Spinal Cap III: “Screwed in California” – Part 2

The alarm bells started to ring in South Africa when Richard Walker of Ortho Sol Development (Pty) Ltd, a surgical supply firm, looked at pedicle screws sold by California-based Spinal Solutions LLC and saw what appeared to him to be product tampering and counterfeiting.

The “brighter yellow luster” of a few screws caught his eye, according to a report by the CIR (Center for Investigative Reporting) in California on November 3, 2014.

Ortho-Sol had been selling their pedicle screws to Spinal Solutions until the company stopped paying its bills. Walker was able to repossess some of his screws and noticed the tampering.

According to a whistleblower lawsuit filed by former Spinal Solutions and workers comp employees, Walker emailed them that, “Unethical perverse incentive payments made to surgeons for product use and Roger’s sudden flamboyant increase in lifestyle from mediocre to upper class property, flashy vehicles, aircraft and yacht purchases, ” contributed to those alarm bells.

“Roger” is Roger Williams, the former owner of Spinal Solutions, in Murrietta, California.

Williams and a slew of alleged accomplices, including self-admitted felons, Michael Drobot and Paul Randall and participating hospitals and surgeons, are accused by the whistleblowers of bilking the California Workers’ Comp system out of hundreds of millions of dollars. The whistleblowers allege that the accused illegally inflated device prices through a web of marketing, management and manufacturing companies.

Worst of all, claim the whistleblowers, Williams et al., were so greedy that they hired a machine shop to make cheap counterfeit and non-FDA cleared pedicle screws and paid surgeons illegal kickbacks to implant them in patients.

Act III, Scene 2, Spinal Cap III: “Screwed in California”

Welcome to the last scene of Act III of Spinal Cap III: “Screwed in California.”

In the previous scenes the whistleblowers accused the defendants of establishing spinal hardware distributorships and paying unlawful kickbacks to surgeons to use their hospitals and implants. They then sold the hardware to collaborating hospitals at grossly inflated prices.

In this final scene, the whistleblowers accuse the group of defendants of overinflating the price of the “counterfeited” devices to hospitals, which in turn falsely billed the state workers comp program. A group of surgeons is also accused of knowingly utilizing the counterfeit screws and rods sold to the hospitals, with the hospital’s knowledge and collaboration.

In a final twist of the screw, Drobot sues the lawyers accusing him of participating in the alleged counterfeit scheme.

The Discovery

Walker, according to CIR, had his fears confirmed when testing showed Spinal Solutions’ devices were not using his firm’s medical-grade titanium. The uneven threads showed potential for backing out or breaking. He told the whistleblowers that he feared the laser-etched markings intended to make them look authentic could be toxic to patients.

Two years later, an employee of Spinal Solution alerted the FDA of the alleged counterfeiting. The FDA swooped in and issued a Warning Letter to the company in January 2012.

The FDA found that the devices were not made in conformity with the current good manufacturing practice requirements of the Quality System regulation

In April 2013, the company recalled its APLIF system.

The whistleblowers say they are in possession of the counterfeit screws and rods. They also have bills, invoices, agreements, and copies of payments that evidence the kickbacks. They also claim to have obtained detailed admissions from individuals involved in the scheme.

Making of the Screw

Williams allegedly hired William Crowder of Crowder Machine & Tool Shop to make the screws and rods. Williams intended to bill the hospitals and insurance carriers for the counterfeit implants as if they were FDA-approved screws. The whistleblowers claim that Crowder employees confirmed that they made the counterfeit implants for Spinal Solutions and Williams.

The whistleblowers say they met with Crowder, who told them that Williams hired him to make the screws and rods. He told them one of the implants was intended to look like the FDA-cleared pedicle screws manufactured by the “U&I Corporation, ” a South Korean device company that makes FDA cleared implants. The defendants allegedly put “U&I Corporation” on the counterfeit implants.

“Mic” McGrath, another defendant, provided the whistleblowers with samples of the counterfeit screws. They also met with U&I’s chief engineer who had flown to the U.S. for a meeting and upon examining the implants confirmed that the samples were counterfeit.

In an interview with CIR, Crowder, now in his late 80s, admitted to making scores of copies of surgical screws for Spinal Solutions. He said the company bargained him down to $65 a screw—less than half of what they usually cost.

CIR showed photos of hardware implanted in a patient who is suing the defendants to engineers at U&I Corporation.

The engineers noted the finishes and lot numbers on some of those screws and connectors did not match their product. “But the dead giveaway was the logo, they said, which lacks the firm’s signature forward-leaning font, ” reported CIR.

During an interview with CIR at the company’s U.S. office in Orange County, California, General Manager Sung Hwang identified three of the patients’ four screws as fakes.

