Laura Perryman, the former CEO of Stimwave was recently convicted on two counts of health care fraud: one count of health care fraud and one count of conspiracy to commit health care fraud and wire fraud. Stimwave sold nerve stimulation devices to combat pain from 2010 to 2019. With Perryman at the helm of the company, Stimwave altered the design of the device to better fit insurance codes by adding unnecessary and ineffective plastic components to the devices that allowed the company to sell them for thousands of dollars more than it otherwise could.
The device at issue is the StimQ peripheral nerve stimulation (PNS) device, approved by the United States Food and Drug Administration in 2017. After approval, physicians reported to Stimwave that they were having difficulty implanting a pink stylet receiver component of the device in certain patients because it was too long. The pink stylet could not be trimmed or cut without impacting the functionality of the stylet as a receiver. Without a receiver component for doctors to implant and seek reimbursement for, physicians would incur a financial loss with each device purchased as Stimwave encouraged providers to bill medical insurance providers for implanting the StimQ PNS under two separate reimbursement codes (at a higher reimbursement rate) – one code for implanting the stimulator portion of the Lead and another code for implanting the receiver. The billing code for implanting just the Lead resulted in reimbursements of roughly $4,000 to $6,000, while the billing code for implanting a receiver resulted in reimbursement of roughly $16,000 to $18,000.
With physicians unable to implant the pink stylet receiver, it was difficult for Stimwave to sell the StimQ PNS to doctors at the $16,000 price. Instead of lowering the price of the StimQ PNS, or recommend that the doctors not implant the StimQ PNS or its receiver component in cases where the pink stylet could not fit, Perryman asked the company to create a white version of the stylet made of all plastic (no copper, and therefore no conductivity). The white version, which could be cut to size by the doctor to use for certain patients, was then marketed to doctors as an alternative to the pink stylet.
However, the white stylet was unable to conduct radiofrequency energy as it was all plastic and essentially rendered the device ineffective. Perryman directed Stimwave employees to assure the white stylets could be used as a receiver and also oversaw the training for doctors that suggested the component was functional.
U.S. Attorney Damian Williams said, “Laura Perryman brazenly created a dummy medical device component — made entirely out of plastic — to be implanted into patients. She marketed that dummy component as a means for doctors to bill Medicare and private insurance companies approximately $18,000 for each implantation of the piece of plastic. She did this so that she could entice doctors to buy her device for many thousands of dollars. Perryman recklessly used patients as tools for financial gain, and this jury’s unanimous verdict sends a resounding message that individuals who defraud health care programs will be held criminally accountable.”
SEC Charges
In December 2023, the United States Securities and Exchange Commission (SEC) also charged Perryman with defrauding investors out of nearly $41 million by making false and misleading statements about the StimQ PNS. According to the SEC’s complaint, Perryman made “material misrepresentations” about the StimQ PNS.
The SEC’s complaint alleges that Perryman knew, or was reckless in not knowing, that the smaller receiver was, in reality, fake and nothing more than a piece of plastic. The complaint also alleges that Perryman made false and misleading statements to investors about Stimwave’s historical revenues, revenue projections, and business model.
“We allege that Perryman touted a supposedly innovative medical pain-relief device while concealing that a primary component of the device was fake and that patients were unwittingly undergoing unnecessary surgeries to implant the non-functional component into their bodies,” said Monique C. Winkler, Director of the SEC’s San Francisco Regional Office. “Investors are entitled to know material information about the products of the companies in which they invest. The SEC is committed to holding bad actors accountable.”