Insurers Accuse Orthofix of Running a ‘Prosthetic Mafia’

DENTON, Texas (CN) – Brazilian insurers claim Orthofix’s “Prosthetic Mafia” cost them millions of dollars by paying bribes and kickbacks to get doctors throughout Brazil to prescribe its medical devices for a decade.

The Associação Brasileira de Medicina de Grupo dba Abramge claims Lewisville, Texas-based Orthofix bribed doctors to use its products on patients since at least 2006, “even if other devices or products may have been better suited.”

In its Nov. 18 complaint in Denton County Court, Abramge claims Orthofix International and Orthofix Inc. forced Brazilian insurers to pay for Orthofix devices that were improperly implanted and/or used when none were necessary.

Abramge also claims that Orthofix charged inflated prices to recoup the costs of the bribes.

“The improper payments and kickbacks the Orthofix defendants made were part of an organized scheme, planned in and run from Texas, to increase their sales in Brazil,” the complaint states.

“The scheme not only caused and continues to cause significant losses to insurers and the Brazilian public health system, but also has resulted in injury to patients throughout the country.”

Brazilian insurers companies pay for medical implants either by paying either the device supplier directly, or paying the hospitals that implant the device.

Orthofix spokeswoman Denise Landry declined to comment, but said the company “is committed to conducting its business in an ethical manner and in compliance with all applicable laws.”

Orthofix was publicly tied to the practice in 2015 when a Brazilian news program broadcast a report that showed an Orthofix distributor offering secret cash payments to doctors.

The Brazilian press and federal police have dubbed medical device companies involved in the scandal the “Prosthetic Mafia.”

“The Orthofix defendants are part of the Prosthetic Mafia,” the complaint states. It claims that “bribes and kickbacks to medical providers have become standard operating procedure for medical device companies selling products in Brazil.”

It adds: “What the Orthofix defendants did in Brazil follows their standard business practice and fits their pattern of doing business. It is simply the way they do business.”

The insurance association says that Orthofix is negotiating fines with the U.S. SEC and the Department of Justice for its conduct in Brazil.

Orthofix paid $7.4 million to settle an SEC accusation of bribing Mexican officials to buy millions of dollars of products from its wholly owned Mexican subsidiary, Promeca, Abramge says in the complaint. It claims Orthofix made $4.9 million in Mexico “as a direct result” of paying government officials more than $300,000 in bribes.

Abramge seeks compensatory and punitive damages for fraud, conspiracy, tortious interference and unjust enrichment, and claims the bribes violated the laws of Texas, the United States, Brazil, and Brazilian medical ethics codes.

Abramge is represented by Paul Coggins with Lock Lord in Dallas.

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