Cardiovascular Systems to settle lawsuit for $8m

Cardiovascular Systems (NSDQ:CSII) said today that it agreed to an $8 million settlement with the plaintiff in a False Claims Act lawsuit based on allegations from a former sales rep that the company ran kickbacks and an off-label marketing scheme to boost sales of its orbital artherectomy devices.

The deal calls for St. Paul, Minn.-based Cardiovascular Systems to pay the $8 million over 3 years, not including plaintiff Travis Thams’s legal costs. The company said the final terms of the deal must still be ironed out.

The lawsuit, filed in 2013 and unsealed 2 years later, accuses 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.

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.”

The case is also the subject of a purported class action lawsuit filed last month on behalf of shareholders, accusing the medical device company and its management of misleading investors about the alleged scheme, claiming it spurred a -70% plunge in the value of CSI’s stock.

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