Lawsuit claims Stryker part of Brazil’s ‘Prosthetic Mafia’

KALAMAZOO, Mich. (WOOD) — A group of Brazilian health insurance companies is suing Kalamazoo-based Stryker for an alleged kickback scheme they say led to unnecessary surgeries.

The group filed the federal lawsuit Monday in Grand Rapids’ Western District Federal Court, accusing the medical device company of several counts of fraud and conspiracy.

The group claims Stryker worked through its Brazilian subsidiary, Stryker do Brasil, Ltda, and a team of distributors to bribe doctors to use more Stryker products. Stryker then allegedly inflated the price of the products in their bills to Brazilian insurance companies, giving between 20 percent and 40 percent of the sales price back to the doctors.

The plaintiffs claim the arrangement led doctors to do unnecessary surgeries and implants in order to increase the amount of Stryker products purchased and the amount of money they earned under this arrangement.

The group of insurance companies say the Stryker scheme is part of larger corruption in the medical device industry, which has become known as the “Prosthetic Mafia” in Brazil.

In the lawsuit, the plaintiffs say a January 2015 undercover investigation by “Fantastico” included a distributor used by Stryker, which offered payments to doctors who used the Michigan company’s products. The report led to an investigation into the medical device industry by the National Congress of Brazil, which, according to the lawsuit, also found evidence that doctors were doing unnecessary surgeries in order to get more money from Stryker and other device manufacturers.

According to the lawsuit, “Once the medical device industry’s payment of improper, secret commissions and financial incentives to physicians came to light, price disparities diminished, and the number of procedures to install medical devices was reduced, at least temporarily. A prominent São Paulo hospital studied the difference in certain medical procedures before and after the public disclosure of the medical device scandal and found a 30 percent reduction in those procedures.”

The allegations listed in the lawsuit are similar to those faced by Stryker in the past. In 2013, the U.S. Securities and Exchange Commission accused the device manufacturer of manipulating financial reports to hide bribes made in Argentina, Greece, Mexico, Poland and Romania. Stryker paid a $13.2 million settlement without admitting guilt or liability.

In 2007, the federal government cracked down on a number of U.S. device manufacturers for alleged bribes and kickbacks to U.S. doctors. Stryker reached a settlement that included no fines. Five other device manufacturers agreed to pay a total of $311 million.

When 24 Hour News 8 reached out to Stryker Monday, the company declined to comment on the lawsuit.