Wright Medical Stays Under U.S. Oversight in Kickback Case

Wright Medical Technology Inc., which paid $7.9 million last year to resolve criminal and civil probes into whether it paid kickbacks to doctors, must undergo another year of oversight by U.S. prosecutors in New Jersey.

Wright, a maker of artificial hips and knees, was criminally charged last September with conspiring to violate the anti-kickback statute by using consulting agreements to induce surgeons to use its products. The U.S. agreed to defer prosecution for a year while a monitor oversaw reforms of consultant hiring.

Gary D. Henley, the chief executive officer since 2006, resigned on April 4 “without good reason” before a board meeting to discuss the compliance program, the company said at the time. On May 4, three other executives resigned, and the company said it had found “credible evidence of serious wrongdoing” regarding its compliance with the deferred- prosecution agreement, Arlington, Tennessee-based Wright said.

Prosecutors said on May 5 that Wright had “knowingly and willfully breached” its deferred-prosecution agreement. First Assistant U.S. Attorney J. Gilmore Childers in Newark, New Jersey, announced today that his office was extending by a year the agreement with Wright.

‘Interim to Permanent’

“Our office is pleased with the extensive cooperation from the newly appointed interim senior management team,” Childers said in a statement. “Today’s extension will allow Wright to make the transition from interim to permanent senior management while still under the terms of the DPA and the surveillance of the federal monitor.”

Wright spokesman Lance Berry didn’t immediately return a call seeking comment.

Under the new agreement, prosecutors will drop the criminal case on Sept. 29, 2012, if Wright reforms the way it hires consultants.

The alleged crimes took place from 2002 through 2007. The monitor has been James B. Tucker, former U.S. attorney for the Southern District of Mississippi.

Federal prosecutors in Newark in 2007 charged Johnson & Johnson (JNJ)’s DePuy Orthopaedics Inc., Zimmer Holdings Inc. (ZMH), Biomet Inc. and Smith & Nephew Inc., makers of hip- and knee-implant devices, with conspiring to violate the anti-kickback law.

The government agreed to defer prosecution if they paid more than $310 million and made reforms. The cases ended in 2009.

The case is U.S. v. Wright Medical Technology, 10-mj-8233, U.S. District Court, District of New Jersey (Newark).

To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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