“This is obviously not what we did, ” Hwang told CIR. “I feel sorry because (patients) got the surgery with improper devices, so they might suffer from it.”

Physicians reportedly ordered the implants for their surgeries at hospitals in California, Nevada, Texas, Wisconsin and Maryland.

Williams: “The Richest Guy on Earth”

Williams is described by CIR as a man who “indulged in luxury—private planes, strip club spending sprees, courtside seats at L.A. Lakers games—as the company collapsed into debt. Attorneys looking to serve him with legal documents now say they can’t find him.”

According to CIR, Williams spent 16 years in the orthopedic sales business with his father before he went out on his own. He started Spinal Solutions in 1999 and launched a firm selling knee and hip implants which he turned into an $18 million-a-year business.

By 2008, his planes were shuttling staff and surgical equipment from coast to coast. “He lived like the richest guy on earth. Like a movie star or something, ” Andreas Leuthold, a pilot who worked for Williams, told CIR.

Williams withdrew thousands of dollars from Spinal Solutions’ account to patronize strip clubs like the Spearmint Rhino Gentlemen’s Club. When creditors later asked why, he said, according to court transcripts, “Because I felt like it.”

But he didn’t pay his medical device suppliers.

He reportedly began relying on Lenders Funding LLC, a firm that fronted cash at an interest rate of 35%. By 2013, Williams owed about $35, 000 per month—solely in interest payments—and imploded in debt.

Quin Ruding, a businessman who helped keep Williams afloat when he started to have cash flow problems in 2012, told CIR that Williams made it clear the consulting deals and free flights were tools to keep doctors hooked on his products.

Bob Garrison, another pilot said Williams told him, ‘These doctors are greedy. They’re so greedy, you can’t believe it. All I do…I take advantage of their greed.”

Billing of the Screw

California law allows providers to mark up implants by 10% or $250 of “documented paid cost.”

The whistleblowers say they are in possession of billing documents that show that distributors created invoices inflating implant costs from 2-10 times the actual purchase price. The hospitals allegedly inflated the invoices further.

As an example, on December 31, 2009 “Mic” McGrath submitted an invoice to Spinal Solutions for his “commission” on the sale of implants for a particular surgery. The invoice reflects the “list price” that Spinal Solutions should have billed to Tri-City Medical Center (a defendant hospital). The total list price was $22, 155 ($5, 580 for 4 screws, $2, 799 for 2 other screws, $850 for two rods, $2, 850 for 6 screw caps, $1, 495 for “Medium Crosslink, ” and $8, 590 for two ALIF Cages).

However, Spinal Solutions allegedly billed Tri-City for a total of $95, 223 for the same hardware.

Tri-City then billed the workers’ comp carrier, Berkshire Hathaway a total of $285, 645 for the same hardware on precisely the same patient, a $263, 490 markup.

In January 2012, Drobot, through International Implants, charged Pacific Hospital $32, 456 for implants. A few days later and without yet having paid for the implants, Pacific billed their carrier $64, 930.

Patients and Their Lawyers

There are now 32 suits filed by former patients and lawyers say there may be thousands more patients with counterfeit devices implanted in their bodies.

Among the plaintiffs is a patient who says that when hardware was removed from her body after she developed complications related to lumbar fusion surgery in 2008, the lot numbers on the removed devices didn’t match those on the delivery slips. Instead, she says, what was removed were non-FDA-approved knock-offs.

Drobot Countersues

On October 22, 2014, Michael Drobot filed a $50 million defamation suit against attorneys Brian Kabateck and Robert Hutchinson, and the law firms of Kabateck Brown Kellner, Cotchett Pitre & McCarthy and Knox Ricksen.

Terree Bowers, Drobot’s lawyer, says the accusations are false and that Drobot and Pacific Hospital “had absolutely nothing to do with allegations concerning the counterfeit screws.”

Bowers said the lawsuits are “scare tactics” and that they are “reprehensible.”

Frank Pitre, a lawyer for one of the accused law firms reportedly said, “This is a bully who is using lawsuits in an effort to intimidate people. We won’t be scared in our effort to expose issues about public safety.”

“[Drobot] is an admitted felon, ” Robert Hutchinson said. “This raises the issue of how can we defame someone when their own actions have tainted them far worse than any comments. He should know it’s not going to work.”

Hutchinson said the lawsuit is characteristic of a Strategic Lawsuit Against Public Participation, commonly known as SLAPP, used to try and censor, intimidate or silence critics by hampering them with legal costs until they abandon their criticism.

Act IV?

The lawsuits have been filed. The lawyers are looking for Williams and Drobot is waiting to be sentenced. Patients are hoping their pedicle screws don’t break and some surgeons are looking over their shoulders.

No doubt, there will be an Act IV to this ongoing drama in California.