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Medical Device Manufacturer Settles Whistleblower Suit

EndoGastric Solutions Inc. (“Endo”) has agreed to pay $5.25 million to settle a whistleblower’s qui tam lawsuit alleging that Endo violated the False Claims Act and Anti-Kickback Statute.  Endo is a medical device company headquartered in Redmond, Washington that develops natural orifice surgical products and procedures for use in the treatment of patients with gastrointestinal diseases.  The specific Endo product at issue in the whistleblower’s lawsuit is EsophyX.  According to Endo’s website, the EsophyX device enables a physician to reconstruct the antireflux valve of a patient with gastroesophageal reflux disease (“GERD”) through the patient’s mouth, rather than through an abdominal incision.   

In 2012, a former employee of Endo, Glenn Schmasow, filed a whistleblower complaint under the qui tam provisions of the False Claims Act.  According to the complaint, the whistleblower was employed as a Program Development Manager for Endo from July 6, 2010 through October 18, 2010 for the Montana, Idaho, and Wyoming territories. The complaint claims that as Program Development Manager, the whistleblower’s objective was to sell the surgeon clinically on using the EsophyX for use in the procedure to treat GERD.

The whistleblower alleged that Endo knowingly encouraged health care providers to upcode when billing government health care programs for procedures using the EsophyX.  Government healthcare programs such as Medicare, Medicaid, and TRICARE use current procedural terminology (“CPT”) codes to determine how much a medical provider should be reimbursed for a specific procedure or service.  When a medical provider bills a healthcare program or insurance company using a CPT code for procedure that costs more than the procedure that was actually performed, it is called upcoding.

Specifically, the whistleblower alleged that Endo instructed medical providers to bill Medicare and others using the CPT code for the invasive surgical procedure which had a much higher reimbursement rate than the non-invasive procedure using EsophyX.  According the government, Endo knowingly caused the submission of false claims to government healthcare programs in violation of the False Claims Act.

In addition, the complaint alleged that Endo violated the Anti-Kickback Statute which prohibits paying remuneration to physicians in order to induce referrals of items or services covered by government healthcare programs.

Endo has agreed to pay $5.25 million to the settle the allegations.  The whistleblower will receive approximately $945,000 as his reward under the qui tam provisions of the False Claims Act.

For more information about whistleblower and qui tam actions, click here.