On September 22, 2026, U.S. District Judge Gregory H. Woods dismissed a class-action securities fraud case: Michiana Area Electrical Workers’ Pension Fund v. Inari Medical Inc., et al. (2026). The investors had failed to prove with sufficient specificity that the company had engaged in an illegal doctor-kickback scheme or deliberately misled shareholders to inflate its stock price.
The evidence confirmed that Inari was providing up to $50,000 in corporate dinners, junkets a vacation destinations and NASCAR race tickets in exchange for doctors ordering Inari’s products. But such spending was found to be standard in this industry (according to the AdvaMed Code of Ethics on Interactions with Healthcare Professionals), as opposed to amounting to illegal kickbacks. The filers attempted to argue AdvaMed does specify a “per individual limit of $3,000 for gifts and promotional materials.” While one salesperson spent $50,000 on physician dinners over a three-month period, and another $5,000, each physician was not receiving over $3,000.
Inari is a manufacturer of technologies that treat and remove blood clots. The case was filed against Inari’s three former administrators: CEO, COO and CFO. They had operated a successful doctor-buttering scheme between 2021-4, before, on February 28, 2024, revealing to investors that they had received a civil investigative demand from the Department of Justice (DOJ), which was investigating if Inari’s practices were violating the Anti-Kickback Statute and the False Claims Act. This revelation led to a single-day 21% drop in Inari’s stock price, at a loss of $700 million in market capitalization.
Since this meant three invested pension funds had lost a lot of money, in May to June 2024, they filed a joint complaint over securities fraud and racketeering. One of the pension funds’ objections was that the administrators had collected $155.5 million in profits during the three years when the DOJ probe was active, but was not publicly disclosed by Inari.
The pension funds lost partly because DOJ’s probe failed to uncover evidence the gifts to physicians were illegal, and this meant the civil lawsuit lacked evidence underlying crimes had occurred. The administrators were allowed to delay disclosure until the date when they revealed it: they did not break the law by their delay. And they were acting in the best interests of shareholders by not disclosing earlier, since the stock would have plummeted earlier, and too soon before the DOJ had to report they had not found any prosecutable law-breaking. The filers might have assumed DOJ records would have what apparently failed to surface in discovery: they had no specific names of a doctor, date, or venue where a provably illegal transaction had taken place. All records proved was that Inari had spent a lot of money on sales and marketing.
The funds might have attached erroneous assumptions by the finding in the Purdue Pharma fraud case. It seems on the surface that Inari spending 68% of its revenue on sales and administration to cultivate customers was as illegal as what Purdue was doing. But in Purdue, the feds were able to prove systemic quid pro quo financial bribery in paying fraudulent “speaker fees” and consulting retainers well over the $3,000 limit to serve as pushers of prescriptions that they were fraudulently selling as safe when they were deadly addictive. There was nothing proven to be fraudulent with Inari’s core devices. Most small businesses wish it was illegal for giant corporations to spend such enormous sums on convincing people to buy their products. But his is how capitalism works: not the best products but the most effective sales campaigns win market share. The legality of Inari’s actions should have been apparent through brisk disclosures without a years-long DOJ audit. If DOJ had dropped their case upon failing to find wrongdoing, investors would not have lost millions in a panic sell-off. The public is too trusting in government actions: when the government declares it is auditing somebody, the public assumes the entity is guilty before the test results come in.
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