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Attorney General Bonta Announces $2 Million National Settlement Against Medicrea to Resolve Alleged Kickback Scheme

OAKLAND – California Attorney General Rob Bonta today announced a $2 million national settlement against medical device maker Medicrea USA, Inc. and its corporate parent company, Medicrea International (collectively “Medicrea”). The $2 million settlement resolves allegations that Medicrea violated the federal Open Payment Program and unlawfully paid physicians – through travel expenses, meals, beverages, and entertainment – to induce them to use Medicrea medical devices in surgical procedures, in violation of federal Anti-Kickback Statute and State False Claims Law.

California’s settlement is part of a larger national settlement involving the United States and the states of Colorado, Florida, Georgia, North Carolina, New York, and Texas. Of the total national settlement amount, the federal government will receive $1 million to resolve alleged violations of the Open Payment Program. The remaining $1 million goes toward healthcare fraud recovery, with Medicrea paying $784,167.54 attributable to Medicaid losses.

“Decisions that affect patients’ health should be made solely on the basis of the patients’ best interest. When a healthcare company offers inducements that give its products an unfair advantage, its actions can pose a threat to the health and wellbeing of those who rely on their products and services,” said Attorney General Bonta. “It is up to us, along with our state and federal partners, to keep violations like those alleged against Medicrea in check. Today’s settlement returns critical funding to our communities and programs like Medicaid that keep them healthy.”

The settlement resolves allegations that Medicrea provided items of value in the form of transportation, meals, alcoholic beverages, and entertainment to various United States-based physicians who attended the Scoliosis Research Society’s September 2013 Congress in Lyon, France. In exchange for these benefits, the physicians were encouraged to purchase or order — or recommend or arrange for the purchasing or ordering of — Medicrea’s medical devices to treat spinal diseases, including scoliosis and other disorders requiring spinal fusion. The purchases, made either by the physicians themselves or at their recommendation, were reimbursed by government healthcare programs, including Medi-Cal. This resulted in false payment claims to federal healthcare programs under the provisions of the Anti-Kickback Statute.

The federal Anti-Kickback Statute prohibits medical device manufacturers from directly or indirectly offering or paying anything of value to induce the referral of items or services, such as device orders or purchases, covered by Medicare, Medicaid, TRICARE, or other federal healthcare programs. The State of California also contends that this conduct violated the California False Claims Act, and resulted in false claims being submitted to Medi-Cal, the state’s Medicaid Program, between October 1, 2013 and December 31, 2015.

The settlement agreement is a result of the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA) working with a team of other states. Through the DMFEA, DOJ works to protect Californians by investigating and prosecuting those who perpetuate fraud on the Medi-Cal program. DMFEA also investigates and prosecutes those responsible for abuse, neglect, and fraud committed against elderly and dependent adults in the state. DMFEA regularly works with whistleblowers, the California Department of Health Care Services, and state and federal law enforcement agencies to investigate and prosecute Medi-Cal provider fraud and elder abuse, and fraud by entities other than Medi-Cal providers when their actions result in fraudulent claims.

It is important to note that the settlement claims are allegations only, and there has been no determination of liability. A copy of the settlement agreement with Medicrea is available here.

The DMFEA receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $41,264,032 for Federal fiscal year 2020-2021. The remaining 25 percent, totaling $13,754,675 for fiscal year 2020-2021, is funded by the State of California. The Federal fiscal year is defined as October 1, 2020, through September 30, 2021.