A Monroeville medical supply company has filed suit against six out-of-state medical device companies, alleging they made kickback payments to several local doctors to gain a competitive edge.
Named as defendants are Zimmer Inc. and Zimmer Holdings Inc.; DuPuy Orthopedics; and Biomet Inc., all of Warsaw, Ind.; Smith and Nephew Inc. of Memphis, Tenn.; Stryker Orthopedics of Mahweh, N.J.; and Stryker Inc., of Kalamazoo, Mich.
More than two dozen local physicians also are mentioned in the suit, with a listing of payments allegedly made to them by the defendants. The payments ranged from less than $100 to more than $8 million.
In the suit, filed in U.S. District Court in Pittsburgh on Monday, Richard and Holly McCullough, owners of Intermedics-McCullough, say the companies blocked them out of the market with inferior and more costly products by offering kickbacks "for the purpose of gaining exclusive access to the lucrative replacement hip, knee and joint industry and to the orthopedic industry in general."
Intermedics-McCullough sold replacement hip joints, knees, shoulder implants and other orthopedic and surgical products to local hospitals and orthopedic surgeons.
According to the suit, it was an independent contractor for Sulzer-Medica Inc. with an exclusive agreement to sell its products in the western half of Pennsylvania and West Virginia.
But, from 1988 to 2007, the McCulloughs said the defendants "paid illegal kickbacks and provided numerous forms of illegal payments" to doctors and hospitals, and that sales began to drop after 1996.
"The defendant's kickbacks and illegal payments prevented McCullough from competing in the replacement hip, knee and joint industry in his territory and destroyed his business," the lawsuit says.
The suit contends that the companies combined made more than 2,000 payments "for the purpose of inducing the physicians and institutions to buy its products and to not do business" with competitors.
The largest payment, according to the suit, was $8,073,997 from Zimmer to Dr. Harry Rubash, formerly of UPMC and now chief of orthopedic surgery at Massachusetts General Hospital. Other payments included up to $825,000 in "royalty income" to Dr. James D'Antonio from Stryker, $408,000 from Zimmer to Dr. Anthony DiGoia's consulting company, and up to $300,000 by DuPuy to Dr. Lawrence Crossett.
Michael Drewniak, a spokesman with the U.S. attorney's office in New Jersey, said that while the investigation into physician conduct continues, the vast majority of doctors who received payments from the various companies had legitimate agreements in place that allowed them to be compensated for consulting services or for royalty agreements.
"That's certainly the case in my situation," said Dr. D'Antonio yesterday. He said he has been a consultant for Stryker for 20 years, working on intellectual property and design improvements for total hip and knee replacement systems.
"I've never been paid to use a product, and I certainly wouldn't do that," he said. In fact, Dr. D'Antonio says he uses products from a number of different companies. "Whatever the patient needs is what we give them."
Efforts to reach the other physicians were unsuccessful.
The suit is an offshoot of a New Jersey-based federal investigation last year of the six companies, which reportedly account for 95 percent of the hip and knee surgical implant market.
A criminal complaint accused all but Stryker Orthopedics, which voluntarily cooperated with federal authorities, of using consulting agreements with orthopedic surgeons as inducement to buy a particular company's products.
According to the U.S. attorney in New Jersey, surgeons who made these agreements "were typically paid tens to hundreds of thousands of dollars per year for consulting contracts and were often lavished with trips and other expensive perquisites."
The companies reached agreements with the U.S. attorney's office last September to avoid criminal prosecution. To meet their end of the agreement, all but Stryker must pay $311 million in fines and must have their payments to physicians, hospitals and health institutions monitored.
