Blackstone Gets Caught with Pants Down

Springfield, MA-based Blackstone Medical, a spinal surgery device manufacturer and subsidiary of Orthofix International, is under federal investigation for allegedly paying doctors to use its equipment.

Yesterday, the prosecutor’s case got a big boost when an Arkansas neurosurgeon, Dr. Patrick Chan, pleaded guilty to soliciting and accepting kickbacks from an Orthofix salesman.

Chan agreed to pay $1.5 million to settle the suit which alleges that Blackstone and another party used phony consulting contracts, fake research studies and gifts to entice Chan and other doctors to use Blackstone’s devices in spinal surgery. In exchange for his cooperation in the case, charges against Chan, which included allegations that he performed unnecessary surgeries, were dismissed.
“We are committed to vigorously investigating, prosecuting, and punishing those healthcare providers who seek to manipulate the system for their own financial gain,” said prosecutor Jane Duke in a statement.

Orthofix acquired Blackstone in 2006 for $333 million. Orthofix set aside $50 million, or nearly 1/6th of the purchase price, to pay for settlements related to the improper payment of doctors. To date, Blackstone has cooperated with the U.S. attorney’s office and has volunteered all documents regarding payments or gifts made to physicians – no doubt wanting to get the incident resolved as soon as possible.

“Dr. Chan is only one piece of a big scheme that has been going on across the United States,” said prosecutor David Ivers of Little Rock.

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