A federal jury last week acquitted Vascular Solutions (NSDQ:VASC) and CEO Howard Root of charges that they ran an off-label promotion scheme for its now-discontinued Vari-Lase varicose vein treatment.
A grand jury in the U.S. District Court for Western Texas indicted Maple Grove, Minn.-based Vascular Solutions and Root in November 2014, alleging that they created a “Short Kit” version of the Vari-Lase device after an unidentified competitor won FDA clearance for a radiofrequency ablation device to treat perforator veins, because Vari-Lase was only cleared for treating superficial veins.
Vascular Solutions, which agreed to a $520,000 settlement of a related civil suit in July 2014, contended that the Vari-Lase Short Kit brought in only $534,000 from 2007 to July 2014, when the company pulled it from the market. Root said Feb. 26 in prepared remarks that he and the company are “vindicated” by the verdict, which cannot be appealed, “but outraged by the obscene legal process we were forced to endure.”
“We greatly appreciate the jury’s complete rejection of the government’s false allegations. But to get to this result, we were subjected to 5 years of attacks which forced us to hire 10 separate law firms at a cost of over $25 million to defend against a criminal prosecution that clearly was never warranted by the facts. This case centered on just 1 version of just 1 of our more than 100 medical devices – a version that was FDA-cleared, made up only 0.1% of our sales, and, by the government’s own admission, never harmed a single patient. To say that this prosecution was wrong-headed and disproportionate would be the understatement of the year,” Root said.
“While this matter is now over for Vascular Solutions and me, an upcoming criminal trial remains scheduled for one of the company’s sales representatives on obstruction of justice charges because he refused to change his grand jury testimony to match what these prosecutors wanted to hear. It should now be obvious that our sales rep’s indictment was merely a malicious retribution by misguided prosecutors, an action that needs to be corrected immediately. And after his indictment is dismissed, if the U.S. Attorney in San Antonio still wants to prosecute someone for obstruction of justice in this case, in my opinion he wouldn’t even have to leave his own office to find the most suitable person to indict,” he added.
Root said that the U.S. Justice Dept. should review every off-label promotion case “to make sure their prosecutors’ theories comply with the law, not just their wishes.”
VASC shares closed up 9.9% on the news at $28.85 apiece Feb. 26.