DJO Global, Zimmer-Biomet’s EBI finally escapes bone-growth stimulator suit

It took 11 years, but DJO Global and Zimmer Biomet (NYSE:ZBH) subsidiary EBI finally escaped the civil side of a False Claims Act lawsuit yesterday alleging that they defrauded Medicare with the sale of bone-growth stimulators.

The suit, filed in 2005 by the owner of a Missouri durable medical equipment billing services company named Jeffrey Bierman, alleged that a raft of companies submitted false Medicare claims for the osteogenesis stimulators. The claims for purchasing the devices should have been made for renting them, Bierman alleged; furthermore, the devices were prescribed for much longer periods of time than was medically necessary, he claimed in the lawsuit.

Although they cost $50 to $100 to make, the stimulators retail for $5,000 and Medicare reimburses for $4,000, according to the suit. The allegedly fraudulent claims from 1998 to 2008 brought in more than $400 million for the defendants, the lawsuit claimed, naming Orthofix (NSDQ:OFIX), Reable Therapeutics (which merged with DJO in 2007), Bioelectron (acquired by EBI in 2008) and Smith & Nephew (NYSE:SNN), in addition to DJO and Biomet’s EBI (Biomet paid nearly $6.1 million to settle with the U.S. Justice Dept. in October 2014.)

After Judge Rya Zobel of the U.S. District Court for Massachusetts granted partial summary judgment in July 2015, Bierman’s claim hinged on a single theory: That DJO and EBI coached doctors to recommend inflated treatment times for the stimulators. Yesterday Zobel ruled that Medicare’s reimbursement calls had nothing to do with how long the recommended treatment times were.

“Because Bierman cannot point to any fact in this record to show that estimated lengths of need are material to Medicare’s decision to purchase DJO’s bone-growth devices, Bierman cannot sustain his False Claims Act action under this theory. Since materiality is also a condition of the state and local False Claims Act analogs under which Bierman has sued, Bierman likewise cannot sustain claims under those statutes,” Zobel wrote.

The other defendants in the case have either settled or had it stayed pending a settlement. Orthofix ended its involvement in late 2012 with a $43 settlement that put to rest both the civil and criminal portions of the suit; Smith & Nephew’s case is stayed pending review of a settlement, according to court documents.

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