Robbins Arroyo LLP: Cardiovascular Systems, Inc. (CSII) Misled Shareholders According to a Recently Filed Class Action
Robbins Arroyo LLP announces that a class action complaint was filed in the U.S. District Court for the Central District of California. The complaint alleges that officers and directors of Cardiovascular Systems, Inc. (NASDAQGS: CSII) violated the Securities Exchange Act of 1934 between September 12, 2011 and January 21, 2016, by making materially false and misleading statements about Cardiovascular Systems’ business prospects. Cardiovascular Systems, Inc. is a medical technology company that develops, manufactures, and markets devices to treat vascular diseases in the United States.
Cardiovascular Systems Accused of Engaging in Medicare and Medicaid Fraud
According to the complaint, from 2011 through 2015, Cardiovascular Systems (“CSI”) filed several Form 10-K’s with the U.S. Securities and Exchange Commission stating, “We make every effort to ensure that the billing and coding information furnished is accurate and that treating physicians understand that they are responsible for all treatment decisions.” However, the complaint alleges that CSI officials failed to disclose that the company distributed illegal kickbacks to health care providers, engaged in off-label promotion of its medical devices, and violated the Food and Drug Administration’s laws and regulations in connection with its medical devices.
On July 15, 2013, a former CSI sales manager brought a whistleblower lawsuit pursuant to the qui tam provisions of the Federal Civil False Claims Act (“the Qui Tam action”). The Qui Tam action alleged that CSI engaged in a fraudulent marketing scheme to increase the sales of its various products and to obtain a more favorable valuation of its stock to attract new investors. CSI’s kickback scheme, allegedly designed to influence medical personnel to use CSI’s medical devices, included all-expense-paid training programs, giving free product to induce the purchase of another product, and showing physicians how to maximize their financial return by using CSI devices, including for unnecessary procedures. Additionally, CSI’s off-label marketing (“OLM”) scheme purportedly influenced medical personnel to use CSI’s medical devices for procedures that were not medically necessary or medically reasonable. The OLM strategy also was said to induce physicians to sue and obtain reimbursement for use of CSI medical devices on patients covered by Medicare, Medicaid, and other government payors.
On May 9, 2014, CSI received a letter from the U.S. Attorney’s Office for the Western District of North Carolina stating that it is investigating the company to determine whether it has violated the False Claims Act, resulting in the submission of false claims to federal and state health care programs, including Medicare and Medicaid. Then, on October 7, 2015, CSI disclosed that it expects revenue from its 2016 fiscal first quarter to be approximately $43.9 million, well below its previously issued guidance of $48.5 million to $50 million, and expects a net loss between $13.1 million to $13.9 million, citing the reformation of its sales force, which was a materialization of the letter from the U.S. Attorney’s Office. On January 21, 2016, CSI disclosed that it expects revenue from its 2016 fiscal second quarter to be $41.4 million, a 4% decrease from the second quarter of fiscal 2015, and 3% below the guidance range due to the continued effects of the sales force transition. On this news, CSI stock fell $3.72 per share, or approximately 30%, to close at $8.74 per share on January 22, 2016.
Cardiovascular Systems Shareholders Have Legal Options
Concerned shareholders who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.
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