- The Washington Times - Tuesday, August 26, 2008

One of the country’s largest medical equipment suppliers says the federal government is using subpoenas to “harass and harm” it as part of an investigation into whether the corporation paid bribes or submitted false claims for Medicare and Medicaid reimbursements.

In a lawsuit filed last week in federal court in Newark, N.J., the Stryker Corp. accused the Justice Department and the inspector general’s office at the Department of Health and Human Services of issuing an “oppressive and overly broad” subpoena in an investigation into whether the company’s reimbursement claims or its payments to doctors were “false or otherwise improper.”

Stryker, which has an estimated worth of $6 billion, came under a federal criminal investigation last year in its sale of medical devices to foreign doctors after being named in a kickback scheme involving U.S. doctors.

Court records show that a Stryker subsidiary - Stryker Orthopedics Inc. of Mahwah, N.J. - signed an agreement in October to avoid prosecution in the kickback scheme and cooperate in a continuing probe.

Four of the firm’s major competitors - Zimmer Holdings Inc., DePuy Orthopaedics Inc., Biomet Inc. and Smith & Nephew Inc. - paid a total of $310 million to settle the case.

Together, the five companies supplied nearly 95 percent of the lucrative worldwide market in hip and knee surgical implants.

According to a report made public in February by Sen. Herb Kohl, Wisconsin Democrat and chairman of the Senate Special Committee on Aging, the five companies together spent $230 million on payments to physicians. The report accused the companies and the physicians of putting their financial interests ahead of their patients.

“These types of unethical payments are not anecdotal, but rather have been pervasive and industrywide for far too long,” Mr. Kohl said. “The physicians who take their money are equal participants and equally culpable.”

Stryker’s attorney, Herbert J. Stern, who filed the lawsuit, was not available for comment.

Justice Department spokesman Charles Miller declined to comment, citing the pending litigation. He said the department would respond to the lawsuit in court.

Stryker is owned by three grandchildren of the company’s founder, Dr. Homer Stryker, two of whom have contributed millions of dollars to help elect Democrats, including Sen. Barack Obama of Illinois, the party’s presumptive presidential nominee.

Patricia Stryker of Fort Collins, Colo., and her brother, Jon, of Kalamazoo, Mich., have contributed more than $10 million to Democrats for federal and state political campaigns since 2004 and, according to the nonpartisan Center for Responsive Politics, rank among the nation’s top individual donors.

In October, Forbes magazine listed Mr. Stryker’s net worth at $2.1 billion and Ms. Stryker’s at $1.8 billion.

The two siblings now are helping finance a multimillion-dollar media blitz in Colorado targeting Sen. John McCain of Arizona, the presumptive Republican presidential nominee. The plan focuses on a range of television, radio, outdoor and direct-mail advertising through independent nonprofit political organizations, or the so-called 527 groups, and includes at least $4 million to help defeat Mr. McCain.

Stryker officials have said that although the Stryker siblings are part owners of the company, they have no hand in running the daily affairs of the business. Spokesman J. Patrick Anderson has said that any political contributions by Pat and Jon Stryker were made independent of the company.

Earlier this year, Stryker informed investors in a Securities and Exchange Commission (SEC) filing that the Justice Department’s Criminal Division was investigating the corporation for “possible violations of the Foreign Corrupt Practices Act.” That law prohibits U.S. companies from paying bribes overseas.

Stryker disclosed the Justice Department probe in its annual SEC report in February. It said Justice had requested documents from Jan. 1, 2000, to the present, regarding suspected violations of federal criminal and antitrust laws.

In the initial U.S. inquiry, prosecutors said financial inducements were offered to U.S. physicians in the form of consulting agreements with hundreds of surgeons, who did little or no work in return but did agree to use the paying company’s products exclusively.

The physicians, prosecutors said, also failed to disclose the existence of the relationships with the companies to the hospitals where the surgeries were performed and to the patients they treated.

More than 700,000 hip and knee replacement surgeries are performed in the U.S. each year. About two-thirds of those are for patients covered by Medicare.

According to its SEC filing, Stryker disclosed that SEC investigators had made an informal inquiry of the company regarding suspected violations of the Foreign Corrupt Practices Act in connection with the sale of medical devices in certain foreign countries and that was followed by a subpoena from the Justice Department.

In the lawsuit, Stryker said it is “fully cooperating” with the Justice Department and the SEC and that it had turned over to investigators more than 300,000 pages of hard copy, multiple compact discs and a digital video disc with myriad election information. It said the data contain “overwhelming and convincing evidence of Stryker’s innocence,” but that the Justice Department was continuing its investigation.

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