By Brendan Pierson
(Reuters) - The founder of a medical device company has been charged with leading a scheme to create and sell a completely non-functional plastic implant purporting to treat chronic pain, resulting in millions of dollars of fraudulent bills to government insurance programs including Medicare.
Laura Perryman, who founded Stimwave LLC in 2010 and served as its chief executive until 2019, was arrested Thursday in Delray Beach, Florida, where she lives. Perryman, 54, is charged by federal prosecutors in Manhattan with conspiracy and health care fraud, with the most serious charges carrying a maximum sentence of 20 years in prison.
Stimwave, which filed for bankruptcy last year, has also agreed to pay $10 million to avoid criminal prosecution and to settle a related civil whistleblower lawsuit, prosecutors said Thursday.
"Our office will continue to do everything in its power to bring to justice anyone responsible for perpetuating health care fraud, which in this case led to patients being used as nothing more than tools for financial enrichment," U.S. Attorney Damian Williams in Manhattan said in a statement.
Jared Dwyer of Greenberg Traurig, Perryman's lawyer, said the allegations are false and that Perryman looked forward to addressing them in court.
"Every piece of that system had a function and was necessary depending on the patient's needs," he said in an email.
An attorney for Stimwave did not immediately respond to requests for comment.
Florida-based Stimwave was founded to provide alternatives to opioid drugs for chronic pain. For that purpose, it marketed the StimQ PNS System, which delivered electrical currents to nerves outside the spinal cord, according to court filings.
The StimQ device consisted of an implantable array of electrodes, an external battery and another implantable component, called the receiver, that transmitted energy from the battery to the lead.
Soon after the StimQ was released in 2017, doctors began reporting that the receiver was too long to fit in some patients, according to court filings.
In response, Perryman directed the company to begin selling an alternative version of the receiver that could be cut to size. That version was made entirely of plastic and did not transmit electricity, prosecutors said, even though the company claimed it was effective.
As a result, authorities said, the non-functional devices were implanted in patients, and government health insurance programs were fraudulently billed "millions" of dollars. It was not clear exactly how many patients received the devices or how much was fraudulently billed.
The criminal case is United States v. Laura Perryman, in the U.S. District Court for the Southern District of New York, No. 23-cr-117.
The whistleblower case is United States et al ex rel SWFC LLC v. Stimwave Technologies Inc et al, in the same court, No. 18-cv-4599.
For the government: Assistant U.S. Attorneys Louis Pellegrino, Jacob Bergman and Monica Folch
For Perryman: Jared Dwyer of Greenberg Traurig
For Stimwave: Rebecca Martin and Rachel Page of Jones Day
(NOTE: This story has been updated to include a comment from Perryman's attorney.)