Zoll Medical has reached a settlement with the U.S. Department of Justice following an investigation into medical devices that the company sold to the government through a longstanding federal contract.
The settlement concerns what the DOJ alleges was a violation by Zoll of the Trade Agreements Act of 1979. The law mandates that goods sold to the U.S. government can be manufactured only in the U.S. and certain designated countries, a list that currently includes 126 nations.
According to the settlement agreement (PDF), the DOJ claims that in January 2019, Zoll “inaccurately represented to government officials that replacement ECG cables offered by Zoll to the government for use with defibrillators and cardiac monitors were manufactured in the United States, when in fact, they were manufactured in China”—which is not a member of the Trade Agreements Act list.
From there, per the DOJ, Zoll went on to sell the China-made devices to several federal agencies, including the defense, veterans affairs and health and human services departments, until November 2022.
“When corporations choose to supply the American military and American government agencies with goods, the law is clear: We expect those goods to be American-made,” U.S. Attorney Zachary Cunha said in a DOJ release Wednesday. “When companies fail in their legal duty by substituting foreign products for the U.S.-origin goods that the law requires, we will hold them accountable.”
Under the terms of their settlement, Zoll will pay the government $400,000 to settle what the DOJ termed “payment by mistake and breach of contract.”
A chunk of the settlement, $80,000, will go to the whistleblower who originally brought Zoll’s manufacturing practices to the government’s attention, and Zoll will also pay out another $35,000 to the ex-employee to cover his expenses, attorneys’ fees and other costs.
The whistleblower’s 2019 complaint focused largely on claims that the company was selling “unreliable, defective, adulterated and misbranded critical care medical devices” to the military and VA, but also included allegations that Zoll had in late 2018 begun phasing out its American-made ECG cables and swapping in alternatives made in China in its shipments of monitor/defibrillators.
The settlement announced this week focuses only on the latter allegations about the source of the cables, without addressing the former employee’s claims that the devices were defective, too. The Justice Department said in Wednesday’s announcement that the agreement came after “an extensive investigation” of the allegations in the whistleblower complaint.
The DOJ noted that the settlement doesn’t represent an admission of guilt from Zoll, nor does it dilute the government’s allegations against the company, but said it serves as an “alternate remedy” to alleged violations of the False Claims Act.
Zoll didn’t respond to Fierce Medtech’s request for comment on the settlement.