It all started when Patricia Katz, a new accountant with SpineFrontier, Inc., enrolled in two compliance classes. By the time this story ends, Katz is fired and suing her former employer under the whistleblower protection law.
Katz went to work for SpineFrontier in February 2011 as a senior accountant. She was fired in March 2012. The company basically said she was opinionated and mishandled confidential human resources information. She said she was fired because she was pushing internally for a better compliance program.
In January 2012, SpineFrontier’s compliance department offered employees a class sponsored by the International Organization for Standardization (ISO), an independent, non-governmental membership organization and the world’s largest developer of international standards. ISO 13285:2003 specifies requirements for a quality management system where an organization needs to demonstrate its ability to provide medical devices that meet regulatory requirements.
To Track or Not to Track
In the first compliance class, Katz says she learned that the company’s lot tracking and tracing procedures violated federal safety regulations for medical devices. When reviewing usage forms, Katz said she immediately noticed that the lot numbers associated with SpineFrontier’s medical devices were rarely, if ever, recorded.
Katz said she was alarmed by this practice and, in April 2011, brought it to the attention of Aditya Humad, SpineFrontier’s chief financial officer and vice president of business development.
Humad and other company executives allegedly told her that SpineFrontier was aware of its failure to record lot numbers but that it was not an essential requirement. She was told that, from a practical standpoint, it was too cumbersome for a SpineFrontier representative present during a surgery to have to log the lot numbers of SpineFrontier’s medical devices.
In her second class, she said she learned how to act on that information by opening a Corrective and Preventative Action (CAPA). But when she opened a CAPA for SpineFrontier’s lot recording deficiencies, she said Christopher Chang, the company’s chief innovation officer, promptly closed it.
She said Chang wrote her an email regarding the CAPA she had opened saying that the CAPA was “mere classwork, ” and that the company was going to shut down the CAPA relating to SpineFrontier’s deficiencies in recording lot numbers.
Going to the FDA
Confronted with conflicting information about the necessity of recording of lot numbers, Katz sent an anonymous email to the FDA to determine whether or not SpineFrontier was in fact required to record lot numbers.
When she received confirmation from the FDA that what she had learned in compliance training was correct and that what she had been told by SpineFrontier officials was wrong, she forwarded her correspondence with an FDA agent to three company officials.
She alleges that the company, in spite of positive job performance reviews, fired her for that behavior.
“You’re Fired”
On March 2, 2012, Katz was informed that company executives would hold a meeting on Monday, March 5, 2012, regarding the email she had sent to the FDA.
Katz reminded Humad and Chang that she was traveling to Florida on March 3 to be with her ailing father and she would not be present for the meeting. Katz says she was told that the meeting regarding her email would be held on March 5, regardless of whether or not she was present.
Katz returned to work on the morning of March 12, 2012, and, at the start of the day, was asked to meet with Christopher Chang and Aditya Humad regarding some HR issues.
At the outset of the meeting, Katz says Chang gave her a one page letter informing her that her employment was terminated “effective immediately.” The termination letter discussed several “areas of concern” that led SpineFrontier to terminate Katz’s employment. None of the concerns in the letter related to the compliance issue.
The letter also cited as cause for termination, “a very adamant opinion.”
Katz says the reasons given for her firing were “pretextual” and that she had received two positive performance reviews, with accompanying cash and stock bonuses before her firing.
On July 18, 2011, Aditya Humad completed Katz’s performance evaluation form for her first five months of work. The evaluation reflected favorably on Katz’s job performance, states her lawsuit. On December 14, 2011, less than three months before Katz’s termination, her employee year-end performance evaluation was completed by Aditya Humad.
“The evaluation was noticeably stronger in almost every respect compared to her July performance evaluation, ” according to the lawsuit.
Lawsuit Filed
In the lawsuit filed on April 28, 2015, Katz claims she was fired for bringing False Claims Act violations to management’s attention, even though she should have been protected as a whistleblower. She accuses the company of violating state and federal false claims acts and Massachusetts common law by firing her.
Katz said the company retaliated against her because she was willing to report misconduct to government officials, despite instructions from company officials to drop the matter.
“SpineFrontier knew that its devices were misbranded and adulterated, but marketed and sold them anyway despite the prohibitions of federal law, ” claims the lawsuit. “This was a violation of the False Claims Act…that Katz attempted to stop. When it became clear to SpineFrontier that Katz would not let the matter drop and that she was willing to speak with the FDA about it, she was immediately terminated.”
