Medical Devices: The New Low-Hanging Fruit for Healthcare Fraud?


A highlight from the 7th Annual Medical Device and Diagnostic Compliance Congress in June was the talk by Jeremy Sternberg, deputy chief of the healthcare fraud unit, U.S. Attorney’s Office for the District of Massachusetts. His succinct and compelling story to medical device manufacturers, sales agents and distributors can be summarized as: We are smarter than ever (thanks pharma!), and we are coming after the new low-hanging fruit: medical devicesThree key takeaways from Jeremy:

  1. Future criminal prosecutions are in devices, biologics and biotech. While pharma has had significant focus up to now, the industry has implemented processes and procedures to support improved compliance. Why?
    1. Device companies are fragmented and don’t share best-practices easily, seeing each device category as “too different” to learn from common compliance functions.
    2. Sales compensation incents bad behavior at an individual level because it tends to be commission-only for expensive devices.
    3. Patient safety issues are greater with implanted devices than a drug that washes out after a few days.
  2. Patient harm and financial fraud will be the two primary criteria for criminal prosecutions. Financial fraud includes not only false billing to Medicare, but also kickbacks to doctors in the form of fake leases of space, oversampling, and funding fraudulent clinical research.
  3. Whistleblowers are not driving the criminal prosecutorial train. Successful prosecutions are based more on data mining and investigative research and reporting.

I spent 20 years in medical devices, and much has changed. Ethics is at the forefront (hooray for patients), compliance is trying to overcome tight budgets and sales is trying to move beyond a few years of recession (or whatever you may believe about the economy) where patients put off necessary procedures. The government is going digging retrospectively, but they do consider current compliance in sentencing. So, play nicely cross-functionally, make compliance part of everyone’s job everyday and decide to stay out of the DOJ’s “sight.”

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One response to “Medical Devices: The New Low-Hanging Fruit for Healthcare Fraud?

  1. I always visit your website and I really love the content. Thank you for sharing such beneficial articles!

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