Innovasis Inc. and Two Executives Settle Allegations of Improper Payments to Physicians

Recently, Innovasis Inc. and two of its senior executives – Brent Felix and Garth Felix – agreed to pay a total of $12 million to resolve allegations that they violated the False Claims Act by paying kickbacks o spine surgeons, to induce the surgeons to use Innovasis’ spinal devices. Brent Felix is the founder, President, and Chairman of the Board of Innovasis while Garth Felix served in various capacities for the company, including time as Chief Financial Officer.

The settlement resolves allegations that from January 2014 through December 31, 2022, Innovasis paid improper remuneration to seventeen different orthopedic surgeons and neurosurgeons to get them to use Innovasis spinal implants, devices, and other equipment in procedures performed on Medicare beneficiaries. According to the DOJ the improper remuneration included payment of consulting fees, intellectual property acquisition and licensing fees, registry payments and performance shares in the company, and travel costs paid for visits to a luxury ski resort.

The Felix brothers and Innovasis allegedly paid the physicians for consulting services in excess of fair market value – or for consulting services that were never actually performed. Physicians were also allegedly paid in excess of fair market value to acquire or license purported intellectual property that sometimes lacked supporting detail, and for which Innovasis never obtained a valuation prior to purchase and never used for meaningful product development.

The travel costs for the luxury ski resort included not only the cost of travel (including first class airfare for high volume physicians), but also lodging and high-end meals while attending the conference. Attending physicians also received welcome gift baskets and Innovasis branded ski jackets.

During the relevant time period, Brent and Garth Felix allegedly controlled or otherwise directed Innovasis’ operations, strategic decisions, and the agreements with surgeons who received the alleged improper payments from the company.

The $12 million settlement amount includes $6 million in restitution. Innovasis is responsible for paying $11.625 million, while Brent Felix is responsible for $250,000 and Garth Felix is set to pay $125,000.

The settlement stems from a qui tam complaint filed by a former Regional Sales Director for Innovasis. The relator will receive roughly $2.2 million as their share of the recovery in the case.

As we often see, the settlement does not include any determination of liability and the claims resolved are only allegations.

“Payments from medical device manufacturers intended to influence a physician’s judgment about which medical devices or supplies to select are illegal,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “When medical devices are used in surgical procedures, patients deserve to know that their device was selected based on quality of care considerations and not on improper payments from manufacturers.”