Life Science Compliance Update

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July 06, 2016

Cardiovascular Systems Inc. False Claims Act and Anti Kickback Settlement

Cardiovascular Systems, Inc. (CSI) has agreed to pay $8 million and sign a corporate integrity agreement (CIA) to settle a False Claims Act (FCA) lawsuit filed against them. The suit is based on allegations from a former sales representative that the company ran kickbacks and an off-label marketing scheme to boost sales on its orbital atherectomy devices.

According to allegations in the court documents, CSI executed a kickback scheme to induce the use of its medical devices by physicians. The government alleges that CSI violated the FCA by providing marketing and other practice development services to physicians who utilized CSI's devices to perform artherectomies (a procedure that clears blockages restricting blood circulation in arteries). The government further alleges that CSI developed and distributed marketing materials to referring physicians to promote physicians who utilized CSI's devices; coordinated meetings between utilizing and referring physicians; and developed and implemented business expansion plans for physicians who utilized their devices. CSI allegedly engaged in these activities, and others like them, to induce doctors to begin to use or continue to use CSI's devices.

The False Claims Act suit, filed in 2013, accused CSI of inducing physicians to use its products by offering free, all-expense paid training programs. The programs were then followed by "explicit demands by CSI employees that attendees use CSI products on future patients." CSI would give the product away for free, use third party referral channel marketing, and sham speaker payments for high-prescribers and those with whom CSI sought to cultivate relationships.

The lawsuit also accused the company of running an off-label promotion scheme to push sales of an unapproved French catheter and promoting its devices for use in areas of the body it is not approved for, such as coronary arteries, and for conditions (i.e., chronic total occlusion) for which it is not approved.

The settlement calls for the company to pay $3 million immediately and then the remaining $5 million in eleven quarterly installments, beginning January 2017, with a 1.8% annual interest rate. The settlement agreement also requires CSI to pay reasonable expenses, costs, and attorneys' fees for Travis Thams, the previous employee and qui tam whistleblower.

Cardiovascular Systems admits no liability in the settlement and the CIA requires CSI to maintain and expand its existing compliance programs and hire an independent review organization to audit its compliance with federal health care programs.

According to United States Attorney Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina, the division of the U.S. Attorney's Office that investigated these allegations,

Doctors are expected to provide medical advice and treatment options that benefit patients, not their own practice. A company cannot reward physicians for using its medical devices over those of competitors. The type of kickback scheme alleged in this case compromises good medical care and can lead to inefficient use of limited healthcare resources. My office is committed to preventing medical device manufacturers from improperly influencing physicians' medical judgment. We will thoroughly investigate any such allegations.

Derrick L. Johnson, Special Agent in Charge with the Department of Health and Human Services, noted,

Medical device companies engaging in kickbacks to boost profits undermine physicians' medical judgment and drive up health care costs for everyone. Our agency will continue to work with our law enforcement partners to investigate and recover Medicare money that was improperly paid.

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