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Medical Device Company Pays-out $8 million to Settle False Claims Act Lawsuit

Stethoscope1-150x150Travis Thams, the whistleblower who filed a False Claims Act (“FCA”) lawsuit on behalf of the United States and 28 states, stands to receive a substantial portion of the $8 million settlement reached with his employer, Cardiovascular Systems, Inc. (“CSI”).

Thams was recruited to CSI to act as a District Sales Manager. He was responsible for selling the entire portfolio of CSI products.

CSI manufactures devices to treat peripheral artery disease (“PAD”). The devices in question are electrically driven and use a diamond-coated “crown” to sand away hard plaque within the arteries. As the crown “spins” at between 60,000 to 120,000 revolutions per minute within the artery, the plaque is effectively “sanded” away, and it restores blood flow.

In his lawsuit, Thams alleged that CSI successfully engaged in a fraudulent marketing scheme to maximize profits through an ongoing pattern of fraud and deception involving illegal kickbacks, off-label promotion, and violations of FDA laws and regulations. The devices in question include CSI’s Diamondback 360 device, Predator 360 device, and Stealth 360 device.

Thams alleges that CSI has and continues to engage in a broad, unlawful scheme to increase the sales of those devices. He claims that CSI is interested in attracting additional investors and/ or selling itself. Increasing its sales will allow the company to obtain a higher sale price and/or a more favorable valuation from new investors.

CSI’s off-label marketing scheme was allegedly designed to and did influence doctors and other medical personnel to use CSI’s devices for procedures that were not medically necessary or reasonable and necessary. The scheme involved promotion and use of devices that lacked FDA-approval.

CSI’s kickback scheme was allegedly designed to influence doctors and other medical personnel to use CSI’s devices. The kickbacks included: “free” all-expense-paid training programs followed by explicit demands by CSI employees that attendees use CSI products on future patients. Sales representatives were told to “demand that physicians who attend the free trainings reward CSI by using PAD devices for at least their next 5 or 10 cases.

CSI offered these training courses at desirable locations and usually covered attendees’ full expenses including luxury hotel, airfare, meals, and incidental expenses. The company held training sessions at Miami Beach’s Fontainebleau Hotel—“a spectacular blend of Golden Era glamour and modern luxury” – in January 2013, as well as other similar courses in New York, San Francisco, and Washington, D.C.

Following an October 2012 “Med Ed” event held at New York University, Jim Breidenstein, CSI’s Vice President of Sales, emailed his sales representatives: “Now that the course is over, what is your follow-up plan of attack? It is your right to ask for their next 5 cases, hopefully this week. Gaining commitment to treat immediately post course is a major way to convert your doctors. I know it seems basic, but how many of you are demanding his/her next 5 cases immediately post course?”

Thams’ complaint also details how the company sold devices by using reimbursement calculators. These calculators showed that physicians could maximize their financial return by using CSI devices—these calculations were inflated by including unnecessary medical procedures.

CSI allegedly also regularly gave-away “free” product to physicians to induce them to purchase CSI devices. Thams’ alleges that the company made sham “speaker fee” payments to physicians who were high-prescribers of CSI products.

Thams alleges that CSI’s quid pro quo kickback strategy and off-label marketing scheme was intended to and did induce physicians to use and obtain reimbursement for use of CSI medical devices on patients covered by Medicare, Medicaid, and other state government payors. These practices constitute violations of those programs’ anti-fraud provisions.

Thams’ complaint suggests that CSI’s practice focus on PAD is particularly ripe for fraud. Federal and state governments pay for the vast majority of costs associated with those medical devices. According to one source, 80% of all payments for PAD medical devices are made through Medicare and Medicaid.

The decision to “blow the whistle” on one’s employer is often tough, but, consulting an experienced False Claims Act attorney may help an employee root-out violations of the Act and make clear their potential remedies.