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$4-million settlement in pacemaker kickback case

June 4, 2010 | 12:38 pm

Pacemaker manufacturer St. Jude Medical Inc. and two hospitals have agreed to pay nearly $4 million to resolve fraud allegations, the Justice Department announced Friday.

The Justice Department had accused the St. Paul, Minn.-based pacemaker manufacturer of paying kickbacks to hospitals in Ohio and Kentucky to secure heart-device business.

St. Jude is to pay $3.7 million and the hospitals to pay a combined $173,000 to resolve the allegations.

The kickbacks were disguised as rebates that were paid based on previous purchases of St. Jude heart devices as well as rebates St. Jude paid on purchases of other manufacturers' devices in an attempt to secure future business, the Justice Department said.

"Hospitals should base their purchasing decisions on what is in the best interests of their patients," said Tony West, assistant attorney general for the Justice Department's civil division. "We will act aggressively to ensure that choices about healthcare are not tainted by illegal kickbacks."

St. Jude said it agreed to the settlement "to avoid the potential costs and risks associated with litigation." It admitted no wrongdoing.

The case was initiated by a whistleblower named Jerry Hudson, who filed a False Claims Act lawsuit exposing the alleged kickbacks. He will receive $640,000 as part of the settlement.

Shares of St. Jude were down nearly 4% in late trading Friday.

-- Stuart Pfeifer