A few months ago, MiMedx, a Marietta biomedical company that makes skin grafts and other treatments, sued to try to prevent 10 former employees from working for a competitor.
On Wednesday, one of those 10 workers alleged in her own lawsuit that she quit her sales job because MiMedx pressured her to break the law and act unethically.
Lora Whooley, an Arizona resident, alleges that when she was working at MiMedx, she and other employees were under pressure from their superiors to violate federal regulations related to the sale of certain MiMedx products, according to the suit filed in Cobb County Superior Court.
“MiMedx tried to compel its employees to continue selling a product that the U.S. Food and Drug Administration determined could not lawfully market without prior FDA approval,” said Whooley, in her counterclaim.
Whooley had been for a short time the regional sales director for MiMedx in Arizona. She said in the filing that the company pressured sales staff “to participate in MiMedx’s schemes to bilk Medicare and other government and third-party payers.”
MiMedx uses placental tissue for a variety of products used to treat wounds, burns and orthopedic injuries.
A spokesman for the company said Wednesday that it will not comment on pending litigation.
The company was once a darling of Georgia’s biotech world, but MiMedx was rocked by a yearslong criminal investigation into its sales to the Department of Veterans Affairs. The scandal resulted in the convictions of two top executives for securities fraud in 2020, and MiMedx was forced to pay some $6.5 million in civil penalties to resolve charges of submitting false pricing to the VA.
The claims in Whooley’s lawsuit are separate from the earlier scandal, but they raise new questions about MiMedx’s sales practices.
A pair of lawsuits
The legal battle between MiMedx and the workers started earlier this year when the employees — most of them members of the MiMedx sales team — resigned, eventually going to work for Phoenix-based Surgenex, a competitor.
The matter spilled into the legal system in June when the company sued them in Cobb County asking a judge to forbid the former employees from using their knowledge of MiMedx procedures, strategies and other secrets to benefit a rival.
The company said that the former employees violated the non-competition agreements they had signed while they were working for MiMedx.
In that filing, MiMedx asked that it be paid for harm caused to its business by the former employees, an amount of damages that would be determined at a trial. MiMedx asked that the 10 be compelled “to account for” any and all money they had made by using secrets learned at MiMedx or “interfering” with MiMedx customers.
The 10 former employees are all represented by the national law firm Mintz.
According to Whooley’s complaint, employees were expected to push the use of products that were inappropriate or unapproved “to treat wounded veterans, diabetics, chronic wound sufferers, and other patients with medically unnecessary or unsuitable products — all to the detriment of patients and the federal government.”
“MiMedx’s ongoing pressure to participate in this and other unlawful and unethical activities took a physical and mental toll,” Whooley’s filing says. “She and others expressed concerns, but those concerns were ignored.”
Whooley is asking the court to toss out the MiMedx complaints, including the request to keep her from working for a competitor.
The other nine ex-employees, one living in Georgia, have not yet filed responses to the company’s complaint.
The federal government in recent years has stepped up enforcement of medical billing.
‘Attrition’
MiMedx last year had revenues of $321.5 million and net income of $67.4 million. Last week, MiMedx reported results from its second quarter showing net sales of $87 million and net income of $18 million.
At the time, company Chief Executive Joseph Capper said in a statement that MiMedx had “unfortunately experienced higher than normal employee and customer attrition during the quarter.”
He blamed that on several unnamed companies that have engaged in “schemes to sell artificially high-priced, yet clinically unproven, skin substitutes,” and said the departing employees and customers had been “swept up by the promise of riches.”
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