More physician owned distributors – MiMedx may not wish to address its investors but it will have to answer the regulators

Viceroy is releasing more on illegal physician owned distributors (PODs) operating in the wound care space within the state of Texas. Our spreadsheet will follow shortly to expose multi state PODS and conflicts.

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Given the large proportion of income derived from Texas sales, investors should be concerned, especially as the numerous, undeniable, illegal PODs we illustrated on our report dated October 13, 2017 have not been addressed by management.

MiMedx’s blanket denial of Viceroy’s report and aversion to conducting an investigation suggest that management are either fully aware of these illegal distributors, or have been negligent in their duties…

MiMedx is not operating in an industry where these abuses are commonplace, and yet within the single state of Texas, we have connected MiMedx with:

  • Numerous illegal PODs;
  • Numerous related party distributors; and
  • Forest Park Medical Center, a $40m fraud uncovered by the DOJ and FBI.

Malfeasance by Physician Owned Distributors and kickbacks are an abuse of the healthcare system. The abuse not only costs patients and insurers, but ultimately undermines the integrity of physicians where products are prescribed to enrich suppliers (namely MiMedx) and enable Physician’s to obtain a kickback in reward.

This report further details connections between MiMedx and its network of physician owned distributors. This network of distributorships owned by employees and physicians allows MiMedx to engaged in large scale channel stuffing activities. The benefit to the physicians and employees comes at a cost to insurers and the medical facilities who ultimately pay the costs.

Lou Roselli made the headlines once more last week as an incriminating email surfaced where Lou admits MiMedx cannot reconcile inventory to federal customers. In the tissues business, this is strictly against the law.

Given the substantive evidence presented in our reports, we call on the board of MiMedx launch an immediate external investigation into the conduct of Senior Personnel, and subsequently resign.

The structure of these distributors leaves open great opportunities to exploit the US healthcare system. As a reminder to our readers, the Office of the Inspector General of the Department of Health and Human Services issued a special fraud warning stating that such ventures “should be closely scrutinized under the fraud and abuse laws.”

Bankruptcy & DOJ/FBI indictments of Physician Owned Medical Center inconvenienced MiMedx CPM channel stuffing program

This report focuses on commercial relationships with currently indicted individuals for fraud with direct trading links with MiMedx and a Physician Owned Distributors in Texas with more to come.

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In this report, we detail exactly what MiMedx management withheld about its relationship with CPM Medical & unquestionably evidence physician owned distributors that have sold & are selling MiMedx products, with full references & FDA evidence. MiMedx’s channel stuffing distributor, CPM Medical, defaulted on its credit terms due to a DOJ/FBI crackdown on a key client, Forest Park Medical Center – a convicted $40M fraudulent kickback scheme.

Viceroy also present indisputable FDA evidence that MiMedx was specifically trading with physician’s spouses – via physician owned/related distributors registered to store MiMedx products ONLY.

More whistleblowers come forward with details of MiMedx sales scheme

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Viceroy has previously published on MiMedx detailing its dubious hiring practices, connections to related party employee owned distributors, improper government filings and undisclosed SEC investigation. Since publication many former MiMedx employees that are not in legal conflict with MiMedx have reached out to Viceroy to provide information and corroboration of our investigations.

Information Viceroy has received from a further Whistleblower expands and gives details into the channel stuffing practices at MiMedx, including the structure of the employee and physician owned distributors and mechanisms of sales enticements.

 

Ex-employees blow the lid on MiMedx sales scheme

Prior to Viceroy’s publications, we filed a significant data bundle of evidence to the SEC Whistleblower program. We always believe where appropriate in notifying regulators first. We under some may not wish to disclose or communicate with Viceroy, however can contact the SEC directly: https://www.sec.gov/whistleblower.

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Viceroy has previously published on MiMedx detailing its dubious hiring practices, connections to related party employee owned distributors, improper government filings and undisclosed SEC investigation.

Many former MiMedx employees that are not in legal conflict with MiMedx have reached out to Viceroy to provide information and corroboration of our investigations.

