Ex-medtech CEO arrested over alleged scheme to sell dummy devices, defraud Medicare

13-03-2023

Dive Brief:

  • Stimwave sold non-functioning pieces of plastic as part of its neuromodulation system because the actual implant was too big for some patients, according to the indictment of the company’s former CEO, Laura Perryman.
  • The former CEO, who was arrested on Thursday, is accused of engaging in a multi-year scheme to sell a device with no medical purpose for implantation into chronic pain patients. According to the indictment, the scheme was designed to make the device more profitable for doctors.
  • The Department of Justice disclosed the indictment alongside two previously sealed agreements with Stimwave. In the agreements, the company admitted creating the dummy device and agreed to pay $10 million.

Dive Insight:

Stimwave received 510(k) clearance for its StimQ Peripheral Nerve Stimulator (PNS) System in 2016. The company pitched the “tiny device” as an alternative to opioids in chronic pain, explaining how its “form factor represents a major breakthrough” and enables implantation “through a standard needle size insert or small incision.” The 23 centimeter implantable receiver component was known as the “Pink Stylet.”

In 2020, the U.S. Food and Drug Administration issued a Class II recall notice for certain StimQ PNS devices because they contained “a non-functional component not referenced in product labeling.” The indictment focuses on events between the 510(k) clearance and the recall.

According to the indictment, soon after the device was released “physicians informed Stimwave that they were having trouble implanting the Pink Stylet in certain patients” because it was too long. The Pink Stylet contained copper to transmit energy from the battery to the lead and, according to the lawsuit, Perryman knew it could not be cut or trimmed to reduce its length without affecting its functionality. 

If the lead is close enough to the battery, the system can function without the Pink Stylet. Perryman allegedly insisted that the device ship with both a lead and a receiver. Without the receiver, which was reimbursed at $16,000 to $18,000, the implantation of the lead, reimbursed at $4,000 to $6,000, would likely not be profitable for doctors, the indictment states. 

Faced with the barrier to the use of the Pink Stylet, Perryman allegedly directed Stimwave to create the “White Stylet,” a receiver with no medical purpose that doctors could cut to size for use in patients with smaller anatomies. The indictment accuses Perryman of “personally” approving the design of the White Stylet, “which showed that it contained no copper or other conductive material, and therefore could not function as a receiver.”

The DOJ also claims the former CEO “lied directly to doctors, and directed Company staff to lie to doctors, falsely stating that the White Stylet was a receiver and therefore purportedly provided some functionality.” The allegations have resulted in one count of conspiracy to commit wire fraud and health care fraud, and one count of health care fraud.

 

Source: MedTechDive

 

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