For nearly a decade, sales representatives from a distinguished medical device maker operated a bribery scheme at a Kansas veterans hospital that wasted thousands and thousands of taxpayer dollars and jeopardized the lives of patients, a recently unsealed whistleblower lawsuit alleges.
The sales reps from the corporate, Medtronic, “bribed hospital staff to buy its devices over those of competitors and to buy grossly excessive inventory,” in accordance with the suit.
In 2017, Tom Schroeder filed the lawsuit, United States ex rel. Schroeder v. Medtronic, Inc., under seal. The case became public at the top of 2022, when the federal government decided to not intervene within the case.
Schroeder said before this lawsuit consumed his life, he devoted his profession to the medical device industry. For years he worked at Becton Dickinson, a direct competitor to Medtronic. On the time of the alleged kickback scheme, Schroeder was a sales manager at Becton Dickinson, but eventually ascended to the extent of an area vice chairman, making him liable for managing sales representatives in his region.
“We get into this industry to assist people,” Schroeder said.
Tom Schroeder, the whistleblower accusing Medtronic of a kickback scheme, left, is interviewed by Morgan Brennan, in Kansas City, Missouri.
CNBC
But while working at one in every of his client sites – a small veterans hospital in Kansas – he said he learned a couple of scheme that had the alternative effect. Schroeder said rumors circulated that Medtronic sales representatives were bribing VA staff to buy an excessive amount of the corporate’s inventory. These products were later utilized in medically unnecessary procedures on veteran patients, Schroeder alleged. He said the prospect of veterans being harmed is what motivated him to file this suit.
“I had a tough time sleeping at night,” Schroder said.
Medtronic, headquartered in Dublin, Ireland, is the world’s largest medical device manufacturer by way of revenue. Shares of the corporate were up greater than 12% 12 months to this point as of Tuesday’s close. Medtronic’s latest annual filing also shows it had greater than $31 billion in sales – with the most important portion of that coming from its cardiovascular portfolio.
The products at the middle of Schroeder’s lawsuit fall under the cardiovascular umbrella.
“There’s a whole lot of money tied up on this business,” Schroeder said.
Medtronic declined an on-camera interview for this story. In a press release to CNBC, Boua Xiong, a Medtronic spokesperson, said the “allegations on this case are false, and Medtronic will proceed to defend the litigation because it moves ahead.”
An alleged scheme
The lawsuit centers on how patients are treated for peripheral artery disease on the Robert J. Dole Veterans Affairs Medical Center in Wichita.
The condition occurs when plaque builds up within the arteries and blocks blood flow to the legs. One option to treat the disease is with an atherectomy device, which removes buildup within the arteries and restores blood flow. These devices may be used together with balloons, which expand within the vessel to place pressure on the buildup to clear it. Devices, referred to as stents, can then be inserted to maintain the artery propped open.
Medtronic is a significant manufacturer of those devices.
Schroeder said atherectomy procedures on the hospital were performed at a level he’s never seen in his profession.
Unsealed text messages from the case show that in 2017, a Medtronic sales representative sat in an operating room as doctors treated a veteran patient for peripheral artery disease. Because the patient lay on the operating table, this worker texted a Medtronic colleague play by play of the devices that were inserted into the veteran’s body.
Medical examiners say typically one to 2 devices are utilized in these procedures. But on this case, 17 devices were deployed, in accordance with the text messages.
“U are going to want to start out going to the VA on a regular basis,” the colleague texted in response to hearing that many devices had been used.
After the procedure concluded, the Medtronic sales representative within the operating room texted her colleague that she was taking the doctors who had performed the procedure to get lunch.
“When you read those text messages and you are not pissed off and you are not indignant and you are not sad for those veterans, I do not know what to say,” Schroeder said. “That broke my heart.”
The Dole VA launched its own internal investigation in 2018 when its latest medical director, Rick Ament, noticed the department that performed these procedures was spending an excessive sum of money.
Ament, who still works within the Department of Veterans Affairs system, declined an interview. CNBC obtained his nearly six-hour video deposition, which was taken in 2022 as a part of Schroder’s lawsuit.
Video deposition of Rick Ament, the previous medical director of the Robert J. Dole Veterans Affairs Medical Center, taken as a part of this whistleblower lawsuit.
United States ex rel. Schroeder v. Medtronic
“The rough estimates early within the evaluation showed that our costs were $5 million a 12 months greater than they need to have been on this department alone,” Ament said in his deposition.
Ament’s investigation, which occurred independently and without knowledge of the lawsuit Schroeder filed a 12 months earlier, found that the Dole VA was purchasing an excessive amount of inventory.
The veterans hospital purchased more devices than a number of the largest veterans medical facilities, in accordance with data the VA’s investigation gathered.
“The foundational number that we were taking a look at was the usage in comparison with the most important hospitals within the VA, and we exceeded that by multiple folds,” Ament said.
