The Justice Department announced Thursday an indictment of the former CEO of medical device company Stimwave on one count of conspiracy to commit wire fraud and one count of health care fraud.
Stimwave, founded by former CEO Laura Perryman in 2010, produced a set of implants starting in 2017 meant to use electrical currents near the spine as a nonopioid treatment for chronic pain.
One implant was an electrode that stimulated the nerve near the spine. The other was a receiver that acted as an antenna to transfer power from an externally worn battery to the electrode.
The set was sold to medical practitioners for upward of $16,000. Those medical providers then sought reimbursement from insurance providers, including Medicare. The reimbursement for the electrode cost $4,000 to $6,000, while reimbursement for the receiver cost $16,000 to $18,000.
The receiver, referred to as the pink stylet in court documents, was too long to implant in some patients and could not be cut down to size because it would have interfered with the device’s ability to transmit power.
Without the larger reimbursement from installing the pink stylet, doctors would take a wash when purchasing the devices to begin with, making the set harder to sell.
Instead of lowering the price, or directing medical providers not to implant the set if the pink stylet could not fit, Ms. Perryman is accused of having directed Stimwave to produce a dummy receiver made entirely of plastic from 2017 to her 2019 termination.
The plastic receiver, referred to as the white stylet in court documents, could be cut to size by doctors. This was possible because the white stylet had no copper and therefore no electrical conductivity to be impeded by paring down the receiver in the first place.
Ms. Perryman furthered the falsehood by directing employees to say the white stylet worked as advertised and by running trainings with doctors wherein the white stylet was a real receiver, the Justice Department accuses.
As a result, doctors implanted the white stylets that had no function, and in turn, submitted reimbursement claims for the devices to insurance providers. The losses incurred by Medicare numbered in the millions of dollars.
Stimwave filed for bankruptcy last June 15 and entered into a nonprosecution agreement with the government in late October. Terms included admitting to the government’s accusations, paying a $10 million penalty and cooperating fully with the government.
Stimwave and Ms. Perryman were also parties to a civil lawsuit filed under the False Claims Act. Stimwave settled the government’s civil complaint for $8.6 million, which was credited toward the $10 million required by the nonprosecution agreement.
If Ms. Perryman is found criminally liable for the count of conspiracy, she faces a maximum sentence of 20 years in prison. If found guilty on the count of health care fraud, she faces a maximum sentence of 10 years in prison.