CEO Indicted For Selling Fake Pain Treatment Device: On March 9, 2023, the United States Attorney for the Southern District of New York announced the filing of a two-count Indictment (the “Indictment”) charging Laura Perryman, the former Chief Executive Officer (“CEO”) of STIMWAVE LLC, a Florida-based medical device company, in connection with a scheme to create and sell a non-functioning dummy medical device for implantation into patients suffering from chronic pain, resulting in millions of dollars in losses to federal healthcare programs. Perryman, 54, of Delray Beach, Florida, has been charged with one count of conspiracy to commit wire fraud and health care fraud, which carries a maximum potential sentence of 20 years in prison, and one count of health care fraud, which carries a maximum potential sentence of 10 years in prison.
In addition, the government announced the unsealing of a non-prosecution agreement (the “Agreement”) with STIMWAVE LLC (“STIMWAVE”), which filed for bankruptcy on June 15, 2022. The Agreement was entered into on October 29, 2022, and was sealed by the United States Bankruptcy Court for the District of Delaware, pending the Government’s ongoing investigation. Under the terms of the Agreement, STIMWAVE has accepted responsibility for its conduct by, among other things: (i) making admissions and stipulating to the accuracy of an extensive Statement of Facts; (ii) paying a $10,000,000 monetary penalty; and (iii) maintaining an adequate compliance program, to include employing a Chief Compliance Officer and holding regular compliance committee meetings. STIMWAVE is also required to cooperate fully with the Government. STIMWAVE’s obligations under the Agreement will continue for a period of three years from the date of execution of the Agreement.
According to the documents unsealed in Manhattan federal court and the United States Bankruptcy Court for the District of Delaware:
STIMWAVE was a medical device company that manufactured and distributed implantable neurostimulation devices designed to treat intractable, chronic pain. Founded in 2010 by Perryman and others, STIMWAVE was headquartered in Pompano Beach, Florida.
STIMWAVE was founded on the premise that its products would provide non-opioid alternatives to chronic pain management. As the founder and CEO of STIMWAVE, Perryman oversaw the design of the StimQ PNS System (the “Device”), a neurostimulator medical device that treated chronic pain by producing electrical currents to target peripheral nerves outside the spinal cord. From at least in or about 2017 up to and including her termination in or about 2019, Perryman, as STIMWAVE’s CEO, engaged in a multi-year scheme (the “Scheme”) to design, create, manufacture, and market an inert, non-functioning component of the Device — called the “White Stylet” — that served no medical purpose but was included with the Device through in or about 2020 in order to make the product financially viable for doctors to purchase.
When STIMWAVE originally brought the Device to market in or about 2017, it contained three primary components: (i) an implantable electrode array (the “Lead”) that stimulated the nerve; (ii) an externally worn battery that sat outside the body and wirelessly provided power to the Lead through the patient’s skin (the “Battery”); and (iii) a separate implantable receiver measuring approximately 23 centimeters in length with a distinctive pink handle — called the “Pink Stylet.” The Pink Stylet contained copper and, unlike the White Stylet, functioned as a receiver to transmit energy from the Battery to the Lead.
STIMWAVE sold the Device to doctors and medical providers for over approximately $16,000. Medical insurance providers, including Medicare, would reimburse medical practitioners for implanting the Device into patients through two separate reimbursement codes, one for implantation of the Lead and a second for implantation of the Pink Stylet. The billing code for implanting the Lead provided for reimbursement at a rate of between approximately $4,000 and $6,000, while the billing code for implanting a receiver, like the Pink Stylet, provided for reimbursement at a rate of between approximately $16,000 and $18,000.
Soon after the Device was released, physicians informed STIMWAVE that they were having trouble implanting the Pink Stylet in certain patients because the Pink Stylet was too long. STIMWAVE and Perryman knew that the Pink Stylet could not be cut or trimmed to shorten it without interfering with the functionality of the Pink Stylet as a receiver, and without a receiver component for doctors to implant and seek reimbursement for, doctors would incur a substantial financial loss with every purchase of the Device, thereby making it more difficult for STIMWAVE to sell the Device to doctors and medical providers at the approximately $16,000 price.
However, STIMWAVE — at the direction of Perryman — did not lower the price of the Device so that its cost to doctors and medical providers could be covered by reimbursement for the implantation of only the Lead, nor did Perryman recommend that doctors not implant the Device or its receiver component in cases where the Pink Stylet could not fit comfortably. Instead, Perryman directed that STIMWAVE create the White Stylet — a dummy component made entirely of plastic that served no medical purpose but which STIMWAVE misrepresented to doctors as a customizable receiver alternative to the Pink Stylet. The White Stylet could be cut to size by the doctor for use in smaller anatomical spaces and was created solely so that doctors and medical providers would continue to purchase the Device for use in those scenarios and continue to bill for the implantation of a receiver component. To perpetuate the lie that the White Stylet was functional, Perryman oversaw training that suggested to doctors that the White Stylet was a “receiver,” when, in fact, it was made entirely of plastic, contained no copper, and therefore had no conductivity. In addition, Perryman directed other STIMWAVE employees to vouch for the efficacy of the White Stylet, when she knew that the White Stylet was actually non-functional.
As a result of these misrepresentations regarding the functionality of the White Stylet, Perryman caused doctors and medical providers to unwittingly implant the non-functional White Stylet into patients and submit fraudulent reimbursement claims for implantation of the White Stylet to Medicare, resulting in millions of dollars in losses to the federal government.
On June 15, 2022, STIMWAVE filed for bankruptcy in Delaware under Chapter 11 of the Bankruptcy Code, through which it sold substantially all of its assets to a third-party through an auction.
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