Boston Scientific Corp.‘s notorious acquisition of Guidant Corp. is causing even more headaches for the Natick-based devices giant, now that a federal “qui tam” whistleblower lawsuit accuses the pair (and five other medical device makers including Medtronic Inc.) of promoting the off-label use of microwave cardiac ablation and potentially bilking millions from the Medicare system.
The lawsuit accuses the two device giants, plus AtriCure Inc., St. Jude Medical Inc. and subsidiary Epicor Medical Inc. and Endoscopic Technologies of offering illegal kickbacks and free equipment to perform microwave cardiac ablation procedures not approved by the Food & Drug Administration.
The suit alleges that Guidant (both before and after its April 2006 acquisition by BSC) initiated a scheme to encourage hospitals to improperly bill Medicare for the procedures and to “upcode” their bills to get even more out of the federal health program.
The whistleblower, whose request that all personal information be redacted from court documents was granted, worked for Boston Scientific as a sales rep. According to court documents, she’s put in 16 years in the medical device industry and was a top 10 sales producer for a previous employer.
During her training to sell Guidant’s Flex 10 ablation system, she was allegedly told to “market the spread” — that is, highlight the difference between what Medicare pays for cardiac ablations (an average $30,289) and the low cost of the Flex 10 procedure (an average $10,650). That $20,000 “spread” is pure profit for the hospitals.
The scheme allegedly called for sales reps to coach hospitals to bill Medicare using codes for open-heart procedures, rather than the minimally invasive technique actually used, to bilk the system out of an extra $20,000 per procedure.
The companies are also accused of providing free marketing and advertising to physicians in return for using the products, allegedly going so far as to pay for the design, printing and publication of brochures and ads.
For hospitals or doctors who bought five of the devices, the companies would allegedly “loan” them microwave generators worth $28,000 and never ask to be repaid.
And in return for locking in an agreement to use a company’s ablation system exclusively, sales reps were allegedly allowed to confiscate — or, in some cases, disable — competitors’ equipment in those hospitals.
Cardiac ablation is a technique used to treat atrial fibrillation, or fast and irregular heartbeat. It’s a large pool of potential patients, as more than 2.2 million people have the condition and another 160,000 are diagnosed every year, according to court documents. Boston Scientific’s training materials allegedly estimated that U.S. hospitals stood to make $7 billion a year in Medicare reimbursements for treating atrial fibrillation.
And the alleged marketing scheme was likely a windfall for the accused firms; Boston Scientific’s Flex 10 alone was used in 1,600 ablation procedures and in another 15,000 operations in conjunction with other procedures, according to the documents. At about $10,000 a whack, that adds up to $166 million in sales.
When the whistleblower challenged the legality of the marketing scheme at training events and a national sales meeting, she was allegedly reprimanded and harassed before Boston Scientific fired her “as a direct cause of her acts challenging [Boston Scientific]’s marketing approach,” according to court documents.
The lawsuit seeks triple damages and penalties of up to $11,000 for each violation. Under rules of the qui tam statute, which allows private citizens to sue on behalf of the government, whistleblowers are entitled to one-third of any damages and penalties won in a successful case. In addition to that, Jane Doe is seeking two times the amount of back pay and interest she would have earned if BSC hadn’t fired her, plus legal fees.
San Ramon, Calif.-based Endoscopic Technologies agreed to pay $1.4 million to settle its part in the case. Federal investigators are still looking into the allegations against the other companies; the U.S. government has until August 21 to decide whether to join the qui tam cases against them.
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