Are You Ready if the Feds Come Knocking? - Healthegy

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Mark DuVal, J.D., FRAPS. President & CEO. Strategic .... Beth Matthews and discipline Shane Carlson, Carrie Powers,
Are You Ready if the Feds Come Knocking? (Lessons From a CEO Who Fought Back and Won)

Howard Root Retired CEO of Vascular Solutions, Inc.

Mark DuVal, J.D., FRAPS President & CEO Strategic Regulatory & Compliance Advice 825 Nicollet Mall, Suite 1820 Minneapolis, Minnesota www.duvalfdalaw.com 612.338.7170 1 1

Minneapolis Airport – June 29, 2011

“U.S. Department of Justice to investigate Federal health care offenses defined in 18 U.S.C. §24(a)”

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Vascular Solutions’ Many Medical Devices 2000

2003

2006

2009

2011

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Vari-Lase Many Versions 1. 100cm (Blue) 2. 70cm 3. 55cm 4. 45cm 5. 24cm 6. 12cm 7. 10cm (Short Kit) 8. 5cm 4

Varicose Vein Many Types Superior epigastric Anterior lateral tributary

Superficial external pudendal Great saphenous

Anterior accessory

Anterior tributary

Perforators

Short saphenous

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510(k) Many Clearances

2003

2004

2005

2006

2004

2007

2005

2008

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FD&C Legal Requirement

The intended use must provide a “general description” of the disease the device will treat.

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FDA Non-Binding Guidance

Does the change affect the indications for use?

YES

New 510(k)

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FDA Cleared Indications for Use

Indicated for the ablation and coagulation of soft tissue . . . Indicated for the treatment of varicose veins and varicosities associated with superficial reflux of the great saphenous vein and for the treatment of incompetence and reflux of superficial veins in the lower extremity.

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Sales Rep Instructions

“Do not indicate that the Short Kit is approved to treat perforator veins . . .” “The Short Kit is not specifically approved for treating perforators . . .”

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Sales (2007 – 2011)

All Other VSI Products $474,000,000

Short Kit = 0.1% of Sales 2/3 of Sales Reps Sold 0 Short Kit $534,000

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Two Rogue Employees West Region Sales Meeting Holiday Inn in Burbank, California April 2008 Danny McIff

Utah Sales Rep

Kip Theno

West Region Manager

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Why San Antonio and Why Criminal? Qui Tam Lawsuit filed in Western District of Texas

Desalle Bui

Disgruntled Phoenix Sales Rep

“This is an action to recover treble damages and civil penalties on behalf of the United States . . .”

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Litigation Hold Memo July 1, 2011

Danny McIff

Former Utah Sales Rep

“This memo instructs you to preserve all documents . . . that concern the use of Vari-Lase products for the treatment of perforator veins . . .”

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Prosecutor Interview Q. Okay. And the government told you you can sign on the dotted line here, or you can face a potential obstruction of justice charge with a 20-year max? Danny McIff

Former Utah Sales Rep

Cross-Examination Testimony at Trial February 10, 2016

d e n g g n i i A. That is correct. S d n a a le against r Q. All you have to do is P testify the company and b s i y t against HowardilRoot. Those are the choices that M u e t were givenG to you, right? a r o p A. That was the agreement. r o C Q. Yeah. Okay. Pretty easy choice – wasn’t it, Mr. McIff? A. Yes it was. 15

Prosecutor Interview

Deborah Schmalz Former VP of Regulatory

Comments on Prosecutor Interview February 12, 2014

“I was given a half glass of water and no food and was interrogated for six hours. A couple times during the process I requested to seek counsel from my attorney and the prosecutor got mad each time I made the request.”

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Prosecutor Interview

Carrie Powers

VP of Marketing

Cross-Examination Testimony February 22, 2016

“Mr. Paulissen got extremely upset and . . . said that if I didn’t start cooperating . . . he would recommend that I would lose my career and would never work in healthcare ever again.”

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Grand Jury Investigation Q. So is the answer to my question a no, then? You weren’t trying to increase business? Glen Holden Sales Rep Connecticut

e g d r e a t h c i C d n I rjury e P y n Assistant U.S. Attorney comments: o l e Glen is “a F poor f***er” who needs to return to

A. No. I – I would say I’m trying to help the patient population. That’s first and foremost. That’s – that’s my job.

San Antonio “on bended knee” to “fix” his testimony

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Prosecutorial Power February 28, 2016

Beth Matthews

Regional Manager Great Lakes

The prosecutor said “if you do not deliver us with the answers we want to hear today, it should be made known that we have the power to withhold rights and privileges provided to your natural born son.”

