DOJ Intervenes in FCA and AKS Lawsuit Against Spinal Implant Company.

Date posted: August 16, 2019

The U.S. Attorney for the Southern District of New York recently filed an intervening lawsuit against Life Spine, Inc. (Life Spine), its founder and Chief Executive Officer (CEO) Michael Butler (Butler), and Vice President of Business Development Richard Greiber (Greiber), for alleged violations of the federal False Claims Act (FCA) and Anti-Kickback Statute (AKS).  A whistleblower filed the initiating private lawsuit under the FCA’s qui tam (whistleblower) provisions, which allow private citizens to bring suits on behalf of the U.S.  Life Spine, a Delaware corporation with its principal place of business in Huntley, Illinois, designs, develops, manufactures, and markets medical devices and equipment used in spinal surgeries.  The U.S. Attorney alleged that Life Spine paid neurosurgeons and orthopedic surgeons millions of dollars in consulting, royalty, and intellectual property acquisition fees in exchange for the surgeons to use Life Spine’s spinal implants, devices, and equipment.  From 2012 through 2018, the surgeons who received these payments accounted for almost half of Life Spine’s total domestic sales.  These payments allegedly violated the AKS and ultimately caused hospitals and physicians to submit false claims to Medicare and Medicaid, in violation of the FCA.

The Federal Government alleges that Life Spine aggressively recruited surgeons who were likely to use a high volume of its products in their procedures.  Life Spine entered into the following types of agreements with dozens of surgeons:  1) medical education agreements where surgeons were paid to train and/or provide educational services;  2) product development agreements where surgeons were paid to allegedly provide input on new products and would receive royalties from any future sales;  and 3) intellectual property agreements where surgeons were paid for up-front acquisition fees for their patents or patent applications and would receive royalties on sales of any products developed based on the patents.  Butler and Greiber were heavily involved in fostering these agreements.  According to the complaint, Butler allegedly tracked surgeon’s usage of the products to guarantee that the surgeons were fulfilling their commitment to use Life Spine products and that the payments to surgeons was generating sufficient sales revenues.  Life Spine allegedly went as far as calculating a return on investment for each surgeon based on the amount paid to the surgeon in consulting fees, royalties, or intellectual property payments, and the surgeon’s use of Life Spine products.  If a surgeon’s usage was low, managers would allegedly pressure the surgeon to use more of Life Spine’s products.

The Federal Bureau of Investigation New York Office and the Department of Health and Human Services Office of Inspector General investigated the case.

The DOJ press release is available at:

https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-files-lawsuit-against-spinal-implant-company-its-ceo-and-another

The complaint is available at:

https://www.justice.gov/usao-sdny/press-release/file/1186211/download

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