Laura Perryman, former CEO of neurostimulation device maker Stimwave, was arrested in Florida on Thursday after being accused of running a yearslong scheme to defraud insurers.
Perryman has been charged with one count of healthcare fraud and one count of conspiracy to commit wire fraud and healthcare fraud, the U.S. Department of Justice (DOJ) announced Thursday. The indictments carry maximum potential sentences of 10 years and 20 years in prison, respectively.
Meanwhile, Stimwave—which filed for bankruptcy last June and subsequently sold off “substantially all of its assets” in an auction, per the DOJ—signed on to a now-unsealed non-prosecution agreement in October that requires the company to admit to “an extensive statement of facts” about the case, maintain a strict compliance program, cooperate fully with the government in its ongoing investigation and pay a penalty of $10 million.
The devicemaker also settled a civil fraud lawsuit filed under the False Claims Act, according to the DOJ. In that settlement, Stimwave agreed to admit to and accept responsibility for the government’s allegations of fraud and to shell out $8.6 million, which will be credited to the $10 million fine.
The legal actions stem from a scheme that Perryman allegedly concocted around 2017.
Stimwave’s flagship offering was a peripheral nerve stimulation system dubbed StimQ. It was cleared (PDF) by the FDA in 2016 as a prescription-only treatment for severe chronic pain, and it was comprised of an implantable neurostimulator, an externally worn battery pack that was used to power the device and an implanted receiver that served as a go-between between the battery and the neurostimulator.
As the commercial rollout of the StimQ system began in 2017, according to the DOJ, doctors began to complain to Stimwave about the difficulty of implanting the 23-centimeter-long receiver, known as the “pink stylet,” into some patients. The pink stylet couldn’t be trimmed or otherwise shortened, but without it, the device—which was sold to healthcare providers for more than $16,000 per system—would only be eligible for between $4,000 and $6,000 in reimbursement from insurers.
Perryman’s solution? Allegedly, to replace the copper-containing pink stylet with the “white stylet,” which could be shortened as needed to fit each patient—but which was made entirely of plastic and offered no actual medical purpose. The DOJ accused the former CEO of not only directing the company to create the phony component, but also overseeing training programs that assured doctors the so-called receiver was functional and asking employees to vouch for its functionality.
With that bogus information, doctors were “unwittingly” billing private and public insurers for the full system, Michael Driscoll, assistant director of the FBI, said in the DOJ’s release. Under standard billing codes, the fake receiver alone could be reimbursed at a rate between $16,000 and $18,000.
“As a result of [Perryman’s] illegal actions, not only did patients undergo unnecessary implanting procedures, but Medicare was defrauded of millions of dollars,” Driscoll said.
Perryman, who helped found Stimwave in 2010, was voted out of the company in 2019, though the fake receiver allegedly continued to be sold as part of the StimQ system into 2020, per the DOJ.