Liberator comes under scrutiny

STUART, Fla. - A Department of Justice investigation into Liberator Medical, among others, could cast a long shadow over the company, say healthcare attorneys.

Government investigations can remain open for years, potentially impacting the mail-order supplier in many ways, says attorney Neil Caesar.

“It costs a lot in legal expenses, but also in investment potential and other opportunities,” said Caesar, president of the Health Law Center. “Reputation in the marketplace can suffer simply from the fact of investigation.”

Liberator is the subject of a whistleblower complaint alleging it has violated the False Claims Act by engaging in illegal kickback arrangements with Coloplast. Other defendants include Hollister, 180 Medical, A-Med Health Care Center, Byram Healthcare Centers, CCS Medical, RGH Enterprises d/b/a Edgepark Medical Supplies, and Shield California Health Care Center.

There are several charges outlined in the complaint, including: Liberator received remuneration in the form of advertising expenses for certain Coloplast products; received free inventory in exchange for not using the products of competitors; and received a “back end” rebate of 30% for patient conversion growth.

“Generally speaking, rebates are problematic under federal law,” said Caesar. “With a rebate, you are rebating for results.”

Arrangements in which manufacturers provide incentives to promote their products are fairly common in the retail world and are called co-op marketing agreements, says provider Tom Wilson.

“The key thing is manufacturers have to offer terms and conditions that put retailers on a level playing field,” said Wilson, president of The Caregiver Partnership and a former high-level Kimberly-Clark executive. “If Walmart can justify that it costs 10% less to do business with them because of their scale, then the manufacturer might be able to give them a slightly better deal.”

The existence of such a complaint doesn't automatically mean Liberator is doing anything wrong, caution attorneys.

“There's no evidence at this point that this is even going to turn into a lawsuit, let alone that Liberator is going to be found guilty,” said Caesar. “It's possible that if the investigation continues we'll find that things are fine or that a whistleblower was overly inflamed for who knows what reason.”

Liberator CEO Mark Libratore said he couldn't comment on the investigation, but a 10-Q report stated that the company is cooperating fully.