This conduct was retaliation that is prohibited by the False Claims Act, 31 U.S.C. § 3730(h), and the Massachusetts False Claims Act, 12 M.G.L. § 5J, and also constituted a termination in violation of public policy under the Massachusetts common law.
FDA Investigation and Warning Letter
Soon after her termination, Katz contacted the FDA by phone to report the violations, later following up with a letter.
Unbeknownst to Katz, claims the lawsuit, SpineFrontier had little interest in lot tracking or tracing “because it did little with that information anyway.”
The FDA seemed to agree.
On July 11, 2012, an FDA investigator completed an inspection of SpineFrontier.
According to the lawsuit, when the FDA investigated Katz’s letter, it found “rampant problems with tracking, tracing, design and inspection safeguards, and handling of adverse event investigation and reporting, leading to a formal, public warning letter that designated the company’s devices as adulterated and misbranded for nine types of violations.”
On August 8, 2012, the FDA issued a public Warning Letter to SpineFrontier President Kingsley Chin, M.D.
As the FDA later stated in the letter, that inspection “revealed that [SpineFrontier] devices are adulterated.” The investigator’s findings were identified to SpineFrontier with a Form FDA 483.
The Warning Letter details SpineFrontier failures to track lot numbers, to report adverse events, to investigate complaints, and to implement CAPAs once created, failures which are highly related to its haphazard compliance with CAPA regulations and its own CAPA procedures.
Disturbingly, the lawsuit pointed out that the FDA stated in the Warning Letter that despite SpineFrontier learning of a patient death associated with one of its devices, the company never reported it to the FDA, making the company’s devices misbranded. Failures to track information about its devices made it difficult for SpineFrontier to comply with other regulatory and statutory requirements.
The Company and Senior Management
The senior management team of SpineFrontier is experienced and not unfamiliar with navigating devices through FDA regulations.
The company, in the Greater Boston area, was founded by Chin in 2006 to make minimally invasive (MIS) spine devices.
Since its founding in 2006, the company says it has launched 35 new products. In 2005, Chin also the founder of Mantis, LLC, a minimally invasive spine surgery device company, sold his device to Stryker Spine as a multimillion-dollar deal. The device was FDA-cleared in 2007 and, in 2008, generated over $20 million in sales.
Chin then started SpineFrontier to develop devices to address the minimally invasive spine surgery market and to expand spine surgery to treat elderly patients. In 2008, SpineFrontier released its first FDA-cleared device and subsequently has generated almost $7 million in revenues and was profitable the first year.
SpineFrontier’s “LES” (Less Exposure Surgery) platform, according to the company’s website, is less invasive than MIS. LES incisions are small, open incisions through which the surgeon “only exposes what needs to be treated and nothing more. By developing improved technologies and techniques tailored for pinpointing a problem and fixing it without collateral damage, LES preserves and minimizes normal tissue disruption without relying on excessive radiation, ” states the company.
The procedures are done outpatient and tailored to be “simpler for the surgeon to perform, reduce pain and blood loss, and speed recovery time for the patient.” The company says over 200 surgeons world-wide have been trained in the procedures and a LES Institute was created for these surgeons to join and “continue to build on the LES Philosophy.”
Chin’s companies have generated over $100 million in revenues to date. He has a degree in engineering from Columbia University, a degree in medicine from Harvard Medical School and former chief of spine at University of Pennsylvania. He served as president and CEO of SpineFrontier from 2007 to 2011.
Aditya Humad is now the president and CFO of SpineFrontier. Before joining the company, Aditya worked for J.P. Morgan where he focused on M&A, financing and restructuring on Wall Street. He earned a Bachelor’s in bioengineering and finance from the University of Pennsylvania and Wharton School of Business as part of the Jerome Fisher Management & Technology Program.
Katz’s Demands
Katz is asking the Court to reinstate her at SpineFrontier and award her two times the amount of back pay she would have earned but for the “retaliation.” She also wants to collect damages including attorney’s fees and the value of her stock options.
Katz’s charges are only allegations and the company has not yet had a chance to defend itself. But there is a lesson here for all device makers. If you send your staff for compliance training, prepare to have a good compliance program. And if you fire them for having strong opinions about the compliance, expect to get sued.