In this report, we detail:

  • Allegations corroborated by whistleblowers that MiMedx engage in a scheme with its distributors, in which larger and / or a number of small products are labeled as cheaper products. This scheme would draw attention away from MiMedx financial accounts as there are no ‘direct’ cash kickbacks to distributors, but distributors can unsuspiciously make large margins on marked up products.
  • Further apparent MiMedx related party entities controlled Donovan Schmidt, all of which appear to deal with medical products – we have a lot more to come on this.
  • MiMedx former subsidiary and current distributor Stability Biologics’ history as a with Osiris Therapeutics, a former NASDAQ listed competitor who is under investigation by the US Attorney’s Office for a criminal offence which, Viceroy believe this investigation is likely related to channel stuffing practices and revenue recognition.

Allegations as they stand are so substantial that Viceroy are now engaging in dialogue with the Department of Justice.

How are MiMedx making their numbers?

“I don’t know how they’re hitting their numbers: that’s what’s blowing me away. What is going on? How are they supposedly hitting these numbers? I want to know.” – Former MiMedx Employee

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Viceroy continues piecing together further damning evidence of MiMedx’s dwindling relationship with the Department of Veteran Affairs.

As a recap, we have established flawed and dubious hiring practices for MiMedx, connections to related party employee owned distributors, improper government filings, photographic evidence of channel stuffing and an undisclosed SEC investigation.

MiMedx refuse to acknowledge the facts. In what appears to be a blatant disregard for the SEC rules and the need for 8-K filing, MiMedx recently filed an 8-K for relating to a “Amendment to Credit Agreement”, ignoring the elephant in the room: the SEC subpoena. According to MiMedx actions, an amendment to credit agreement” is significantly more important than the need to file an 8-K relating to an SEC subpoena. Viceroy believe that this is to avoid people tracking the issues of MiMedx and/or owning up to the seriousness of an on-going investigation.

This is in addition to MiMedx misleading its investors about the publication of an alleged independent report that was concealed from its own investors. As highlighted by Aurelius Value, MiMedx went one step further and prohibited its disclosure even when the SEC made enquiries. Investors would be prudent to check the SEC filings from April 18, 2017

MiMedx’s selective non-compete litigation & questionable disclosures

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While Viceroy pieces together further damning evidence of MiMedx’s dwindling relationship with the Department of Veteran Affairs, investors should question the discretionary nature of MiMedx’s aggressive litigation. Namely against employees which have breached their non-compete with MiMedx. Viceroy has previously published on MiMedx detailing its dubious hiring practices, connections to related party employee owned distributors, improper government filings and undisclosed SEC investigation.

Many former MiMedx employees that are not in legal conflict with MiMedx have reached out to Viceroy to provide information and corroboration of our investigations. All whistleblowers are extremely fearful of physical and legal retribution from MiMedx. They have provided images, statements, corroborating phone data/records and further information about the company’s channel stuffing practices, executive impropriety and lack of disclosure.

Contrary to their statements, we believe MiMedx intentionally turns a blind eye to certain employees setting up their own distributorships especially where it is likely to benefit MiMedx revenue schemes. This has been confirmed by former employees who told Viceroy:

“…some people are allowed to break a rule [that] others are not. And there’s so much stuff that goes on behind the scenes with the executive team that no one knows who makes the rules…” – Former MiMedx Employee.

MiMedx’s Channel-Stuffing: Hard Evidence

Viceroy has previously published on MiMedx detailing its dubious hiring practices, connections to related party employee owned distributors, improper government filings and undisclosed SEC investigation.

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Following publication of our first report, MiMedx held an investor conference call on September 21st where management knowingly made false statements to their investors and the general public. MiMedx published a rebuttal to Viceroy’s second report, which is posted to the front page of the MiMedx website, linked to a Box account, and not on company letterhead.

We believe this represents a misaligned focus between the organization’s strategy in crisis control and Pete Petit’s systematic attempts to clear his name and slander Viceroy’s investigations.

Many former MiMedx employees that are not in legal conflict with MiMedx have reached out to Viceroy to provide information and corroboration of our investigations. All whistleblowers are extremely fearful of physical and legal retribution from MiMedx. They have provided us with images, statements and further information about the company’s channel stuffing practices, executive impropriety and lack of disclosure.