The evidence Ament’s team collected was concerning enough to shut down the unit that performed these procedures, which it did in 2018, in accordance with his deposition testimony. Ament also said he referred the case to the VA’s Office of Inspector General, or OIG, which opened its own investigation later that 12 months. As of this month, the OIG said its investigation still has not been accomplished.
Most of the documents gathered through the OIG’s investigation have recently been unsealed as evidence in Schroeder’s lawsuit. Internal Medtronic records the OIG gathered show dozens of pages of dinner receipts.
“There’s an incredible amount of activity here,” Ament said when he saw the receipts during his deposition.
In Ament’s deposition, a few of these itemizations were disclosed. In one in every of these outings, two orders of oysters at $34, three orders of filet mignon at $76, two orders of lobster tail for $84, a rib eye for $42 and halibut for $40 had all been expensed.
“This clearly gives the look that influence is attempting to be asserted,” Ament said in his deposition.
Based on the OIG’s investigatory documents, these meals were provided to hospital staff on the Dole VA in addition to the doctors the VA contracted to perform atherectomy procedures.
Medtronic pushes back
Since 2011, Medtronic and its subsidiaries have paid greater than $60 million in settlements related to allegations of kickback schemes and fraud claims.
Medtronic said it has “cooperated fully” with the Department of Justice in past settlements, and “when problems were found, took appropriate remedial motion.” In these settlements, Medtronic made no admissions of wrongdoing.
Past Medtronic settlements
- 2011: Medtronic paid $23.5 million to settle claims that the corporate paid kickbacks to physicians.
- 2015: Considered one of Medtronic’s acquirees, ev3, paid the federal government $1.25 million to resolve allegations that it caused certain hospitals to submit false claims to Medicare for alleged unnecessary inpatient admissions related to atherectomy procedures.
- 2018: Medtronic paid $13 million related to allegations of a kickback scheme that originated from one in every of its subsidiaries, Covidien. Medtronic said the settlement is expounded to alleged misconduct largely before its acquisition of Covidien.
- 2019: Medtronic paid greater than $17 million because a health care provider from Covidien offered discounted and free marketing to doctors using its products. The alleged misconduct occurred between 2011 and 2014, largely before Medtronic acquired Covidien.
- 2020: The medical device giant paid greater than $8 million for alleged kickbacks to a neurosurgeon.
Medtronic also said that Schroeder has “admitted under oath that he has no firsthand knowledge of any problematic procedure involving Medtronic devices.” Evidence shows “the physicians performing these procedures … received no additional compensation for the procedure of using the devices,” the corporate said.
In a motion to dismiss, filed in November 2022, Medtronic wrote Schroeder was a “direct competitor” who “lacks sufficiently concrete factual allegations to plausibly claim medically unnecessary procedures occurred.” Nevertheless, the judge found that the allegations of medically unnecessary procedures were sufficient because Schroeder said Medtronic’s employees had a financial incentive to advertise the usage of its products, even when those products weren’t medically mandatory.
“Anybody who thinks I’m a disgruntled worker just really hasn’t read the facts. Because whenever you read the facts, I believe it speaks for itself,” Schroeder said.
Schroeder also doesn’t think you’ll be able to chalk up the alleged kickback scheme on the Dole hospital to a mere rogue sales representative. Schroeder alleges that this misconduct was visible to employees with leadership roles at the corporate.
“I used to be an executive with a competing company, so I even have a definite understanding of what is visible to the higher-ups,” he said.
Brendan Donelon, Schroeder’s attorney for this case, also pointed to this being a systemic issue.
“These pretty grotesquely large dollar amounts needed to have stuck out like a sore thumb.” Donelon said. “But you’ll be able to decide to look the opposite way.”
Brendan Donelon, the whistleblower’s attorney, right, is interviewed by Morgan Brennan, in Kansas City, Missouri.
CNBC
Donelon said probably the most shocking points is that one in every of the sales representatives who allegedly perpetrated this kickback scheme on the Dole VA remains to be employed with Medtronic and selling products at other VA facilities throughout the country.
“You possibly can have policies on paper, but unless you set them into practice, unless you modify your culture, it will keep happening,” he said.
CNBC spoke with greater than a dozen former Medtronic employees, a lot of whom touted the corporate’s compliance system and said they weren’t aware of any improprieties. When asked how this alleged kickback scheme could have slipped through the cracks for nearly a decade, many said if Schroeder’s allegations were true, this alleged misconduct could have been inherited from corporations Medtronic acquired because they’d less rigorous compliance systems in place.
In a press release to CNBC, Xiong said Medtronic has a “strong compliance and reporting program, including robust auditing and other internal controls along with an worker Code of Conduct.”
Douglas Winger, one in every of the Medtronic sales representatives named as a defendant in Schroeder’s lawsuit, won a Medtronic President’s Club award in 2016 for his sales. This annual recognition rewards Medtronic’s highest performers, who’ve demonstrated exceptional performance in meeting their revenue and growth targets, in accordance with former employees. Many also said it’s the best award the corporate bestows to sales representatives.
