Medical Device Maker AngioDynamics to Pay $12.5 Million
A New York medical device manufacturer must pay $12.5 million to resolve claims that the company defrauded Medicare. Prosecutors say that AngioDynamics lied about the safety of its products.
Court documents reveal that the company served as the distributor for two medical device products, LC Bead and the Perforator Vein Ablation Kit (PVAK). The science behind these medical devices may be complex but prosecutors say the fraud was pretty easy to understand. “The basic legal rule in this area could be mastered by a third-grader: Don’t lie,” said San Antonio U.S. Attorney John F. Bash. “If you do, you will be held accountable. This settlement reflects that.”
LC Bead Product
Beginning in May 2006 AngioDynamics served as the U.S. distributor for Biocompatibles plc, the manufacturer of LC Bead. The LC Bead is a drug-delivery device designed to be used with chemotherapy drugs. Highly toxic tumor drugs can be loaded into tiny beads that are supposed to dissolve slowly in the body and help the medication get to the source of the cancerous tumor.
Although twice declined for approval by the FDA, AngioDynamics claimed the device was “better”, “superior”, “safer” and “less toxic” than alternative treatments. Prosecutors say the company did not have enough evidence to support these claims. In fact, use of the product could actually be harmful given the highly toxic nature of the cancer drugs which are loaded into the beads.
Prosecutors also claim that because the company knew that use of the device was not approved, physicians were instructed to use inaccurate billing codes when submitting claims for reimbursement.
According to the complaint, the company received approval for clinical trials of the beads. The FDA wanted the beads tested for both safety and efficacy. Instead of conducting those trials, however, it appears the company filed a false FDA Form 510 clearance notice and continued marketing the device.
Internal marketing materials given to sales reps said, “So… Are you ready to hit the field with this incredible product? Launch is NOW…You have continuous support between the RITA and Biocompatible team! Best of all you are now going to make a tremendous amount of money!!”
Medicare fraud cases are almost always motivated by greed but this case was worse. It also involved a grave risk to patients, patients who because of their cancer already have incredibly weak immune systems.
Kickbacks and the “Oncology Referral Program”
It was bad enough that AngioDynamics was lying to its sales force and physicians. To push sales even more, a sales rep says the company created an Oncology Referral Program that would pay doctors between $1,000 and $2,000 to promote the LC Bead device.
Doctors who performed a lot of procedures with the LC Bead device were invited to be on the company’s speaker board. They would then be paid to lecture about the product at dinners paid for by the company.
Under federal and most state laws, kickbacks are illegal. While it probably is probably okay for a medical device sales rep to buy a cup of coffee for a physician during a sales call, expensive dinners or paying “speaker fees” to doctors who frequently use the device isn’t kosher. They are considered kickbacks or bribes.
By 2011, the company began to sense that it had pushed the envelope too far. Instead of cleaning up their act, however, a sales rep instead claims the cover up became even more sinister. The lawsuit says the company created a Medical Science Liaison to “prevent” off-label promotion of LC Bead. In reality, however, members of that team were actually helping push the product for off-label use.
Of the $12.5 million settlement, $11.5 was allocated to the LC Bead device while $1 million was attributed to fraud involving the Perforator Vein Ablation Kit. The PVAK device uses a laser to close or collapse nonfunctioning veins. The FDA approved the device for superficial veins only. In 2011, the company sought approval to use on perforator veins.
A superficial vein is one near the surface of the skin. Perforator veins are called that because they “perforate” muscle tissue and connect the superficial veins with deep veins.
The FDA denied the company’s request to use the device on perforator veins until more testing and safety data was available.
Instead of complying with the FDA, prosecutors say the company merely changed the product name and continued to market it for treatment of perforator veins.
In announcing the PVAK portion of the settlement, a Justice Department official said, “This settlement reflects the expectation that medical device manufacturers will give doctors accurate information about devices they manufacture and underscores the vital role of the False Claims Act in protecting the public fisc.”
Whistleblower Awards and Medical Devices
Medical devices must be FDA approved in order to be eligible for Medicare and Medicaid reimbursement. And devices that are FDA approved can only be used for approved purposes. While the devices marked by AngioDynamics may have been safe, there is no way of knowing that without rigorous clinic studies. That is why medical devices need FDA approval.
Pharmaceutical companies and device makers violate the law when they begin marketing products without such studies and approvals. Obviously, lying to the physicians who are using these devices is also illegal.
The case against AngioDynamics was filed by Ryan Bliss, a company sales rep. Bliss claims that when he first began marketing the LC Bead product, he believed it had been approved by both the FDA and European regulatory authorities. Years later he discovered the product had been denied approval.
Ryan Bliss was awarded a $2.3 million whistleblower award.
If you have information about companies selling unapproved medical devices or pushing those devices for unapproved purposes, give us a call. Your actions may save a life and you may be eligible for a cash award.
The False Claims Act authorizes rewards of between 15% and 30% of whatever the government collects from wrongdoers. Collecting a reward involves filing a sealed lawsuit in federal court. That scares some folks away but we handle that and you never have to pay us legal fees or costs unless we first recover money for you.
Ed. Note: AngioDynamics was allowed to settle without any admission of wrongdoing. The claims made in this post are from court records and statements made by the Department of Justice.