Manhattan U.S. Attorney Files Lawsuit Against Spinal Implant Company, Its CEO, And Another Executive For Illegally Paying Millions Of Dollars In Kickbacks To Surgeons In Exchange For Using Its Products
Suit Alleges Approximately Half of Company’s Spinal Product Sales Were for Procedures Performed by Surgeons Who Received Payments from Company
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Scott J. Lampert, Special Agent in Charge of the New York Regional Office of the U.S. Department of Health and Human Services, Office of the Inspector General (“HHS-OIG”), announced today that the United States has filed a civil healthcare fraud lawsuit against LIFE SPINE INC. (“LIFE SPINE”), MICHAEL BUTLER, the founder, president, and chief executive officer of LIFE SPINE, and RICHARD GREIBER, the vice president of business development of LIFE SPINE. The Government’s complaint seeks damages and civil penalties under the False Claims Act for paying kickbacks in the form of millions of dollars of consulting fees, royalties, and intellectual property acquisition fees to surgeons to induce them to use LIFE SPINE’s spinal implants, devices, and equipment. The lawsuit alleges that the surgeons who received these payments accounted for approximately half of LIFE SPINE’s total domestic sales of spinal products from 2012 through 2018. As set forth in the complaint, these payments violated the Anti-Kickback Statute and, as a result of this unlawful conduct, LIFE SPINE, BUTLER, and GREIBER caused hospitals and surgeons to submit false claims for payment to Medicare and Medicaid.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Life Spine and its senior management flagrantly ignored the law by paying surgeons millions of dollars in fees and royalties to get them to use Life Spine products during spinal surgeries. Kickbacks to doctors can alter or compromise their judgment about the medical care and services to provide to patients, and can increase healthcare costs. This office will continue to hold companies and the people who run them accountable when they make improper payments to doctors.”
FBI Assistant Director William F. Sweeney Jr. said: "Cases like this are why patients sometimes distrust the care they receive because they don’t know if it’s what the doctor actually thinks, or if there is a company pushing a new drug or new device. People seeking medical treatment are dependent on the advice they get, they don’t have the expertise to question the doctors. The FBI does all it can to stop those companies who overlook the patient who is just hoping to get better, and only sees the dollar signs.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “Paying kickbacks to physicians as a means to boost company profits, as alleged in this case, compromises medical judgement and drives up healthcare costs. Our agency, working closely with our law enforcement partners, will continue to investigate such illegal activities.”
The following allegations are based on the Complaint that was filed in Manhattan federal court and unsealed today:
LIFE SPINE is a Delaware corporation with its principal place of business in Huntley, Illinois. LIFE SPINE designs, develops, manufactures, and markets medical devices and equipment primarily used in spinal surgeries performed by orthopedic surgeons and neurosurgeons, including implants and instruments (“Life Spine Products”). BUTLER is the founder, president, and chief executive officer of LIFE SPINE and is its majority shareholder. BUTLER was closely involved in overseeing the operations of LIFE SPINE. From 2012 to 2015, GREIBER was involved in selecting and approving surgeons who served as paid “consultants” for LIFE SPINE.
LIFE SPINE paid surgeons to induce them to use Life Spine Products during their surgeries. LIFE SPINE aggressively recruited surgeons who had the potential to use a high volume of Life Spine Products to enter into agreements to serve as paid consultants and/or to transfer their patents/patent applications to LIFE SPINE in exchange for payments and promised support to bring the surgeons’ new products to market. LIFE SPINE tied these agreements and the associated payments – as well as the company’s continued commitment to devote resources to the surgeons’ product development projects – to the surgeons’ usage of Life Spine Products. LIFE SPINE and BUTLER expected surgeons to commit to using Life Spine Products at a certain level in exchange for the consulting fees, royalties, and intellectual property acquisition fees paid to them.
LIFE SPINE, with the knowledge, involvement, and participation of BUTLER and GREIBER, entered into agreements with dozens of surgeons. These agreements included medical education agreements under which the surgeons were paid to provide training and/or educational services; product development agreements under which the surgeons were paid to purportedly provide input on new products and then would receive royalties on future sales of the product; and intellectual property agreements under which the surgeons were paid large up-front acquisition fees for their patents/patent applications and then would receive royalties on sales of any products developed based on the patents. Life Spine paid surgeons millions of dollars in consulting fees, royalties, and intellectual property acquisitions pursuant to these agreements.
BUTLER informed LIFE SPINE staff that he expected surgeons who were paid for their consulting services to commit to using Life Spine Products. LIFE SPINE’s senior management, including BUTLER, closely tracked surgeons’ usage of Life Spine Products to ensure that the payments to surgeons were generating sufficient sales revenues for the company and that the surgeons were fulfilling their “commitment” to use Life Spine Products. LIFE SPINE went so far as to generate a report that compared surgeon consulting, royalty, and intellectual property payments to surgeon product usage levels, and then calculated an “ROI” (return on investment) for each surgeon based on those figures. If a surgeon’s usage was too low, LIFE SPINE managers, including BUTLER, pressured the surgeon to use more Life Spine Products during his or her surgeries.
The kickback scheme was successful. Surgeons who received payments from LIFE SPINE accounted for approximately half of LIFE SPINE’s total domestic sales of spinal products between 2012 and 2018. Most of these surgeons substantially increased their usage of Life Spine Products after entering into agreements with LIFE SPINE. These surgeons used Life Spine Products during procedures performed on Medicare and Medicaid patients, which resulted in the submission of kickback-tainted false claims to Medicare and Medicaid.
The Government intervened in a private whistleblower lawsuit before Judge Jed S. Rakoff that had previously been filed under seal pursuant to the False Claims Act.
Mr. Berman thanked the FBI and HHS-OIG for their assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Jennifer Jude, Jeffrey K. Powell, and Lara K. Eshkenazi are in charge of the case.