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St. Jude Pays $16 Million to Settle Kickback Probe

Jan. 20 (Bloomberg) -- St. Jude Medical Inc. agreed to pay $16 million to settle a U.S. government probe of claims the company paid kickbacks to doctors who implanted its heart devices in patients.

The accord resolves a five-year investigation of St. Jude’s marketing practices for defibrillators and pacemakers. Investigators began probing the St. Paul, Minnesota-based company’s payments to doctors after its employees alerted them about the scheme, federal prosecutors said today.

“When companies pay kickbacks to health-care providers in order to pad their bottom line, it taints the information patients rely on to make informed choices about their health,” Tony West, a U.S. Justice Department lawyer, said in a statement.

St. Jude officials said they weren’t admitting liability. The settlement is the second in eight months over allegations that St. Jude paid kickbacks to health-care providers who used its products. The company, with sales of $4.68 billion in 2009, is the world’s second-biggest maker of heart-rhythm devices, after Medtronic Inc.

“The company entered into a settlement agreement to avoid the potential costs and risks associated with litigation,” Amy Jo Meyer, a St. Jude spokeswoman, said in a statement.

‘Sham Fees’

In June, St. Jude agreed to pay the federal government $3.7 million to resolve a separate whistleblower case over claims that it made illegal payments to hospitals in Kentucky and Ohio that used the company’s heart devices.

The $16 million settlement stemmed from a case filed by Charles Donigian, a former St. Jude technician from St. Louis, who accused the company of using kickbacks to market products.

The kickbacks, which ranged as high as $2,000 per patient, came in the form of “sham fees” for phony clinical-research studies on the devices, Donigian said in his suit.

As part of the settlement, Donigian will get $2.64 million for tipping the government to the kickback scheme, prosecutors said.

The case is U.S. ex rel. Charles Donigian v. St. Jude Medical Inc., 06cv1116, U.S. District Court, District of Massachusetts (Boston.)

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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