Legal win leaves Vascular Solutions CEO Root weary of the corner office

After being acquitted of federal felony charges for off-label marketing and a prosecution that spanned 5 years, Vascular Solutions (NSDQ:VASC) CEO Howard Root said he’s still recovering from the strain of battling federal prosecutors.

TJSmith, a lawyer, said if it wasn’t for his previous life in the field of law he would have cracked under the pressure of the investigation. And even with that training, the experience made him question staying in the industry.

“I don’t want to do this job anymore. I feel like I’m getting pushed out. I was a lawyer, I started a medical device company. I create jobs, I create medical devices, I try to save lives, and I’ve had good fortune to be successful. And they want to throw me in prison because a sales rep said the wrong word,” Root told MassDevice.com last week after appearing on a panel at the annual AdvaMed conference in Minneapolis. “Why would I do this? I’m not doing it for the money. I’m not doing it for the fame. All I’m doing it for is to make medical devices, and I have this sort of risk. Something’s got to change or no one is going to be doing this for the right reason.”

The company’s employees faced intense scrutiny from the U.S. Justice Dept. that changed the lives of many at Vascular Solutions, Root said during the panel interview, and won’t be the last to face DoJ charges.

“Fifty percent of public commercial medical device companies have at least 1 ongoing government investigation and today, all of those are criminal,” he explained. “Look at the person next to you. Does that person look like a criminal? If not, it’s you. Fifty percent are subject to criminal indictment.”

Vascular Solutions faced charges in an off-label promotion scheme for its now-discontinued Vari-Lase varicose vein treatment, specifically a “Short Kit” version designed for treating perforator veins. Root said the charges stemmed from a disgruntled ex-sales rep, who filed a whistleblower case that was picked up by federal prosecutors.

Root said the device only ever brought in just over $500,000, making up only around 0.01% of total sales, and that it had a general indication for treating varicose veins, which included perforator veins. Despite the general indication, Root said he personally instructed sales reps to not offer or sell the device for any off-label indications.

Even though the company fully cooperated with the government, Root said his employees were over-scrutinized by investigators, and mishandled in a fashion that made him question the motivation of the state.

“Prosecutors will call your employees’ testimony a line of shit and warn that things will get much worse for you if you don’t change your testimony. That followed up with calling another employee a ‘poor effer,’ using the actual word, ‘who needs to return on bended knee to fix his testimony,'” Root said. “Then the worst 1, said to my female employee, ‘If you do not deliver us with the answers we want to hear today, it should be made known that we have power to withhold rights and privileges provided to your natural born son.’ I remind you, these are federal prosecutors. Federal agents on a charge of off-label promotion of a product that made up 0.1% of our sales and never harmed a single patient. This is where they are going when they don’t get their way.”

And intrusive questioning and harassment weren’t the only loss – the case also came with a $25 million legal bill.

“What does it take to survive a trial, before you get to the trial? What is it going to take?” Root said. “Start with $25 million to pay 14 law firms and 121 lawyers. That’s just to get everyone covered. Maybe we had wasted $5 million to $10 million, but it’s an expensive process. That’s the easiest thing to do.”

The Justice Dept. alleged that the company designed and pushed the Vari-Lase short kit after an unidentified competitor won FDA clearance for a radiofrequency ablation device to treat the same veins. Prosecutors claimded that the Vari-Lase device was being pushed for indications for perforator veins, for which it was denied an extended 510(k) in 2007.

At trial, however, the FDA expert called by the prosecution admitted that the device’s general indication covered perforator veins, Root said.

“He just admitted that our general indication included perforator veins. This is an off-label prosecution on an on-label use,” he told us after his panel appearance. “I was being charged in violation of a non-binding FDA guidance document. That’s how crazy this trial got to be.”

A federal jury in February acquitted Vascular Solutions, without the defense having to call a single witness, Root said. Despite the positive outcome, cases like this are having a major impact on the industry, he added, and need to be addressed to keep medtech headed in the right direction.

“This is important for our industry. We do a lot of great things. People with heart attack don’t die as often as they used to. Twenty-five percent in ’78, 5% now. Stroke’s down 59% and we’re doing even more today,” Root said. “I think you need to be prepared, because this is coming after a lot of people. Not just me.”