MiMedx: What the VA Was Told About the Price

MiMedx agreed to pay $6.5 million to resolve allegations that false commercial pricing disclosures enabled inflated prices in VA tissue-graft purchasing. Two former sales representatives brought the allegations under the False Claims Act. Their case put the company’s account of its commercial deals at the center of what the government paid for its products.

MiMedx Group Inc. manufactures and sells human tissue grafts and is based in Marietta, Georgia. The Department of Justice announced the settlement on April 6, 2020. The government alleged that MiMedx knowingly gave the Department of Veterans Affairs false statements and disclosures about its commercial pricing practices, allowing it to charge the department inflated prices.

The Commercial Prices Behind the VA Purchase

The way the government buys through Schedule contracts explains why commercial pricing disclosures matter. The commercial-sales disclosure format sought actual discounts and concessions, including departures from written policies. A published price list could leave out the deal a commercial customer actually received. The disclosure was supposed to bring those practices into the government’s price negotiation.

The government sought favorable commercial pricing, then negotiated a customer reference against which specified later price changes would be tracked. That reference customer could differ from the company’s most favored customer. The contract’s chosen comparison mattered: it determined which commercial relationship the government would follow.

For a healthcare supplier’s pricing employee, that distinction gives the paperwork a concrete purpose. A standard discount policy describes what sales staff are generally allowed to offer. Actual concessions show what customers received. When those diverge, a disclosure based only on the written policy can leave the government negotiating from an incomplete account of the business.

The timing mattered too. Traditional commercial-sales disclosures called for current, accurate and complete information, with changes reported before negotiations closed. A price sheet from one point in the negotiation and a concession granted later tell different parts of the story.

The alleged overcharge fell on taxpayers funding veterans’ health care. We see the absurdity in that bargain: the buyer relies on the seller to disclose the very deals that could bring its price down.

The Sales Representatives and the Inspector General Disclosure

Former MiMedx sales representatives first brought the allegations in a qui tam case. Their role matters because commercial pricing is part of the selling side of the business: the customer, the discount and the terms of the deal. Someone familiar with those transactions may see a gap between the sales practices and the account given to a government buyer.

MiMedx also disclosed its commercial sales practices to the Department of Veterans Affairs Office of Inspector General before the United States told the company about its investigation. The government acknowledged MiMedx’s cooperation in the settlement.

The Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of Minnesota, and the Office of Inspector General of the Department of Veterans Affairs investigated the matter.

The Whistleblowers’ Share of the Recovery

The settlement provided for the former sales representatives to receive $1.6 million together as their share of the government’s recovery.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

What Proof Do You Need as a Whistleblower?

In a commercial-pricing case, useful proof connects what the company told the government with its actual commercial sales and the government’s purchases. We work through that comparison with you, using the pricing disclosures, commercial sales records and government orders to understand where the account diverged from the deal.

Product knowledge belongs in that comparison. The person who knows the goods can explain which commercial sales concern the products in the government order. The person who knows the pricing can explain the concessions behind the invoice. The person who handled the disclosure can explain how the company described those practices to the Department of Veterans Affairs.

You may know why a price was approved, which customers received it, or how the commercial practice differed from the company’s description given to the government. Our work is to connect that knowledge to the representation that mattered to the buyer and the money at issue.

The Same Pricing Problem in Other Purchases

Other government purchases show how commercial-pricing information can go wrong at different points: when it passes through a reseller, when a comparison price changes, or when a rebate never reaches the government’s side of the bargain.

Informatica settled allegations that it supplied false discount information to resellers for General Services Administration Schedule negotiations, causing inflated maximum prices and purchases. The manufacturer’s information was the alleged link to the government’s inflated price. For an insider, the important connection is who created the pricing account and how it reached the government customer.

In the Department of Veterans Affairs portion of Spacelabs’ settlement, the government alleged that the patient-monitoring equipment supplier failed to extend specified comparison prices required by its contract. The commercial sale mattered because the department’s pricing terms made it a reference for the government’s own price.

Coloplast, another medical-product manufacturer, resolved allegations that included omitted Department of Veterans Affairs discounts under its Price Reductions Clause. Its pricing issue concerned reductions the government said it should have received under the existing contract.

Avantor resolved allegations involving government-only price increases, omitted commercial-customer rebates and incentives, and unreported commercial pricing changes across contracts that included Department of Veterans Affairs purchasing. A rebate or incentive can be part of the comparison even when it does not appear as a lower price on the face of an invoice.

These cases give a sales or contracts employee something specific to recognize. The information can originate with a manufacturer, pass through a reseller, or change after the government contract begins. The commercial transaction and the government pricing promise have to be read together.

You Know the Deal Behind the Disclosure

If you worked on tissue-graft sales, commercial discounts or VA pricing disclosures, speak to our whistleblower experts about where the company’s account given to the government diverged from the deals you knew. We build the case with you, bring in VA procurement fraud whistleblower lawyers who understand commercial-pricing disclosures, and stay beside you through the pursuit of a recovery.