The U.S. has joined in a whistleblower lawsuit filed by the former chief compliance officer of Merit Medical (NSDQ:MMSI), who claims the company ran a fraud scheme involving physician kickbacks.
Dr. Charles Wolf alleges the Salt Lake City-based medical device company engaged in unlawful kickbacks to induce physicians to use more of its Embosphere and QuadraSphere microspheres for embolization and occlusion — as well as off-label uses. The practice ran up expenditures for Medicare, Medicaid and other public healthcare payers.
Merit, according to Wolf, provided paid advertising for loyal users and paid consulting fees in order to influence physicians to use its devices. The company disguised the money as educational in nature, and payments were meant to affect and induce hospitals and physicians to purchase additional equipment, supplies and/or products from Merit, according to Wolf’s complaint, handled by attorneys at Joseph, Greenwald & Laake.
The complaint claims that management at Merit often spoke openly about compliance and concocted a numeric system to discuss how risky certain proposals would be. Risk evaluation included a “chili pepper” scale from 1-3 in terms of how much “heartburn” a particular action would give the company as far as compliance and ethics go, the document said.
The company paid the supposed kickbacks specifically to high-volume users of its Embosphere and QuadraSphere products, according to the complaint, which also says that the company made false and misleading claims about the two products, which resulted in them being eligible for certain federal and state reimbursement.
The whistleblower also claims there were systematic payments for physicians to induce the use of Merit products and devices. The complaint alleges that kickbacks included all-expenses-paid trips to destinations such as Paris, Ireland and Hawaii.
According to a news release from Joseph, Greenwald & Laake, Wolf reported concerns to Merit management about the potential fraud while he was employed there. When his complaints came to nothing, he resigned and reported his information to the U.S. Justice Dept., which then investigated the matter before intervening.
The U.S. made the lawsuit public on June 12, filing a notice of intervention, and the court unsealed the case as the federal government is expected to file its own complaint in an intervention by July 13. Additionally, 29 states are included in the lawsuit and may join in as well.
“Prosecuting these cases protects patients,” said Veronica Nannis, who is representing the whistleblower alongside partner Jay Holland and McInnis Law’s Timothy McInnis. “When medical device companies pay something of value to induce physicians to use their devices to the exclusion of others, that can effect independent medical judgment and patient care.”
Merit Medical did not immediately respond to a request for comment. This story may be updated.