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Why Not Settle? § VSI must agree to “pay a seven figure fine” § VSI must agree to “remediation” Bud Paulissen

Assistant U.S. Attorney W.D. Texas

Pre-Indictment Settlement Offer November 9, 2014

§ VSI must agree to terminate Howard Root, Glen Holden and Beth Matthews and discipline Shane Carlson, Carrie Powers, and Susan Christian § CEO has to plead guilty to misdemeanor misbranding § “You can go over our heads to our superiors, but your pleas would fall on deaf ears and would be a total waste of time as the push to charge Howard is coming from above.”

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Ham Sandwich Indictment

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Trial Begins 15 Months Later

Bud Paulissen

Assistant U.S. Attorney W.D. Texas

Opening Statement February 2, 2016

“The defendant sold a medical device that they knew based on their own testing could cause deep vein thrombosis . . . .” “And we want to be very clear about something: we have no evidence, and we’ll show you no evidence, that anybody died from using this device.” 22

Prosecutors’ Only Customer Witness

§ I’ve used Vari-Lase for 11 years with “nothing but good outcomes” Dr. Duncan Belcher

Interventional Radiologist

In fact, Dr. Belcher, testified that telling doctors about the 14% would have § Vari-Lase is “safebeen and effective” misleading.

Cross-Examination Testimony February 5, 2016

§ Deep vein thrombosis risk is “completely hypothetical” and “never seen”

Prosecutors’ Only FDA Witness

Neil Ogden

FDA Branch Chief

Cross-Examination Testimony February 9, 2016

Q. And if we go to the third page, so this is the new indications for use statement that was cleared by FDA, correct? A. Yes. Q. And if we look at the first part, it refers to the ablation of soft tissue, correct? A. Yes. Q. And you'd agree that the veins are soft tissue, correct? A. Yes. Q. The great saphenous vein is made up of soft tissue? A. Yes. Q. Perforator veins are made up of soft tissue? A. Yes. 24

Prosecutors’ Only FDA Witness

Neil Ogden

FDA Branch Chief

Cross-Examination Testimony February 9, 2016

Q. The second part of this clearance refers to varicose veins, correct? A. Yes. Q. The great saphenous vein can be varicose, correct? A. Yes. Q. Perforator veins can be varicose, correct? A. Yes. Q. And this clearance has been in place since March 26th, 2008? A. Correct. But nowhere in the indication for use does it say "perforator or tributary veins." Q. You'd agree with me that perforator and tributary veins can be varicose, right, Mr. Ogden? A. Yes. Q. And the clearance says "varicose veins," correct? A. Correct. 25

Prosecutors’ Only FDA Witness

Neil Ogden

FDA Branch Chief

Cross-Examination Testimony February 9, 2016

A. But if the company wanted to say perforator veins, they could put it in their indication for use. Q. And that would be a specific indication, correct? A. Yes. Q. And FDA -- that's under FDA's guidance, correct? A. Yes. Q. It's FDA's guidance that says you should list specific indications that you want, correct? A. Yes. Q. Okay. And the guidance is not the law, correct? A. Correct. 26

Jury Verdict

t o N

y t l i u G

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Juror Reaction Email from Alternate Juror #1 (one hour after verdict)

“I turned 52 years old yesterday and in all my life I have never feared the government. As a law abiding, tax contributing citizen one should not have to fear our federal government. Unfortunately, I will never feel that way again.” “What the federal government did to you, your company and your employees is nothing short of criminal.”

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2 Types of Punishment

By the Process

By a Conviction

§ 121 lawyers at 14 law firms

§ >36 month prison sentence

§ >50 employees & customers “interviewed” by prosecutors

§ Exclusion of Vascular Solutions from selling any medical device to any U.S. hospital

§ $25 million in legal expenses

Royce Lamberth

Sr. U.S. District Judge

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Odds of a Conviction?

How many acquittals has Judge Lamberth had in the last 10 years? In fact, Dr. Belcher, testified that telling doctors about the 14% would have been misleading.

Royce Lamberth

Sr. U.S. District Judge

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Today Every CEO is a Criminal Jury Instructions U.S. v. Howard Root February 25, 2016

“The United States is not required to prove that Defendant Root knew about or intended to commit the misbranding violations.” “[Y]ou must find beyond a reasonable doubt that, by reason of his position in the corporation, he had the responsibility and authority either to prevent or promptly correct the violation, and that he failed to do so.” 31

Lessons Learned Are You Ready if the Feds Come Knocking? Howard Root Retired CEO of Vascular Solutions, Inc.

Mark DuVal, J.D., FRAPS President & CEO Strategic Regulatory & Compliance Advice 825 Nicollet Mall, Suite 1820 Minneapolis, Minnesota www.duvalfdalaw.com 612.338.7170 32 32