipment in procedures paid for by Medicare and Medicaid. The civil allegations followed those purchases through to government health care claims.

What Are Some Examples of Kickbacks in Healthcare?

The Olympus case includes consulting payments, foreign travel, lavish meals, research grants and free use of medical equipment. Under its criminal deferred prosecution agreement, Olympus admitted using benefits to induce doctors and hospitals to buy its products. Its admitted statement of facts describes conduct from 2006 through 2011 and connects it to more than $600 million in sales and more than $230 million in gross profits.

A Research Grant Waiting for a Purchase Order

Olympus admitted that its grant committee used grants to build customer loyalty and induce purchases. Until July 2009, the committee consisted largely of sales and marketing personnel. Management endorsed the strategy. The people responsible for selling the equipment had a say in awarding the research money.

The admitted examples put the sales purpose in plain view. A $5,000 grant helped facilitate a pending $750,000 sale and a hospital’s conversion from a competitor. At another hospital, a sales representative arranged an unrestricted research grant of $50,000 for three years, then had the funds held for several months until the hospital signed an equipment deal.

The research grant was called unrestricted. Releasing the money still depended on an order.

Consulting Fees Chosen by Sales Potential

The whistleblower’s civil complaint alleged that sales and marketing personnel selected consulting payments according to sales potential, without regard to the value of the services. In many cases, it alleged, there was no written consulting agreement. The speaker program allegedly paid whatever physicians demanded, often up to $100,000 a year.

The complaint states what it alleged those payments actually bought:

Our work connects the promised work, the payment and the product use.

The same comparison appeared in Life Spine’s civil settlement. Life Spine admitted keeping management reports that compared surgeon payments with product use, including a return-on-investment calculation. Paying a physician and tracking the business that physician generates can appear in the same report.

Trips That Kept a Competitor Out

Olympus admitted agreeing to pay for three doctors to spend a week in Japan in exchange for their hospital switching from a competitor. The same criminal admissions describe a Japan trip for a professional organization’s physician president and spouse. Olympus also paid for lavish meals, ballooning, winery tours, golf and spa treatments at a company-sponsored forum because it was “a great way to network, talk business, socialize without our competitors.”

Another Japan trip and grant supported business with a Midwestern hospital system. The admitted statement of facts quotes a vice president’s message celebrating the result:

The message measured the trip’s success in orders and a competitor’s exclusion. Competitors lost business to the kickbacks, and the civil case alleged that taxpayers’ health care programs received the resulting false claims.

Why Free Equipment Mattered

Free equipment could buy influence over a much larger customer. Under the same criminal agreement, Olympus admitted giving a physician free use of approximately $400,000 in endoscopes and other equipment for his private practice. The company believed he played a major role in a New York medical center’s purchasing decisions. The private practice received the benefit while the hospital supplied the business Olympus wanted.

The civil complaint describes the broader equipment practice this way:

The complaint alleged that equipment described as a permanent loan was actually given away, sometimes with free maintenance coverage. It also alleged that gifts of scopes, imaging equipment and generators came with an agreement to buy consumables and give Olympus products preferred status. The equipment placement opened the door to subsequent orders.

The complaint alleged that Gyrus, which Olympus had acquired, supplied free generators to induce hospitals and physicians to buy consumables, including cutting forceps and biopsy forceps. The free capital equipment and the recurring purchases belonged to the same sales arrangement.

The complaint also identified paperwork that tied equipment placement to customer retention. A service-agreement exception form recorded the customer, the number of scopes under contract and the justification for the loan. One request described promised loaners if a physician converted a competitor’s equipment to Olympus. An internal email in another example said equipment had to remain on site to prevent a customer switching away.

The Compliance Officer Saw Who Controlled the Decisions

The former chief compliance officer alleged that management kept control over compliance decisions while limiting his authority and staffing. The company had created the position in 2009. In its criminal admissions, Olympus acknowledged that it lacked appropriate training and compliance programs and did not hire an experienced compliance professional until August 2010.

The civil complaint gives the internal account of that gap. The officer alleged that he challenged free equipment, sales-linked grants and expensive physician entertainment. Management wanted him to find ways around the rules without affecting the business. He also alleged that senior officials told him not to enforce the company’s meal spending limit.

A grant discussion showed how the sales purpose could survive a change in policy. According to the complaint, meeting minutes and a follow-up email connected a proposed grant with a business partnership and future sales potential. When the compliance officer questioned the discussion, he alleged that the chief executive deleted the documents from his computer in the officer’s presence.

The question inside this account is who could stop a sale when the method of winning it was challenged. Giving someone the compliance title did not, according to the complaint, give him that authority.

The government’s Merit Medical allegations show a related pattern: the company allegedly disregarded warnings from its own chief compliance officer about its inducements to customers. A dated internal objection connects the sales practice to what management had been told about it.

The Olympus resolution addressed those operating controls. The Justice Department described requirements for compliance training and annual certification by the chief executive and board. Olympus also entered a corporate integrity agreement with the Department of Health and Human Services inspector general covering consulting arrangements, grants, charitable contributions, field assets and travel expenses. Those were the same business functions through which the benefits had moved.

The Civil Settlement Followed the Government Claims

The civil settlement resolved allegations that Olympus’s kickbacks caused false claims to Medicare, Medicaid and TRICARE. The Justice Department allocated $267.3 million to the federal government and $43.5 million to participating states for the Medicaid payments at issue.

The physician’s product choice, the institution’s purchase and the provider’s claim were distinct parts of the transaction. The whistleblower’s complaint alleged that benefits induced purchases of equipment, supplies and consumables, after which physicians or their hospitals billed Medicare and Medicaid for procedures using Olympus equipment. That is how conduct inside a device distributor reached a government payment program.

How Much Is a Whistleblower Claim Worth?

In the Olympus case, the Justice Department announced that the former chief compliance officer would receive $44.1 million from the federal share and $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.

The Separate Latin American Training-Center Scheme

Olympus Latin America, a subsidiary, faced a separate criminal case under the Foreign Corrupt Practices Act. The Justice Department’s account of that criminal case describes payments to practitioners at government-owned facilities in Central and South America, including cash, money transfers, personal grants, travel and free or heavily discounted equipment.

Nominal training centers, supposedly established to educate doctors, provided benefits to preselected practitioners. The department reported that Olympus Latin America admitted bribing publicly employed health care providers and hospital officials to win business. Here, too, the educational label sat over a sales purpose.

How Is Healthcare Fraud Detected?

In this case, the useful connections ran between benefits, buying decisions, equipment use and government claims. A grant approval could be compared with a pending order. A loaner form could explain an equipment placement. A sales report could show what business a physician’s consulting payment was expected to bring.

The 2020 Journal of Forensic and Investigative Accounting paper A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud explains why a review confined to cash payments misses part of the problem. Its analysis describes both cash and in-kind compensation, including economic relationships more complicated than a simple payment for services. Olympus’s grants, free equipment and travel make that point concrete.

Different records reveal different parts of the arrangement. Sales records explain the expected business. Grant and expense records show the benefit. Service and inventory records show where the equipment stayed. Compliance correspondence shows what management knew when it approved the next transaction. We work with device insiders to connect those records to the purchases and claims that give the case its substance.

You Know What the Customer Was Promised

If you saw a grant wait for an order, equipment stay on permanent loan or consulting pay follow product use, talk to our whistleblower experts about the sales arrangement. We build the medical device kickback case with you, bring in medical device whistleblower lawyers who understand purchasing and government claims, and stay beside you as the case moves forward.