Medical device makers settle fraud case

NEWARK, N.J. (AP) -- Five makers of medical device implants have made agreements with the U.S. government to resolve fraud concerns over industry practices, with four companies paying a total of $310 million, federal prosecutors said Thursday.

The agreements were made by Biomet Orthopedics Inc. (Charts), DePuy Orthopaedics group, Smith & Nephew Inc. (Charts), Stryker Corp. (Charts, Fortune 500), and Zimmer Holdings Inc. (Charts)

The five companies account for nearly 95 percent of the market in hip and knee implants, prosecutors said.

Biomet will pay $26.9 million; DePuy, $84.7 million; Smith & Nephew, $28.9 million; Stryker, which will not be paying any money, has agreed to be monitored; and Zimmer will pay $169.5 million and be monitored by former U.S. Attorney General John Ashcroft.

The U.S. Department of Justice began investigating the industry in 2005 regarding concerns that companies may have paid kickbacks to orthopedic surgeons in return for favoring their products.

Messages seeking comment from the companies were not immediately returned.

In July 2006, another medical device maker, Medtronic Inc. (Charts, Fortune 500), agreed to pay $40 million to settle civil allegations that it paid kickbacks to doctors. The allegations dealt with its Memphis, Tenn.-based subsidiary Medtronic Sofamor Danek, which makes implants used in back surgery to stabilize a patient's spine.

The government said that between 1998 and 2003, Medtronic paid kickbacks that included sham consulting fees, bogus royalty payments and trips to tourist destinations. Medtronic denied any wrongdoing in the settlement.

Biomet, of Warsaw, Ind., was acquired Tuesday for $11.4 billion by a consortium of private equity firms and ceased trading on Nasdaq.

DePuy, also of Warsaw, Ind., is a unit of New Brunswick, N.J.-based health care giant Johnson & Johnson (Charts, Fortune 500). Zimmer is also based in Warsaw, Ind.

London-based Smith & Nephew has its U.S. orthopedics operations in Memphis, Tenn.

Stryker is based in Kalamazoo, Mich.