The former CEO of a medical device company in Florida has been indicted for creating a non-functioning “dummy device” that was implanted in patients suffering from chronic pain.
The scheme led to millions of dollars in losses to federal healthcare programs for the fake devices, according to the Department of Justice. Laura Perryman, the former CEO of Stimwave, was arrested on a two-count indictment in Delray Beach, Florida.
According to the Justice Department, Stimwave manufactured and distributed implantable neurostimulation devices designed to treat intractable, chronic pain. The company was founded in 2010 by Perryman and others and was headquartered in Pompano Beach, Florida. The premise of the device was that it would provide non-opioid alternatives to chronic pain management.
Perryman, as CEO, oversaw the design of the device, known as StimQ PNS System, which produced electrical currents to target peripheral nerves outside the spinal cord. The Justice Department alleges Perryman engaged in a multi-year scheme to design, create, manufacture and market an inert, non-functioning component of the device, called the “White Stylet.” This component “served no medical purpose" but was included with the device in order to make the product "financially viable for doctors to purchase,” Justice said.
When the device first came to market in 2017, it include three primary components: an implantable electrode array that stimulated the nerve; an externally worn battery that sat outside the body and wirelessly provided power to the lead through the patient’s skin; and 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, the indictment stated.
The device was sold to doctors and medical providers for more than $16,000, and it was reimbursed through Medicare and insurance providers via two CPT codes for implanting the device in patients. One code was for the implantation of the lead (between $4,000 and $6,000), and the other was for implantation of the Pink Stylet (between $16,000 and $18,000). However, doctors often found problems with the implantation of the Pink Stylet because it was too long in certain patients.
The Pink Stylet could not be trimmed without interfering with its function. Instead of lowering the price of the device to doctors and providers so it could be covered by reimbursement for the implantation of only the Lead or recommending doctors not implant the device if the Pink Stylet could not fit comfortably, Perryman had Stimwave create a 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 indictment stated.
“As alleged, at the direction of its founder and CEO Laura Perryman, Stimwave created a dummy medical device component––made entirely of plastic––designed to be implanted in patients for the sole purpose of causing doctors to unwittingly bill Medicare and private insurance companies more than $16,000 for each implantation of the piece of plastic,” U.S. Attorney Damian Williams said in a statement. “The defendant and Stimwave did this so that they could charge medical providers many thousands of dollars for purchasing their medical device.”
The White Stylet was used solely so that doctors and medical providers could bill for implantation of a receiver component. Perryman also oversaw training that suggested to doctors the White Stylet was a receiver, when the component had no copper and therefore no conductivity. The misrepresentations of the device led doctors to unwittingly implant it in some patients and bill Medicare for reimbursement.
Stimwave filed for bankruptcy in 2022, and the Justice Department unsealed a non-prosecution agreement in which Stimwave accepted responsibility for its conduct. Within the agreement, Stimwave accepted paying a $10 million monetary penalty and that it will maintain an adequate compliance program, including employing a chief compliance officer and holding regular compliance committee meetings.
In addition to Perryman’s arrest, the U.S. Attorney’s Office also unsealed a civil fraud lawsuit filed against Stimwave under the False Claims Act. The settlement has been brought to U.S. District Judge George B. Daniels
“In connection with the FCA settlement, Stimwave admitted and accepted responsibility for conduct alleged in the government’s civil complaint and agreed to pay $8,600,000 to the United States,” the Justice Department said. “This payment will be credited towards the $10,000,000 monetary penalty discussed above. The civil complaint also brings claims against Perryman under the FCA, which are pending.”
Perryman has been charged with one count of conspiracy to commit wire fraud and healthcare fraud, which carries a maximum potential sentence of 20 years in prison, and one count of healthcare fraud, which carries a maximum potential sentence of 10 years in prison.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."