Stimwave LogoThe U.S. Justice Dept. (DOJ) announced today that it filed a two-count indictment charging former Stimwave CEO in connection with a scheme around the company’s neuromodulation technology.

Damian Williams, the United States Attorney for the Southern District of New York, Michael J. Driscoll, the Assistant Director in Charge of the New York Field Office of the FBI, and Fernando P. McMillan, the Special Agent in Charge of the New York Field Office of the FDA – Office of Criminal Investigations — announced the charges filed against Laura Perryman.

The charges allege connection with a scheme to create and sell a non-functioning, dummy medical device. DOJ said Stimwave designed the implant for patients suffering from chronic pain. It alleges that the scheme resulted in “millions of dollars in losses to federal healthcare programs.”

Perryman founded and served as CEO of Florida-based Stimwave until her termination in 2019. She was arrested this morning in Delray Beach, Florida.

Williams also announced the unsealing of a non-prosecution agreement with Stimwave. Stimwave filed for bankruptcy on June 15, 2022. In February 2020, Stimwave ceased all sales of its high-frequency spinal cord stimulation systems in exchange for the dismissal of a patent infringement lawsuit brought by rival Nevro (NYSE:NVRO).

Summary of the allegations against Perryman and the company

According to Williams, DOJ alleges that Stimwave created a “dummy” medical device component made entirely of plastic. It designed the device for implantation into patients “for the sole purpose of causing doctors to unwittingly bill Medicare and private insurance companies.” DOJ claims the bills cost more than $16,000 for each implantation of the piece of plastic.

Perryman and Stimwave did this, DOJ says, to charge providers thousands of dollars to purchase the device.

“Our office will continue to do everything in its power to bring to justice anyone responsible for perpetuating health care fraud, which in this case led to patients being used as nothing more than tools for financial enrichment,” Williams said.

Patients implanted with the device suffered from chronic pain. They unwittingly received a non-functioning component for their treatment, DOJ said.

“As a result of [Perryman’s] illegal actions, not only did patients undergo unnecessary implanting procedures, but Medicare was defrauded of millions of dollars,” Driscoll said. “Today’s action demonstrates the FBI’s continuing commitment to protect Medicare and other government programs from financial fraud and abuse.”

Stimwave admits to wrongdoing

Stimwave entered into the now-unsealed non-prosecution agreement on Oct. 29, 2022. The U.S. Bankruptcy Court for the District of Delaware sealed it, pending the ongoing investigation. Under the terms of the agreement, Stimwave accepted responsibility for its conduct.

The company made admissions and stipulated to the accuracy of an extensive statement of facts. It also paid a $10 million monetary penalty. The company has to maintain an adequate compliance program, including the employment of a chief compliance officer and the holding of regular compliance committee meeting. Stimwave’s obligations under the agreement last over a period of three years.

The U.S. Attorney’s Office also unsealed a civil fraud lawsuit filed against Stimwave under the False Claims Act. Parties settled that suit, with Stimwave admitting and accepting responsibility for conduct alleged in the government’s civil complaint. Stimwave agreed to pay $8.6 million to the U.S., credited toward its $10 million monetary penalty. The civil complaint also brings claims against Perryman, which remain pending.

Background on Stimwave

Perryman and others founded Stimwave in 2010, headquartering it in Pompano Beach, Florida. The company manufactured and distributed implantable neurostimulation devices designed to treat intractable chronic pain. According to DOJ, its founding centered around the premise that the products would provide non-opioid alternatives to chronic pain management.

As CEO, Perryman oversaw the design of the StimQ PNS system. The device treated chronic pain by producing electrical currents to target peripheral nerves outside the spinal cord.

DOJ alleges that, from “at least in or about” 2017 until her 2019 termination, Perryman engaged in a scheme to design, create, manufacture and market an inert, non-functioning component. This component — called the “white stylet” — served no medical purpose, DOJ said. The alleged scheme aimed to include the stylet to make the product financially viable for doctors to purchase.

Stimwave originally brought the device to market around 2017 with three primary components. It featured an implantable electrode array (lead), an externally worn battery and a separate implantable receiver. The receiver included a distinctive pink handle, called the “pink stylet.” The pink stylet contained copper. Unlike the white stylet, it functioned as a receiver to transmit energy from the battery to the array.

About the alleged scheme

The StimQ PNS system sold to doctors and providers for more than approximately $16,000, DOJ said. Insurance providers, including Medicare, reimbursed medical practitioners for device implantation through two separate codes. One code covered lead implantation and the other covered pink stylet implantation.

The lead reimbursement rate ranged between about $4,000 and $6,000. Billing for receiver implantation like the pink stylet totaled reimbursement of between approximately $16,000 and $18,000.

Shortly after device launch, physicians informed Stimwave of troubles implanting the pink stylet, DOJ said. They attributed these issues to the length of the device.

DOJ alleges that Perryman and the company knew they could not cut or trim the pink stylet without interference with functionality. Without a receiver component, doctors would incur a “substantial financial loss with every purchase of the device” because they could not seek reimbursement for the component. DOJ said this made it difficult for Stimwave to sell the device at its normal price.

According to DOJ, Stimwave — at Perryman’s direction — did not lower the price of the device, nor did Perryman recommend that doctors not implant the device or receiver component in cases where the pink stylet could not fit comfortably.

Instead, DOJ says, Perryman ordered the creation of the white stylet. The government claims Stimwave misrepresented this dummy component as a customizable receiver alternative to the pink stylet. Doctors could cut the white stylet to size for use in smaller anatomical spaces. The allegations claim Stimwave created this solely so doctors and providers continued to purchase the device and continued to bill for receiver implantation.

More on Perryman’s alleged role in the scheme

DOJ alleges that Perryman oversaw training that suggested to doctors that the white stylet constituted a receiver. However, the white stylet, made entirely of plastic, contained no copper and offered no conductivity. According to DOJ, Perryman then directed other Stimwave employees to vouch for the white stylet’s efficacy. However, she knew of its non-functionality, DOJ said.

As a result, Perryman caused doctors and medical providers to unwittingly implant the non-functional component, the government alleges. This led to fraudulent reimbursement claim submissions, resulting in millions of dollars in losses to the federal government.

The government charged Perryman, 54, with one count of conspiracy to commit wire fraud and health care fraud. This charge carries a maximum potential sentence of 20 years in prison. DOJ also charged Perryman with one count of health care fraud. That charge carries a maximum potential sentence of 10 years in prison. Maximum potential sentences offer informational purposes only. A judge determines any and all sentencing for the defendant.

The Complex Frauds and Cybercrime Unit of the Office’s Criminal Division is handling the criminal case. Assistant U.S. Attorneys Louis A. Pellegrino, Jacob M. Bergman, and Mónica P. Folch are in charge of the prosecution.

The civil case against Stimwave and Perryman is being handled by the Civil Frauds Unit of the Office’s Civil Division. Assistant U.S. Attorneys Jacob M. Bergman and Mónica P. Folch are in charge of the civil case. The charges contained in the Indictment are merely accusations. The defendant is presumed innocent unless and until proven guilty.

On June 15, 2022, Stimwave filed for bankruptcy in Delaware under Chapter 11 of the Bankruptcy Code. Through this, it sold substantially all of its assets to a third party through an auction.