Brian Buntz

March 22, 2016

3 Min Read
Cardiovascular Systems to Pay $8M to Settle Kickback Suit

The company has agreed to pay millions over three years to settle a whistleblower lawsuit.

Nancy Crotti

Diamondback 360

It's the third blow in the past year for the New Brighton, MN-based company Cardiovascular Systems, Inc. In February, it disclosed in a regulatory filing that a shareholder class action lawsuit had been filed in U.S. District Court for the Central District of California against the company over the same allegations. That same month, it announced that David Martin had stepped down as CEO and board director to focus on treating stomach cancer.

In a March 16 filing with the Securities and Exchange Commission, Cardiovascular Systems said it had reached an agreement in principle to settle the kickback suit filed in 2013 in the Western District of North Carolina. The court agreed to grant the company until May 15 to iron out the details of the settlement, which does not include the legal fees of the whistleblower, former sales manager Travis Thams.

"CSI is encouraged that the settlement negotiations are proceeding in a timely fashion," wrote company spokesperson Jack Nielsen in an email. "We remain optimistic that we will bring resolution to this investigation prior to May 15."

Thams claimed in his suit that Cardiovascular Systems had violated the False Claims Act through the alleged kickbacks and off-label promotion of medical devices. The allegations revolved around ways that the company allegedly tried to sell its Diamondback 360, Predator 360 (pictured above), and Stealth 360 peripheral atherectomy devices. Thams also claimed to have seen the alleged illegal activity firsthand, according to the Minneapolis Star Tribune.

The shareholder lawsuit claims that the company "made materially false and misleading statements and failed to disclose material adverse facts" about its performance "relating to (1) alleged kickbacks to health care providers, (2) alleged off-label promotion of medical devices, and (3) alleged violations of the Food and Drug Administration's laws and regulations in connection with the Company's medical devices."

Cardiovascular Systems "believes that this lawsuit is without merit and intends to defend itself vigorously," the filing said.

Cardiovascular Systems describes its Diamondback 360 as a high-speed cutting tool that is inserted via a catheter through the skin into a patient's blood vessel to remove calcified plaque and reestablish blood flow in narrowed arteries or arterio-venous dialysis shunts. FDA approved the system in October 2013, but recalled it in May 2014, citing the possibility that a sheath might fracture during use.

Over the past year, the company's stock peaked at $38.14 in April 2015. It has fallen precipitously since then, reaching a low of $8.58 in February. This morning, it was $10.30 per share.

Learn more about cutting-edge medical devices at BIOMEDevice Boston, April 13-14, 2016.

Like what you're reading? Subscribe to our daily e-newsletter.

Sign up for the QMED & MD+DI Daily newsletter.

You May Also Like