Cardiac Arrest - Five Heart-Stopping Years as a CEO On the Feds' Hit-List

We met in a well-windowed conference room at the Minneapolis office of Dorsey & Whitney – the law firm I’d worked at 20 years prior as a young lawyer. Back then, I gave legal advice. Now, I needed legal advice. Joining Blum and me were Tom Vitt, Dorsey’s genial courtroom giant who handled all our litigation matters, and a colleague he said was “the guy” to manage a federal criminal investigation.

“The guy” was Bill Michael, the co-head of Dorsey’s white-collar crime practice, who arrived at the meeting looking like a less-rugged Harrison Ford. His heavily-starched dress shirt and steely eyes hinted at his military past, and as Bill Michael spoke, it was hard not to be impressed by the Green Beret turned federal prosecutor. With 100 jury trials to his name, Bill Michael was just the guide I needed in this unfamiliar land.

But right now, he didn’t know anything – about my company, about varicose veins, or about me. Luckily for him, I’d spent my Fourth of July weekend prepping a 90-slide briefing instead of floating on my boat around the lake. But before I fired up the PowerPoint, I gave a few opening remarks.

“I already know this is a serious matter, for both the company and me. We all know that last year another medical device company went through a criminal investigation and even had its CEO indicted. Nobody wants that here – especially me.”

The joke landed flat. This Bill Michael guy was all business. Good – I liked that.

“But we can’t kill the company trying to save it. If we over-react and panic our shareholders and employees, the company will be dead before we even begin.” I looked around at the silver-plated water pitchers and bus-sized cherrywood conference table and felt the need to add one more thing. “Legal costs alone are a significant issue, so we need to manage and plan those, okay?”

Nods all around, including from my expensive new lawyer. To the projector!

After briefly explaining the causes of varicose veins, I corrected the most common misperception of the disease. “We all know varicose veins look ugly, but they aren’t just a cosmetic problem. Left untreated, the crushing pressure of all that pooling blood in the vein can cause skin ulcers and, eventually, amputation of the leg.” I scrolled through a few unpleasant photos to drive the point home, before moving to the treatments.

“Years ago, doctors treated varicose veins using a barbaric procedure called vein stripping. In it, the leg is fileted open and the entire vein is literally ripped out. Once the diseased vein is gone, the blood finds its way back to the heart through the remaining healthy veins.

“But around 10 years ago, two doctors developed a new way to permanently shut down varicose veins using laser energy to heat them from the inside. Through just a needle prick, a doctor inserts a thin glass rod called a laser fiber into the patient’s vein, turns it on, and pulls it through the diseased portion of the vein. This procedure is called endovenous laser ablation, and unlike with vein stripping, the patient walks in and walks out an hour later with their varicose veins fixed and only a Band-Aid over the needle puncture.

“At least seven other companies make laser systems for the treatment of varicose veins. Ours is called Vari-Lase and has two parts: a console that generates the laser energy, and a disposable kit with everything else the doctor needs – the needle, the glass fiber, and a plastic tube called an introducer sheath that acts as a tunnel for the physician to push the fiber into the vein.

“Because there are so many different lengths of varicose veins, and because doctors love to buy customized products, we sell over 80 different versions of our procedure kit. This subpoena looks like it’s all about one version we started selling in 2007, called the Short Kit. The only difference between the Short Kit and our other kits is the length of that introducer sheath – the tunnel. The Short Kit’s sheath [circled below] is 10 centimeters long, which you can compare to the Flex, our longest, at 100 centimeters. We even sell a version that’s shorter than the Short Kit, called the 5 centimeter kit. So that’s like the ‘Shorter Kit.’”

Next, I gave a brief anatomy lesson. “There are two parallel tracks of veins in the leg: deep veins, which are closer to the bones, and superficial veins, which are closer to the skin. The short veins that connect these two tracks are called perforator veins. Although perforator veins are only rarely treated, as far as I can tell, they’re the entire focus of the subpoena.”

I knew everyone was familiar with the U.S. Food & Drug Administration (“FDA”), but its role here was a bit nuanced. “As I’m sure you know, we need FDA’s permission to sell a medical device in the U.S. But the FDA doesn’t approve the medical device itself. Instead, it approves the use of the medical device to treat a particular medical condition. It’s like saying ‘you can sell this hammer only if the label says it’s to be used exclusively for hitting these nails.’ That use, slapped on every device we sell, is called the device’s indications. And Vari-Lase has a fairly long and technical indications, as you can see on this slide:

“Now here’s the thing. In general, all types of varicose veins, including perforators, are part of a common condition. You see, when one vein fails, it puts extra pressure on the vein next to it, which often fails in turn. There’s a domino effect. And because perforator veins are connected to the great saphenous vein, a diseased perforator is ‘associated with’ superficial reflux of the great saphenous. It’s also important to know that a diseased perforator is usually treated above the muscle fascia, in the superficial portion of the vein. So even though the word ‘perforator’ isn’t specifically listed in the indications, the treatment of perforators is still generally covered by these indications.”

Forty slides in now, and I figured I was losing them … just when I needed to sprinkle some legal issues into the confusion.

“It seems from the subpoena that the government thinks Vari-Lase is being illegally promoted ‘off-label’ to treat perforator veins. That is, they believe our indications don’t cover the treatment of perforator veins, but that we are selling the Short Kit for perforators anyway.

“And here’s where the law is weird. It’s 100% legal for doctors to use a medical device however they want to treat a patient, even if that treatment is off-label. FDA itself has recognized that off-label use is essential to the practice of medicine. Many cancer treatments, for example, are off-label, as is virtually every device used in children, like miniaturized guidewires for heart interventions.

“But there’s a big catch: While the off-label use of the product is completely legal, the government takes the position that it’s criminal for a company sales rep to talk with a doctor about that use.”

Bill Michael got up from the table. I thought he’d heard enough of my lecture on law he already knew, but he assured me he had a bad back and just needed to stretch out for a bit. I continued as he paced.

“In May 2007, while we were developing a kit that would allow doctors to easily treat perforator and other short veins, which we’d later call the ‘Short Kit,’ we asked FDA for permission to add the word ‘perforator’ to our indications.

“Since we thought our indications already covered perforators generally, we simply asked FDA to ‘clarify’ that this was the case before we added the word ‘perforator’ to the label. We had added specific wording to our indications twice before – both cleared by the FDA – but this third time FDA wanted something they had never required before. They wanted to see a study, in either humans or sheep. We didn’t understand why, but we had already started a study of perforator treatment in humans, so we said ‘okay.’ Unfortunately, we didn’t complete that study in time, and six months later, our application to add the word ‘perforator’ was automatically withdrawn for inaction.

“So then we did exactly what FDA asked us to do; we told all our sales reps not to promote the newly-launched Short Kit for perforators, period. Until the word ‘perforator’ was specifically on the label, we said, our reps could only promote it for short veins, not for perforators. It was extra-cautious, but we’ve taken that approach with all our products, and it’s why we have yet to have any issues with FDA in over 14 years of business.”

At this point, I sensed Bill Michael thought I was sugarcoating it. As a former Army JAG and federal prosecutor, he’d surely seen plenty of defendants contrive stories of their own innocence. He didn’t call me out, but I could tell he wouldn’t believe me until he’d talked to the witnesses himself and seen the documents. Fine – that’s what he...