In a rare criminal indictment of a health care executive, a Texas grand jury has charged the chief executive of a large Minnesota med-tech firm with conspiring to sell a varicose-vein treatment device for unapproved uses.
Howard Root, 53, longtime CEO of Maple Grove-based Vascular Solutions, was indicted Thursday by a San Antonio grand jury on one felony count of conspiracy and eight misdemeanor charges of selling unapproved and adulterated medical devices. Prosecutors filed the same charges against the corporation, which has grown into one of Minnesota’s biggest device makers.
Prosecutors say the company marketed a device called the Vari-Lase to seal off veins deep in the leg, even though the device was approved only to treat superficial blood vessels near the surface of the skin. The company marketed the device for use on the deeper perforator veins even after a clinical trial recorded numerous adverse results in patients, according to the indictment.
“These charges involve a deceptive sales campaign led by the CEO of a public company,” Joyce Branda, acting assistant attorney general for the Justice Department Civil Division, said in a prepared statement. “We will take action to hold corporations and their leaders responsible when they violate laws intended to protect public health.”
Root, a lawyer and entrepreneur who co-founded the company in 1997, said he intends to plead not guilty.
“Allegations that we conducted an off-label campaign resulting in almost no sales are absurd and will not stand,” Root said in a prepared statement. “We welcome the chance to demonstrate the truth before the court.”
The Vari-Lase “short kit,” as it is referred to by the company, was supposed to revolutionize vericose-vein treatment and generate major revenue for the company because it eliminated the need to surgically strip out diseased veins. Doctors simply insert a fiber-optic cable through a catheter to deliver laser energy inside a vein, sealing it off.
But the device was voluntarily pulled from the market in July after the company paid $520,000 to settle a civil whistleblower lawsuit alleging the same off-label marketing at issue in the new criminal case.
The Food and Drug Administration approved use of the Vari-Lase short kit in 2007, but only to treat superficial veins that lie near the surface of the skin. Although it is often legal for doctors to put devices to unapproved uses, it’s generally illegal for companies to specifically promote any unapproved uses.
Vascular Solutions employs about 400 people and its $110.5 million in sales in 2013 placed it 64th in the Star Tribune 100 list of biggest publicly held companies in Minnesota.
While vowing to fight the charges in court, the company didn’t hold back in public statements about the case. “The indictment is the profoundly flawed product of government attorneys who have conducted a misguided and abusive investigation,” a company statement said.
The company also downplayed the significance of the device in Vascular Solutions’ product catalog, noting that it created revenue of $534,000 over seven years, or 0.1 percent of company sales. Executives promised to reveal what it called the motives for prosecutors’ “abusive conduct” in future court filings.
Vascular Solution’s stock price on Nasdaq dipped Thursday and then recovered, ending the day virtually unchanged near its all-time high, at $30.59.
The criminal case stems from allegations in a civil whistleblower lawsuit filed in 2010 by a former sales representative.
Hundreds of whistleblower cases are filed against health care companies each year, but the government joins only a small fraction, as it did in the civil case against Vascular Solutions.
Even after the Food and Drug Administration announced in 2010 it would bring more cases against executives, only a handful have been filed. The most prominent was in 2011, when four executives of the Johnson & Johnson spine division Synthes were sentenced to prison time for failing to stop the company from doing an unauthorized clinical trial of a new bone cement. Several patients died during the experimentation.
Vascular Solutions denies that any of its patients’ adverse events were that severe. However, one complication alleged in court files involves deep-vein thrombosis, which can lead to a potentially life-threatening pulmonary embolism.
The Justice Department alleges business pressures drove off-label promotion at Vascular Solutions.
In 2009, Vari-Lase held about 35 percent of the market for devices used to seal off varicose veins. A competing company, meanwhile, touted a device that also had approval to treat deeper veins.
Vascular Solutions sought the same FDA approval, and launched a clinical trial to bolster its claim. The government says 14 percent of the patients in that study had small clots emerge from perforator veins into deeper veins, creating a risk of deep vein thrombosis, while 25 percent had an “abnormal burning sensation” six months after the procedure.
“Internally, Vascular Solutions employees admitted that the trial was ‘lacking some key data points’ and that the data was … ‘less than optimal,’ ” the Justice Department said in its whistleblower suit. Yet “the Vice President of Marketing sent an e-mail to the entire sales force indicating that the company had “completed a successful clinical trial on using laser for perforators.”
The company disputes that the internal communications indicated wrongdoing.