Consumer Fraud

Whistleblower helps U.S. recover more than $5 million from medical device manufacturer

osha whistle Whistleblower helps U.S. recover more than $5 million from medical device manufacturerA whistleblower who sued his former employer, medical device manufacturer EndoGastric Solutions Inc., under the U.S. False Claims Act will receive nearly $1 million for his role in exposing alleged fraud at the company and helping the U.S. recover millions in government health care funds.

EndoGastric Solutions agreed to pay the U.S. up to $5.25 million to resolve allegations that it misled health care providers about how to bill taxpayer-funded health care programs for using a device called EsophyX, which it manufactures.

The device is designed to treat gastroesophageal reflux disease in a less invasive way than other procedures, which require surgeons to make abdominal incisions in patients. The whistleblower lawsuit alleged that the company led health care providers to bill for the less invasive EsophyX procedure using codes for the more invasive procedure, which provided a higher level of reimbursement. The scheme caused Medicare and other taxpayer-funded health care programs to pay much for EsophyX procedures than they should have.

The lawsuit also accused EndoGastric Solutions of making illegal payments to certain physicians for participating in patient seminars and co-marketing agreements that were designed to peddle EsophyX, arrangements that violated the Federal Anti-Kickback Statute.

“Health care providers that cause the government to pay more than it should for medical devices not only cost us money as taxpayers, they raise the cost of health care for everyone,” said Stuart Delery, Assistant Attorney General for the Justice Department’s Civil Division.

Michael W. Cotter, U.S. Attorney for the District of Montana, where the lawsuit was filed, said that a medical device manufacturer “violates the law when it advises physicians and hospitals to report the wrong codes to federal health insurance programs in order to increase reimbursement rates.”

The settlement resolves a lawsuit filed by Glenn Schmasow, a former employee of EndoGastric Solutions, under the qui tam or whistleblower provision of the False Claims Act, which permits private parties sue on behalf of the U.S. government for fraud and other wrongdoing. In return, whistleblowers receive a percentage of the recovery. Mr. Schmasow will receive about $945,000 for his role in exposing the fraud at EndoGastric Solutions.


U.S. Department of Justice