Ex-sales rep sues Cardiovascular Systems

A former sales rep for Cardiovascular Systems (NSDQ:CSII) is suing the company, alleging that it ran a kickbacks and off-label marketing scheme to boost sales of its orbital atherectomy devices in violation of the False Claims Act.

The lawsuit, filed by ex-rep Travis Thams in  July 2013 and unsealed this week, accuses St. Paul, Minn.-based CSI of inducing physicians to use its products by offering free, all-expense-paid training programs “followed by explicit demands by CSI employees that attendees use CSI products on future patients,” giving away product for free, 3rd-party referral channel marketing, and “sham Speaker Bureau payments for high-prescribers and others whom CSI sought to cultivate,” according to the complaint filed in the U.S. District Court for Western North Carolina.

Thams worked for CSI as a district sales manager from 2012 to 2013, according to the complaint.

“CSI executed its scheme primarily through unlawful kickbacks and utilized its sales force to illegally promote the off-label sales and use of its medical devices in order to obtain reimbursement for non-FDA-approved indications and maximize profits through false and fraudulent statements,” the lawsuit alleged. “CSI’s quid pro quo kickback strategy was intended to and did induce physicians to use and obtain reimbursement for use of CSI medical devices on patients covered by Medicare, Medicaid, and other government payors.”

The lawsuit also accused the company of running an off-label promotion scheme to push sales of its unapproved 4 French catheter. It alleges that CSI also promoted its devices for use in areas of the body it’s not approved for, such as the coronary arteries, and for conditions such as chronic total occlusion for which it is not approved.

In May 2014, CSI revealed that the district attorney for western North Carolina opened a probe into Thams’s allegations “to determine whether the company has violated the False Claims Act, resulting in the submission of false claims to federal and state health care programs, including Medicare and Medicaid.”

CSI said this week that federal prosecutors have decided not to join the Trams lawsuit for the time being.

“The company maintains rigorous policies and procedures to promote compliance with the FCA and other regulatory requirements and intends to vigorously defend this lawsuit, should it proceed. However, the company cannot predict when the Department of Justice’s investigation or this litigation will be resolved, the outcome of the investigation or this litigation, or the potential impact of either on the company,” CSI said in a regulatory filing.

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