Full article reprinted from "The Gray Sheet" - February 16, 2009
Find out how NeuroMetrix will pay $3.7 million to the government and comply with a five-year corporate integrity agreement to settle allegations that it provided illegal kickbacks to physicians as part of a marketing program for its NC-stat neuropathy diagnostic system.
NeuroMetrix Settles Kickback Charges Related To Device Marketing
Full article reprinted from "The Gray Sheet" - February 16, 2009
Announced Feb. 9, the settlement relates to marketing practices from August 2004 through October 2006, and fraudulent reimbursement practices from January 2003 through April 2006, according to the Department of Justice.
"The marketing programs at issue were discontinued several years ago and only involved a small fraction of our business," President and CEO Shai Gozani said.
The multi-part settlement includes a $1.2 million criminal penalty payment to DoJ as part of a three-year 1deferred prosecution agreement, and an additional $2.5 million payment to DoJ and the HHS Office of Inspector General in 2civil damages and penalties.
The deal stems from an investigation that began in 2006 and resolves allegations that the firm paid illegal kickbacks to physicians to encourage them to use NC-stat, and in certain circumstances led them to improperly bill Medicare.
NC-stat is used to help diagnose neuropathies in peripheral nerves and the spine that can be caused by or associated with carpal tunnel syndrome, leg pain, diabetes and other clinical disorders.
According to the U.S. Attorney's Office for the District of Massachusetts, the Waltham, Mass.-based firm gave physicians free boxes of the disposable biosensors used with NC-stat "to induce them to recommend purchase of the NC-stat system to their colleagues."
In addition, DoJ says the firm caused NC-stat users who performed nerve conduction studies without an "F-wave" measurement to bill under a higher CPT code intended for studies with an F-wave measurement - resulting in inflated Medicare charges.
"After each test was performed with the NC-stat system, NeuroMetrix faxed the physician a coding report that summarized the test performed and the number of units of each code that should be billed," DoJ explained.
The coding reports caused doctors to bill "as if an F-wave had been measured when no such measurement was actually obtained," DoJ said.
While NeuroMetrix does not admit to the F-wave coding violations, the settlement enables the company to "put this matter behind us rather than continue with protracted legal proceedings," the firm says.
A Warning To Industry
According to Arnold Friede, with the law firm McDermott Will & Emery in Washington, D.C., the settlement bears a warning about marketing referral programs such as NeuroMetrix's, which tried to induce people who had experience with the firm's product to recommend it to their colleagues.
"The government was trying to send a message to the industry on referral programs of this kind: Don't do them," Friede, a former associate chief counsel in FDA's Office of Chief Counsel, said in an interview.
"DoJ is saying: This is a strict construction statute. We're not going to tolerate anything, no matter how small, that attempts to influence the neutrality of individual physician judgments."
Corporate Integrity Particulars
As part of the five-year corporate integrity 3agreement with OIG, NeuroMetrix will establish a compliance officer and committee, and will train employees on the Anti-Kickback Statute and federal reimbursement rules.
The compliance officer will be a member of NeuroMetrix senior management.
The firm will also create a database to track all sales and marketing arrangements. A new independent review organization will audit the arrangements.
NeuroMetrix has also created a disclosure program to allow individuals, including employees or the compliance officer, to report suspected compliance violations without fear of retaliation.
The firm must report annually to OIG on its progress, and may be fined for failing to comply with certain obligations in the agreement.
Better Reimbursement In Sight?
NeuroMetrix reported Feb. 10 that its fourth-quarter 2008 revenues fell 27% from a year ago, to $7.2 million, "primarily due to the continued uncertainty surrounding reimbursement for the NC-stat system," coupled with a 40% sales force reduction last summer (4"The Gray Sheet" May 19, 2008, In Brief).
The revenue drop, along with the $3.7 million in settlement charges, resulted in a fourth-quarter loss of $4.1 million. For the year, revenues declined 29% to $31.1 million and the firm had a net loss of $27.7 million.
Reimbursement has been a persistent problem for NeuroMetrix. Last February, the American Medical Association CPT editorial panel said NC-stat did not fall under an existing Category I CPT code and instead proposed a Category III code, which would have paid little or nothing through Medicare.
But in October, the panel met again and decided to establish a new Category I CPT code for nerve conduction studies performed with pre-configured electrode arrays, such as NC-stat, the firm says.
The company expects the new code to be published in the fall and implemented by January 2010. "This CPT code, when issued, could streamline the process for obtaining reimbursement," chief exec Gozani said.
NeuroMetrix offerings also include the Advance platform for traditional nerve conduction studies and needle electromyography procedures.
In addition, NeuroMetrix is preparing to submit a 510(k) for its Ascend nerve localization system, designed to provide regional anesthesia pain control and treat certain types of neuropathies. The firm hopes to launch Ascend in the second half of 2009.
- Jessica Bylander
Sign up for your 30-day, risk-free trial of "The Gray Sheet" today.
"The Gray Sheet" gives you 51 issues per year filled with useful articles that will help you meet your business and regulatory objectives.
