The Justice Department has sued Life Spine, alleging the privately held company paid kickbacks to surgeons in violation of the Anti-Kickback Statute. The payments resulted in false claims being submitted to government programs like Medicare and Medicaid.
According to the lawsuit, Life Spine failed to report some of the $7 million it paid to surgeons from 2012 to 2018, putting it in violation of the Physician Payment Sunshine Act. The government also alleged they were illegal under the law.
Life Spine allegedly compared its payments to each surgeon to their purchases of its devices and calculated the return on investment on Life Spine’s payments to each of these surgeons, sorting the surgeons from highest to lowest ROI.
The government’s case centers on the activities of Life Spine and two of its executives between 2012 and 2018. Over that period, Life Spine allegedly recruited surgeons who could potentially be large volume users of its devices and made payments to induce them to use its products. The payments totaled more than $7 million in consulting fees, royalties and intellectual property acquisitions.
The government claims those payments were illegal kickbacks. For example, the government said one surgeon, who had never previously used Life Spine products, bought $2.2 million worth of the company's devices after receiving a $200,000 intellectual property payment from Life Spine.
The crux of the government's case is that Michael Butler, Life Spine's founder, president, and CEO as well as the company's majority shareholder and Richard Greiber, Life Spine’s vice president of business development, caused false claims to be submitted to Medicare and Medicaid by providing kickbacks to doctors to induce them to use the company's products.
"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," U.S. Attorney for the Southern District of New York Geoffrey S. Berman said in a statement.
The lawsuit also cites Life Spine’s relationship with its highest-paid surgeon, who accounted for 24% of the company’s sales in 2016 and 2017. The government is trying to tie the payments to use of Life Spine devices by showing how the doctor’s practices changed over time. In 2015, the doctor used around $2.2 million worth of Life Spine products. After entering into an intellectual property deal with Life Spine, the doctor’s annual purchases of the company’s devices rose to $7 million.
The government also highlighted a second intellectual property deal between the doctor and Life Spine. Life Spine allegedly entered into the $2 million agreement weeks after the doctor threatened to stop using its products. The government said the threat was precipitated by Life Spine’s decision to have a rival doctor as a keynote speaker.
The government is asking for a jury trial in the case.
Life Spine, based in Huntley, Illinois, sells medical devices and equipment primarily used in spinal surgeries including implants and instruments.