A Lesson for Healthcare Execs: Make Sure Your New Technology Isn't Fake

The founder and CEO of a medical device company has been convicted of selling an implantable medical device to providers that didn't work at all—and then creating a replacement part that was also fake.

Healthcare executives looking to embrace the latest in implantable technology for patient care need to make sure their vendor partners are trustworthy.

The U.S. Attorney’s Office in southern New York has secured a six-year prison sentence for the founder and CEO of a medical device company that sold a fake neurostimulator to healthcare providers and instructed them to bill insurers, including Medicare, for thousands of dollars in reimbursements. The device contained a plastic part that was purposefully too long, forcing providers to spend thousands of dollars to buy a replacement plastic part from the company that still didn’t work.

Laura Perryman, 55, of Delray Beach, Florida, founder and CEO of Stimwave, was sentenced to six years in prison and three years of supervised release by U.S. District Court Judge Denise L. Cote for healthcare fraud and conspiracy to commit healthcare fraud and wire fraud following a two-week trial.

“Laura Perryman callously created a dummy medical device component and told doctors to implant it into patients,” U.S. Attorney Damian Williams said in a press release. “She did this out of greed, so doctors could bill Medicare and private insurance companies approximately $18,000 for each implantation of that dummy component and so she could entice doctors to buy her device for many thousands of dollars.”

“Perryman breached the trust of the doctors who bought her medical device, and more importantly, the patients who were implanted with that piece of plastic,” Williams continued. “This prosecution and today’s sentence are part of this Office’s ongoing work in combating fraud in the healthcare system and protecting patients from being exploited for money.”

According to the press release, Stimwave created and marketed an implantable neurostimulation device called the StimQ PNS System, which was supposed to treat chronic pain by stimulating certain peripheral nerves via an electric current. The device featured a so-called Pink Stylet, which was implanted in the patient to receive the electric impulses from another part, called the Lead.

Law enforcement officials said Stimwave sold the device to providers roughly between 2017 and 2020 for about $16,000 and told them they could bill insurers through two separate reimbursement codes for as much as $24,000.

Soon after receiving the device, providers told the company the Pink Stylet was too long to be safely implanted in patients. After a while, Stimwave—which didn’t lower the price of the device or alert providers to the problem—created a White Stylet as a replacement and sold it to providers for another $16,000.

“Perryman directed that Stimwave create the White Stylet — a dummy component made entirely of plastic, but which Perryman misrepresented to doctors as a receiver alternative to the Pink Stylet,” the press release stated. “The White Stylet could be cut to size by the doctor for use in smaller anatomical spaces and was created solely so that doctors and medical providers would continue to purchase the device for use in those scenarios and continue to bill for the implantation of a receiver component.”

According to law enforcement officials, Perryman oversaw training for doctors in how to use the device and also told others in her company to vouch for its effectiveness.

The lesson learned is that healthcare providers should do due diligence on vendors offering the latest medical devices with promises of improved clinical outcomes. And remember that plastic does not conduct electric currents.