Medtronic Subsidiary ev3 Pays $1.25 Million to Settle Allegations Related To Promotion

Earlier this month, Minnesota-based ev3 agreed to pay $1.25 million to the Department of Justice to settle False Claims Act (FCA) allegations related to the company’s promotion of their atherectomy device, Silverhawk. The whistleblower complaint was initially filed in 2009, and alleged that Fox Hollow Technologies (purchased by ev3 in 2007), induced hospitals to bill Medicare for more expensive inpatient codes rather than outpatient codes when billing the Silverhawk procedure.

The “Silverhawk Plaque Excision System” is a catheter device that has the ability to strip and collect plaque within a patient’s artery to treat peripheral arterial disease. According to the complaint, the Silverhawk procedure is “minimally invasive,” and “typically performed under local anesthesia and with a very low complication rate.” The relator argues that “[f]or the majority of patients, the procedure can safely be performed in an outpatient setting. Inpatient hospital care is only necessary where there are unexpected complications from the surgery or the patient has other medical conditions that require treatment or inpatient-level hospital care following the procedure.”

At the time of the allegations, Medicare reimbursement for an outpatient Silverhawk procedure was $3,000—an amount that hospitals were “often losing money on,” notes the complaint. Medicare reimbursement for an inpatient procedure, on the other hand, averaged approximately $10,000.

To make it feasible for hospitals to use the atherectomy device, Fox Hollow “initiated a coordinated nationwide marketing strategy to encourage physicians and hospitals to admit Medicare patients undergoing the Silverhawk procedure to inpatient status—usually for a one-night stay—even though medical necessity only supported outpatient treatment in the majority of cases,” argued the whistleblower.

The relator accused Fox Hollow of “marketing the spread,” between what the physician or hospital pays for an item and the reimbursement that they receive from government health insurance for that item. When manufacturers induce device purchases by marketing the spread, they violate the anti-kickback statute, argues the plaintiff.

The complaint alleged that by advising hospitals they could bill Medicare for a higher-paying inpatient procedure, Fox Hollow believed that hospitals would be more likely to buy the Silverhawk and perform the procedure. The complaint states that the marketing strategy was “particularly successful” with physician-owned hospitals, due to the operating physicians’ financial stake in the hospital profits.

—-

Whistleblower Strikes Twice?

The $1.25 million settlement with DOJ resolves claims that Fox Hollow caused 12 hospitals to submit false claims to Medicare for unnecessary inpatient admissions. The False Claims Act permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.

The relator in this case, Amanda Cashi, was employed by Fox Hollow from 2006-2008, primarily as a District Sales Manager, states her complaint. In this position, she “implemented corporate strategies to promote the Silverhawk.” Cashi was represented by Phillips & Cohen, and received $250,000 for her participation in the case.

View Phillips & Cohen’s press release on the settlement.

A search for the relator’s name brought up another life sciences company settlement – United States of America ex rel. Amanda Cashi et al. v. Kos Pharmaceuticals, Inc.

The settlement notes that Cashi was part of a five person whistleblower team of Kos employees that initially filed a sealed complaint in 2004. Cashi’s lawyers there were also Phillips & Cohen.

View their 2010 Press Release on the Kos case as well.

The corresponding DOJ announcement in 2010 does not mention Cashi by name, but states that Kos Pharmaceuticals settled for more than $41 million to resolve kickback and off-label promotion allegations, and the whistleblowers split $6.4 million from the federal share of the civil recovery. Kos Pharmaceuticals was bought by Abbott in 2006.