Dive Brief:
- Inspire Medical Systems revealed Monday that the company received a civil investigative demand (CID) from the Department of Justice about an investigation concerning allegations of false claims submitted to government payers in connection with the company’s sleep apnea implants.
- CEO Tim Herbert, who revealed few details about the investigation in an after-market earnings call, said the company received the demand on Jan. 17. The document requests information on the marketing, promotion and reimbursement practices associated with Inspire’s products. The CEO added that Inspire will fully cooperate with the investigation and provide information as requested.
- J.P. Morgan analysts, in a note to investors, wrote Monday that they expect to hear more in the coming weeks, adding that without more details, “it's difficult to handicap the duration of the investigation or whether there will actually be a negative outcome.”
Dive Insight:
Inspire makes mask-free implants to treat obstructive sleep apnea. The implants deliver pulses to help keep patients’ airways open and improve breathing during sleep. The company plans a full launch of its Inspire V device in 2025 after receiving Food and Drug Administration approval last year.
Inspire reported strong quarterly and annual revenue growth ahead of its earnings call. However, the announcement of the DOJ investigation overshadowed the financial performance and brought several questions from analysts.
The CID, which came from the DOJ’s U.S. Attorney’s Office for the District of Minnesota, is related to the government’s investigation into allegations of false claims submitted to government payers in connection with Inspire’s implants, including false claims arising from violations of the Anti-Kickback Statute, according to a securities filing.
“We do not anticipate that the investigation will interfere with the important work we're doing to improve the lives of patients who need our products,” Herbert said during the call. “As noted, the investigation remains ongoing. As such, we don't have additional comments or details at this time.”
Truist Securities analysts wrote Monday that CIDs are “fairly commonplace” in the industry but can often distract management and require incremental time and resources over several years. Because of this, Inspire may not provide an update on the investigation any time soon.
“Ultimately, it may not amount to anything, and if it does, usually these items tend to result in manageable settlement payments--- if there is a negative outcome,” they said.
The analysts added that during a conversation with Inspire after the earnings call, management “emphasized it does not expect any business impact and has not implemented any change(s) to its selling practices (nor is there a plan to currently).”
Inspire reported fourth-quarter revenue of $239.7 million, representing year-over-year growth of 25%. For the full year, Inspire grew revenue by 28% to $802.8 million.
The company forecast revenue growth in a range of from 17% to 19% year over year for 2025.
