DOJ Investigating Medical Distributorship Scheme
According to the Wall Street Journal, a doctor formally employed by Ventura Hospital in California, is being investigated by the U.S. Food and Drug Administration, the California Medical Board, and in over 20 other lawsuits, 12 of which involve spinal implants from an obscure company called Reliance Medical Systems.
The Department of Justice is also investigating Dr. Sabit after finding he had ownership interest in Apex and profited by recommending and using the company’s spinal implants.
About Medical Device Distributorships
- Medical device distributorships act as intermediaries between medical device makers and hospitals.
- When a distributorship sells medical devices to a hospital, they keep a portion of the sale as compensation.
- As surgeons normally dictate which devices hospitals should buy, there stands the chance that physicians who own or partially own a distributorship will recommend the products from their distributorship to their hospital for increased kickbacks.
Dr. Sabit, Apex, and Reliance Medical Systems
- Apex is a distributorship created by Adam Pike and Bret Berry.
- Just as they reportedly did in 6 other states, Mr. Pike and Mr. Berry recruited local surgeons to buy a portion of the company.
- Dr. Sabit and a neurosurgeon from Los Angeles each bought a 20 percent interest in the company, leaving the remaining 60 percent owned by Mr. Pike and Mr. Berry.
- Adam Pike and Bret Berry also owned Reliance Medical Systems.
- Surgeons invested in the newly created distributorships would recommend the products created by Reliance Medical Systems and push for their use, receiving commission for each unit moved.
- It is estimated that this system made the investors tens of millions of dollars over the 6 years it was in operation.
- Dr. Sabit is claimed to have received an average of $12,000 per month during the time he was part of the scheme.
- Investigators argue that Dr. Sabit over-operated and chose the device that best suited him financially without taking patient health into consideration.
The Wider Concern- Medical Device Distributorships
- The Department of Justice's investigation against Dr. Sabit is only a small part of a broader investigation into similar schemes.
- Mr. Pike and Mr. Berry already operate a network of 11 similar models with physician owned spinal implant distributorships.
- The Department of Justice states such structures, though not always illegal, pose a danger of inticing surgeons to do more operations and to favor the devices they personally profit most from.
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