“This shouldn’t be something that may be neglected or missed,” Schroeder said.
Winger didn’t reply to CNBC’s request for comment.
In a deposition for this case, Winger was asked whether he recalled receiving any training concerning the indisputable fact that purchasing meals for federal employees was prohibited. He responded that he didn’t recall any training during his time at Medtronic.
During his deposition, Winger also denied providing kickbacks on the Dole VA.
Questions on patient safety
While conducting his internal investigation, Ament requested one in every of his nurses to tug a sample of patient data for veterans treated for peripheral artery disease. This sample, which was unsealed as a part of Schroeder’s lawsuit, found that a median of seven devices were used per patient. One patient had 33 devices placed of their body.
“Where can you set 33 devices in a single patient?” said Dr. Kim Hodgson, a retired vascular surgeon and the previous president of the Society for Vascular Surgery.
Schroeder retained Hodgson as an authority for this case to review patient data once the VA provides more detail beyond the initial sample. Without the detailed patient information, Hodgson said he cannot make a definitive determination as as to whether medical inappropriateness occurred. But in an interview with CNBC he said this sample suggests some patients could have been improperly treated.
Schroeder said he believes these veterans may very well be facing significant consequences. Based on Medtronic’s labeling on one in every of its atherectomy devices, it lists a number of the opposed outcomes as “amputation” and “death.”
“It enrages you,” he said. “These aren’t reversible. What’s done is finished.”
The Dole VA’s investigation found that amputations amongst hospital patients increased sixfold through the period of alleged misconduct. Nevertheless, the veterans hospital didn’t determine whether there was a direct correlation between the procedures and the rise in amputation rates.
In a press release to CNBC, the VA said its investigation found a big increase of costs on the Dole VA were related to purchases of Medtronic devices. It also said “patient safety is our top priority” and “to this point has found no quality of care issues.”
In a recent court filing, the VA said 59 veteran patients are having their medical records examined for “possible substandard care issues.”
ProPublica previously wrote about Schroeder’s lawsuit. In response to learning concerning the allegations of misconduct on the Dole VA, Kansas senators urged the VA to contact patients that these procedures could have impacted.
On account of privacy laws, the identities of the patients who underwent these procedures haven’t been made public.
Hodgson also said the science supporting atherectomy procedures is flimsy. Hodgson says he considers the clinical trials that Medtronic uses to market its products to be “fairly low evidence trials.”
In a press release to CNBC, Xiong said that the procedure is a “protected and effective frontline therapy” and that its devices “demonstrated safety across multiple clinical trials.”
Xiong also said Medtronic’s atherectomy devices are supported by greater than 15-peer reviewed studies. This features a study called DEFINITIVE LE, which Medtronic funded. Xiong said it’s “the most important independently adjudicated study of an atherectomy procedure ever conducted.”
The Food and Drug Administration approves all medical devices. One process for approval is named the 510(k) pathway. This fast-tracks devices onto the market, without having for comprehensive studies to be done. Firms just need to prove their product is comparable to ones already on the market.
Medtronic received FDA approval for its atherectomy devices through this pathway.
In a video deposition conducted as a part of Schroeder’s lawsuit in February, Medtronic’s chief medical officer, John Laird, was asked whether the technology regarding atherectomy procedures was approved with definitive clinical data. He said that it was approved with data that was “adequate” to permit the FDA to clear the devices to be used.
Video deposition of John Laird, Medtronic’s current Chief Medical Officer, taken as a part of this whistleblower lawsuit.
United States ex rel. Schroeder v. Medtronic
Laird declined an interview with CNBC.
But in 2015, at the identical time the lawsuit alleges these devices were being inappropriately utilized in veterans, Laird gave a presentation at a University of California symposium on vascular surgery, saying “the standard of information supporting the usage of atherectomy devices” is “poor.”
In a press release to CNBC, Xiong said, “Since Dr. Laird’s presentation in 2015, several additional clinical studies have been conducted.”
In 2021, the FDA issued a Class I Recall for one in every of Medtronic’s atherectomy devices. Based on the FDA, that is the “most serious style of recall” because issues with these products could cause “serious injuries” or “death.”
The FDA reported 163 complaints, 55 injuries and no deaths reported regarding this device.
In his 2023 deposition, Laird said showing the advantage of atherectomy over other therapies would require “500 or more patients” and price as much as “$50 million.”
When questioned concerning the indisputable fact that Medtronic makes billions annually selling these devices, Laird said “that is not how it really works.”
Medtronic’s latest annual filing shows it had nearly $2.4 billion in sales partially from devices used to treat peripheral vascular disease – nearly 8% of the corporate’s total sales for 2022.
Boua said the corporate doesn’t share device specific sales in its public filings.
–CNBC’s Samantha Woodward contributed to this report.
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